Earlier in my career I often volunteered as a guest speaker in State Street Bank’s training program for recent college graduates. I always asked the new hires: how long do you plan on being in the workforce? I wanted to get them thinking about career planning. I also encouraged them to immediately begin retirement planning by participating in the 401(k) plan and take advantage of the company’s matching contributions. More than twenty years later I’m quite certain that all those trainees are now in different jobs and many in different occupations – they adapted their career plan. Retirement plans also need adaptation as we progress in life. 

When we are young and just starting our careers, many of us invest our retirement plan in equity securities. This makes sense since historically over longer time periods equities have provided better returns than bonds. Often this is the last time when investors think about their retirement plan until later in life when they are at or close to retirement. 

Everyone is different. Some investors are fortunate enough to have a strong, well-funded retirement plan. They may be concerned with philanthropic endeavors and minimizing overall taxation in their lifetime and that of their beneficiaries. However, other investors may not have a large nest egg as they get closer to retirement. They are more concerned with ensuring they don’t outlive their savings. I have read so many stories about people making significant, risky investments due to concerns of running out of money in retirement. This all too often doesn’t end well. Tactically reducing some investment risk is more appropriate in these circumstances.

To guard against “last minute” worries I encourage ongoing attention to your retirement plan from the beginning of your career to the end - and into your golden years. How is your retirement plan invested? Do the current investments align with your goals?  As you get closer to retirement is your overall portfolio still 100% equities or have you added some sound fixed income investments to reduce volatility and mitigate investment risk? The answers are different for everyone. Most importantly, investors need to regularly ask if their current investment plan is suitable for each phase of life, taking into consideration current investment objectives, time horizons and risk tolerances.