09 March 2016
Re-Evaluating Your Retirement Savings

As the “newness” of 2016 recedes, and the deadline of April 15 looms closer, dust off one of your New Year’s resolutions, and check to see if your retirement accounts are performing the way they should be, and more importantly, the way you would like them to be.

How should you go about doing this, and what should you be looking for? Whether you are self- directing your investments in an IRA, or have a company-managed 401(k), it is important to review your assets periodically to ensure that you are maximizing your investment potential and future retirement funds, while retaining your original goals and asset allocation.

First, look at current performance. At least once a year, review a current statement or your year-end summary to see your accounts’ performance numbers. Then compare your performance results with those of yearly indices for similar products. Don’t be discouraged by performance in down years, such as what we have just been through, so long as your investments are on track with similar products.

When you initially allocated your retirement portfolio, you probably chose a diversified portfolio of cash, bonds, and equity investments. Performance review does not mean abandoning your initial investment decisions, but it does mean making sure that they are still what you originally intended. The experts call this “rebalancing”. You do not need to re-allocate your investments in a yearly review, but you may need to re-balance them to ensure that your original goals are still being met and that you are not incurring more risk than your investment strategy can handle. Of course, these are personal decisions to make in consultation with your investment advisor, and taking into account how many years you have until retirement.

Don’t forget about the investments in your company 401(k) while you are undertaking this review. Most companies have several investment options in their retirement plans that afford you diversified choices, and you are permitted to change your choice of investments annually, if not quarterly.

Also check the fees you are paying. If your retirement investments are in mutual funds, the fees will be listed as the “expense ratio.” If you are paying a high expense ratio, you may want to look into switching into a different fund with similar goals but lower fees. Plenty of excellent investments are available that do not charge high fees.

Lastly, take advantage of the tax savings that retirement accounts afford. Make sure you are contributing the maximum allowable amount to your company 401(k) plan. If your contribution is matched by your employer, you will receive an immediate benefit, and your pre-tax contribution will save you money on taxes until you withdraw the funds.

Similarly, if you have IRA accounts, try to make the maximum IRA contribution every year. Contributions to your traditional IRA fund will reduce your current income tax burden, and withdrawals from your Roth IRA will not be taxed at retirement time. Wouldn’t you rather pay yourself than Uncle Sam?

The good news is that you have until April 15 to make your IRA contribution for last year, so you have not missed out!

Nevada State Bank can help you set up an IRA account. Their bankers can also assist you in transferring or rolling over funds from other retirement accounts.

 

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.

 

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