When Should You Update Your Retirement Plan?
by Gabriel Lewit
An annual retirement plan review can help keep your strategy aligned with your lifetime goals and changing circumstances. You may also want to revisit your plan after a major financial or lifestyle change, or when inflation, tax laws, markets, health needs, or retirement goals shift. Regular reviews can help ensure your assumptions, investments, income strategy, and spending expectations continue to reflect your current needs.
A solid retirement plan starts with core assumptions: your expected spending in retirement, lifespan, investment performance and returns, inflation, and tax exposure. These estimates provide a valuable starting point, but they aren’t fixed. As your life and the financial landscape evolve, your strategy may need to evolve, too.
At SGL Financial, we partner with our clients through ongoing check-ins two to three times a year to keep your financial goals on track. We believe retirement planning is an evolving journey, not a single one-time and forget about it event.
Leveraging decades of combined experience as financial professionals in Chicagoland, we’ve met with countless people who have a retirement plan tucked away in an impressive binder but haven’t reviewed or updated it in years. As retirement planning specialists in Buffalo Grove, IL, the SGL Financial Team can help you regularly revisit the interconnected areas of your financial life so your plan continues to align with your goals, needs, priorities, and circumstances.
Read our latest quick guide: Will Your Retirement Plan Limit Your Future Choices?
How Often Should You Review Your Retirement Plan?
A comprehensive retirement plan should generally be revisited at least once a year. Depending on your circumstances, more frequent conversations may be beneficial, particularly as you approach retirement or begin drawing income from your savings.
An annual check-in gives you an opportunity to compare your original assumptions with what is actually happening in your financial life. It can also help identify changes in your spending, income, investments, taxes, health, family circumstances, and goals that may call for adjustments to your strategy.
Here are some life events and financial changes that may warrant an update to your retirement plan:
- Changing jobs, retiring, promotion, reduction in force (RIF)/Layoff: A change in employment can affect your income, workplace benefits, retirement contributions, and planned retirement timeline.
- Receiving an inheritance or selling a business: A significant financial event may create new opportunities while introducing important investment, tax, and estate-planning considerations.
- Getting married, divorced, or widowed: Changes in marital status can reshape your income needs, beneficiary designations, estate plan, insurance coverage, and long-term goals.
- Buying, selling, or relocating a home: A housing decision can meaningfully affect your expenses, cash flow, taxes, and available retirement assets.
- Experiencing a significant health change: New healthcare needs may alter your anticipated expenses, insurance decisions, and plans for long-term care.
- Beginning Social Security, Medicare, or pension benefits: Coordinating the timing and structure of these benefits can have a lasting effect on your retirement income and tax strategy.
- Providing financial assistance to children or parents: Supporting loved ones may require adjustments to your spending, savings, gifting, and estate-planning strategies.
- Making a substantial change to your retirement lifestyle: New plans for travel, relocation, hobbies, or family time may change how much income you need and when you need it.
- Experiencing a major change in income or finances: A sudden financial shift, such as winning the lottery, signing a professional sports contract, receiving a significant bonus, or another substantial increase in income or wealth, may require you to reconsider your retirement, investment, tax, and estate-planning strategies.
As you can see, these types of events can affect several parts of your retirement plan. The value of a comprehensive review comes from considering all these effects together rather than treating each decision in isolation.
Listen to our new podcast episode: “Building Your Investment Philosophy.”
Why Should You Revisit Your Retirement Assumptions?
Every retirement projection depends on assumptions. Even a detailed plan can become less useful if its underlying inputs no longer match your reality.
Suppose you originally expected to retire at 65, spend $80,000 per year, and receive a certain level of Social Security income. Five years later, you may decide to retire earlier, travel more, or help fund a grandchild’s education. At the same time, your salary, savings, home value, and expected healthcare costs may have changed. Your original projection might look ok, but it’s only focused on answering outdated assumptions/plans:
The purpose of reviewing your retirement plan regularly isn’t to predict every detail accurately. No planning process can do that. The objective is to use reasonable assumptions, plan different scenarios, and identify areas where greater flexibility may be useful.
