Retirement Product Review

Spring Cleaning – How to Make Sure Your Financial Life is in Order in 2018

by Alli Thomas

Apr 3, 2018

Spring has arrived! Milder weather and longer days may inspire you to clear the clutter, organize, and neaten up your nest. Why not use some of that extra energy to do the same with your finances? Here are three spring-cleaning tips for your financial house.

Dust off your post-retirement budget

By the time you’re 12-18 months away from retirement, you should have a pretty good idea of what your fixed expenses will be for at least the next few years. Now is the time to take a closer look at your discretionary spending to make sure you will be able to live within your means when you no longer get a regular paycheck.

According to a 2013 poll by Gallup, over two-thirds of Americans do not have a budget in place. Although it may require some time and legwork to create, having a budget should eliminate stress. Start by gathering your last six to twelve months’ worth of bank statements and credit-card statements to get a broad picture of how much you’ve made and how much you’ve spent. Then, look more closely at each of your expenditures. How much do you spend on extras, like entertainment, dining out or the “latte factor?” Is it possible to reduce your fixed expenses, such as car insurance premiums or your monthly cable bill?

After you’ve determined what your post-retirement budget should look like, consider adopting it for three to six months prior to leaving the workforce. That way, you’ll have some flexibility to adjust your budget if necessary before you retire.

Purge your debt

You may have heard that there are two kinds of debt: good (student loans, mortgages) and bad (credit cards, car loans). But once you stop getting regular paychecks, both kinds of debt can eat into your income. According to, the average household nearing retirement (ages 55 to 64) carries about $8,100 in credit-card debt. This amount drops to about $6,800 for people in their mid- to late 60s; but even that can be challenging to tackle when you’re living on a fixed income. Obviously, the best way to eliminate debt is to pay it off while you’re still bringing home a paycheck. There are still options, however, to make the process of debt payoff a little less painful post-retirement. Look into transferring your credit-card debt to a card that offers a low- or zero-rate introductory period—just beware of teaser rates that start low and end high. If you own a home, consider taking a home equity loan or opening a home equity line of credit to consolidate your debt. The interest rates on these loans are generally far lower than your credit card’s interest rate. 

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Spruce up your asset-allocation strategy (if necessary)

Asset allocation refers to how you divide your investments among the three major asset classes: stocks (which tend to be riskiest, but offer a higher return potential); bonds (which can be less risky than stocks, with a lower return potential); and cash or another interest-bearing, short-term investment option, like a savings or money market account (which are least risky, in exchange for a minimal return).

Traditional retirement investing wisdom goes something like this: the closer you are to retirement, the less risk you should take in your portfolio. In the past, many financial planners recommended subtracting your age from 100 to determine the percentage of your portfolio that you should keep in stocks. That’s because people who are decades away from retirement have more time to recoup potential losses that can accompany riskier investments; pre-retirees and those in retirement, on the other hand, generally focus on protecting the savings and investment gains they have accumulated over their working years.

However, one of the top concerns of retirees is the possibility of outliving their savings. If your entire portfolio is invested in the most-conservative option, it’s likely that your returns won’t keep pace with inflation, or the increase in cost of living. Throw in the fact that many people are now living 20 to 30 years (or longer) after leaving the workforce, and it’s clear that there is no one-size-fits-all strategy for post-retirement investing.

The best way to determine how to invest in the years immediately before—and following—your retirement is to consider your age, your anticipated post-retirement income and your personal level of risk tolerance. If you’re not sure what your risk tolerance is, take the investor questionnaire here. Keep in mind that your ideal asset allocation does not necessarily depend on your age: for example, some millennials may be nervous fully invested in stocks; while some baby boomers are comfortable with a larger-than-typical portion of their portfolio in more-aggressive investments. We also recommend that you assess your risk tolerance at least yearly; as you progress further into retirement, your risk profile will likely change, and you should adjust your asset-allocation strategy accordingly.

If you have any questions about retirement and your finances, leave a comment below. If you prefer to submit your question confidentially, click here to use our secure form, and one of our experienced financial professionals will respond shortly.

Alli Thomas

Alli Thomas has worked in the financial services industry for nearly 20 years, with a focus on retirement-related investing. She began her career as a FINRA-licensed participant-services call-center associate at Vanguard, and then moved to Principal Financial Group, where she worked closely with employers, assisting with retirement plan set-up and design, selecting appropriate plan investment offerings, and maximizing employee participation through targeted education campaigns and enrollment meetings. Alli has also worked as a qualified 401(k) administrator and registered investment advisor for several small investment firms. She now writes about all things investment- and finance-related, leveraging her extensive experience and passion for retirement planning to help investors make well-informed financial decisions.

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