How Often Should I Review My Financial Plan?

Bob French, CFA

by Bob French, CFA

December 19, 2016

You need to have a financial plan. But a plan doesn’t do you any good if you don’t keep it updated.

If you only look at your plan once every ten years, you don’t really have a financial plan. Your plan is your financial road map, and you need to refer to it regularly to make sure that you’re still on track. A financial plan is a living document – your life keeps changing, and you plan should change to reflect that.

Like most things, maintaining your financial plan is a balancing act. Your goal is to make sure that your plan keeps up with you, but you also want to make sure that you are not making unnecessary changes to your plan. If you keep changing your route and destination, you’ll never get to where you want to go.

There’s no “right” time to check your financial plan. But you should look at it at least annually (for instance, when you rebalance your investment portfolio), as well as whenever something significant happens in your life.

Whenever you review your portfolio, there are a couple of questions you’ll always want to ask:

  • Are the goals you have listed still the ones you want to accomplish? Has what you wanted to achieve in retirement changed over time? Is there something else you want to be able to do? Are there any goals that aren’t relevant anymore?
  • Is your planned savings amount reasonable? Are you going to be able to keep up with the amount that you plan on saving for retirement? Are you able to save more now than what you originally wrote into your plan? If so, is saving more necessary, or would you prefer to use that money on something else?
  • Are you comfortable with the level of risk in your plan? Financial plans are about managing the total level of risk that you take throughout your financial life. You can manage the level of risk you are taking on – and you need to be comfortable with whatever amount that takes.
  • Does everything look right? It’s easy to run all the analytics in the world, but you still need to eyeball your plan. Is there anything that just looks off, or makes you uncomfortable?
  • Is everything still on track? This is broader than looking at what the market did this year. It would make things easier if the market went up every year, but we know that’s not going to be the case. What you want to be sure of is that your plan is still on track with your goals. You want to be confident that you will be able to meet your objectives.

At McLean Asset Management, we actually check this for our clients every day so we can alert them immediately if there is a problem (to find out more about how we help our clients, click here to read What McLean Can Do For You).

But, all of these questions and points of review hinge on having a financial plan to begin with. If you don’t have a plan, or think it might be time to rework the one you do have, getting your own Retirement Income Optimization Map is a great first step.

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