How Does Inflation Affect Your Retirement Plan?
Inflation gradually reduces what your money can buy. Even relatively modest inflation can have a significant cumulative impact over a retirement that lasts 20, 30, or more years.
Think of inflation like a slow leak in a tire. You may not notice a dramatic difference from one day to the next, but over time, that small loss can affect the entire journey.
For example, if your lifestyle costs $75,000 today, maintaining that same lifestyle could require significantly more income in the future as prices rise. A retirement review can help you evaluate whether your spending assumptions remain realistic and whether your investment and income strategies are positioned to keep pace with rising costs.
The goal isn’t to react to every short-term inflation report. It’s to recognize inflation as a long-term planning factor and make sure your retirement strategy accounts for its potential impact on your purchasing power.
When Do Tax Changes Require a Retirement Plan Update?
Taxes can influence how much of your retirement income is ultimately available for spending. Changes in tax law, income, deductions, account balances, or state residency may warrant revisiting your strategy.
Many people we meet have carefully saved for retirement but have not fully considered how taxes may affect their income once they stop working.
Retirement savings are often spread across tax-deferred accounts, Roth accounts, and taxable investments, each with different tax rules. How and when you withdraw from these accounts can influence your current and future tax liability, required minimum distributions, Medicare-related costs, and the assets ultimately transferred to your beneficiaries.
A tax-focused retirement review may help you evaluate the following:
At SGL Financial, our comprehensive retirement planning approach considers taxes as part of your broader financial picture. Tax decisions should be evaluated based on your individual circumstances and in coordination with qualified tax professionals, not through a one-size-fits-all rule.
Why Do Longevity and Healthcare Assumptions Matter for Retirement Plan Reviews?
Living longer can mean more years to enjoy retirement, but it can also mean more years of spending, healthcare costs, and potential long-term care needs.
A retirement plan built around a shorter life expectancy may underestimate the resources you could need. On the other hand, planning around an unusually long lifespan without considering your health, family history, financial resources, and other circumstances may result in assumptions that don’t meaningfully reflect your situation.
Longevity can affect much more than your investment balance. It may influence when you claim Social Security, how you evaluate pension options, how much liquidity you maintain, and how you prepare for potential healthcare and long-term care expenses.
You don’t need to predict your exact lifespan. Instead, a more useful approach is to consider a range of possibilities, such as:
- What might your plan look like if you live to 85, 95, or beyond?
- What happens if one spouse lives considerably longer than the other?
- How might your plan change if healthcare or long-term care costs are higher than expected?
Scenario planning can reveal dependencies and tradeoffs that a single projection might hide.
Check out our blog: “Can Your Retirement Income Adapt to Market Changes?”
How Should Market Changes Affect Your Retirement Strategy?
Market movements alone don’t necessarily mean you should change your investment strategy. However, significant changes in markets or your personal circumstances may be a good reason to review your asset allocation, withdrawal strategy, and comfort with investment risk.
Market changes can affect more than the value of your investments. They can also change the risk profile of your retirement plan, particularly when your portfolio is being used to generate income. For instance:
- After a strong period for stocks, your portfolio may become more heavily weighted toward equities than you originally intended, potentially increasing your exposure to market declines.
- During a market downturn, withdrawing from investments can create sequence-of-returns risk. This occurs when significant losses early in retirement coincide with portfolio withdrawals, potentially reducing the assets available to participate in a future recovery.
A review with a certified Chicagoland retirement planning specialist can help you consider:
- Whether your portfolio still matches your timeline and comfort with risk: Market movements and life changes can leave you with a different investment mix than you originally intended.
- Whether it may be time to rebalance: Rebalancing can bring your portfolio back toward its target allocation after certain investments have grown or declined.
