2. Think holistically. It’s easy to get lost in the details and lose track of your ultimate goal – being able to retire when you want. Does it make sense to focus on small differences in return if you are not contributing enough or you are undermining your savings with loans or withdrawals? Successful investing can augment or preserve your savings. But think about what can have the biggest impact on your retirement goal first.
3. Think outside the nest egg. Save as much as you can, invest wisely and build your nest egg. That’s good advice. But a nest egg can seem more formidable than it is, especially in comparison to our yearly salary. It’s not the size of the nest egg that counts; it’s how you are going to spend it or draw income from it.
4. Know what you own. The suggestion that you shouldn’t think of retirement primarily as an investment problem doesn’t mean you can safely ignore your portfolio. But when you do look, look beyond your returns. There are many factors that may put your goal of retiring on time at risk, including not taking appropriate risk for your age, in particular by parking in cash. ( 63% of respondents in a recent survey say two thirds of their savings are held in cash.) Too much risk is also a concern for pre-retirees, such as holding extensive company stock or some other concentrated position. Reviewing your portfolio at least once a year, preferably with a professional, is a good habit to build.
Chip Castille, Managing Director, is head of the BlackRock US Retirement Group. You can find more of his posts here.