- How to fund your near-term spending: Keeping upcoming expenses in appropriate investments or cash reserves may reduce the need to sell long-term assets during a downturn.
- Whether to adjust withdrawals after a major market movement: Temporary spending changes may help protect your portfolio following a significant decline.
- How your income sources work together: Coordinating Social Security, pensions, investment withdrawals, and other income can help create a more cohesive strategy.
- Whether your emergency and cash reserves remain sufficient: An appropriate reserve can provide flexibility when unexpected expenses arise or markets become volatile.
Rather than trying to predict the market or react to every short-term fluctuation, focus on whether your investment and withdrawal strategy remains aligned with your retirement goals and changing needs.
Watch our co-founder, Steve Lewit, discuss AI and your finances on WGN9 News.
What Is the Value of Working with a Fiduciary Financial Advisor?
A fiduciary financial advisor is required to act in your best interest when providing financial advice. This means recommendations are based on your needs, goals, and financial circumstances rather than what may benefit the advisor or their firm.
Working with a fiduciary financial advisor can provide structure and coordination for your financial life. They can help coordinate the regular review of your plan, ask questions, and consider how one financial decision may affect another.
For example, a portfolio withdrawal is not merely an investment decision. It could affect your taxes, Medicare premiums, future income, and the balance available to a surviving spouse. An advisor can help bring those connections into the same conversation.
At SGL Financial, our holistic planning perspective considers investments, income, taxes, estate planning, and personal finances as interconnected parts of retirement planning. As fiduciaries, we focus on understanding your circumstances and helping you evaluate available choices.
Advisor oversight does not remove uncertainty or guarantee a particular outcome. It can, however, create a disciplined process for monitoring changes and keeping your strategy connected to your life.
Frequently Asked Questions About Updating a Retirement Plan
How often should I meet with my financial advisor about retirement?
You should generally meet with your financial advisor at least once a year. More frequent reviews may be useful as retirement approaches, when you begin taking withdrawals, or after a significant change in finances, family, health, or lifestyle.
At what age should I start retirement planning?
Retirement planning can begin as soon as you start earning and saving. There is no single “right” age to start retirement planning. The earlier you begin, the more opportunity you have to build savings and adjust your strategy over time. Planning often becomes more detailed in your 40s and 50s as retirement draws closer, your financial picture becomes clearer, and decisions about income, taxes, Social Security, and healthcare become more immediate.
What life events should trigger a retirement plan review?
Common triggers include retirement, a job change, marriage, divorce, widowhood, inheritance, a business sale, relocation, a significant health change, a home purchase, a substantial work bonus or income windfall, or a decision to provide financial support to a family member.
Should I change my retirement plan when the market drops?
A market decline is a reason to review your plan, but not necessarily a reason to make immediate changes. Your appropriate response depends on your asset allocation, withdrawal needs, time horizon, cash reserves, and tolerance for risk.
How does inflation change how much I need for retirement?
Inflation increases the future cost of goods and services, reducing your purchasing power. Your retirement projection should account for rising living and healthcare costs rather than assuming today’s spending will remain constant.
How do taxes affect retirement withdrawals?
Withdrawals from traditional retirement accounts are generally taxable, while qualified Roth distributions may be tax-free. Taxable investment income can be treated differently. The timing and source of withdrawals may affect your tax bracket, Medicare premiums, and future required distributions.
What should a comprehensive retirement plan include?
A comprehensive plan should address income, expenses, investments, inflation, taxes, Social Security, healthcare, insurance, estate considerations, longevity, and your personal goals. It should also include a process for reviewing and updating those elements.
Can a CFP® professional help update an existing retirement plan?
Yes. A CFP® professional can review your assumptions, accounts, projected income, risks, goals, tax strategy, cash flow, and estate plan. The advisor can then help you evaluate possible adjustments while considering how the different parts of your financial life interact.
