Everything you need to know to prepare for retirement

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How to Get the Most Out of Your Retirement Plan

Retirement. Something that once felt so far away is becoming more of a reality. And the years nearing and following your retirement are crucial because that's when your investment portfolio is at its greatest value and most heightened risk.

But even if you think you have a solid retirement plan, things like a dip in the stock market could threaten it. Your initial plan didn't factor in such events, and you fell victim to a false sense of security. So, where do you go from here?

Joseph Ready, head of Wells Fargo Institutional Retirement and Trust, offers the following advice to navigate this important time in your life.

Be flexible with your plan.

Continuously monitor your initial plan and mold it accordingly. This is called contingency planning and it's important for a smooth, easy retirement because it helps keep you on track with your investments during difficult periods in the market and other unexpected life events."Given today's market volatility I think it's really important to create some flexibility with your withdrawal strategy [which is when you pull your investments out of the stock market] for market cycles," says Ready.

Invest with a purpose.

Your portfolio is more than just a collection of investments. Take advantage of asset allocation, which means investing in various asset classes, and assign a purpose to each investment. Some should help provide financial stability, while others should increase your potential income, fight inflation, or add market liquidity — assets that can be bought or sold at stable prices – to your portfolio.

Understand the risks.

It's important to realize how risks tied to your investment portfolio could affect your retirement account. Ready advises taking the time to incorporate all of these different sources of assets and income because you may come out with a different portfolio and allocation strategy. Besides the sequence-of-returns risk, which involves the order of investments and how they influence a portfolio's value, there are five other types of risk: market/return risk, withdrawal rate risk, inflation risk, healthcare/unexpected expenses, and longevity risk.

Diversify your investments.

You've heard it before: Don't put all of your eggs in one basket. This rule also applies to your retirement strategy. Though some retirement income comes from social security, pensions, and annuities, the majority of it flows from investment portfolios, which most likely includes a significant portion held in a 401 (k), and a defined contribution plan. This is especially true for younger generations who are facing retirement without a pension and will rely heavily on their 401 (k) for retirement security.

Adjust your spending.

Look at your budget and expense plan in detail — it'll give you a better sense of your current and future needs. "It's crucial to have some level of income for your day-to-day bills; the basic essentials of living, if you will," explains Ready. Breaking down your budget will also help you figure out your spending flexibility and distinguish necessary expenses — like insurance and mortgage payments — from luxury expenses, like entertainment.

wells fargo expense report snapshot new for realShutterstock

Track your progress

At the end of the day, it's about whether your assets and expected income are meeting your expectations and will cover anticipated liabilities. One way to keep track of your progress is with Wells Fargo Advisors' Envision® profile. It helps you create an initial plan and records your possible success based off of your current portfolio, listed priorities, and investment results.

Wells Fargo Envision Dot Shutterstock

"Those who plan to save save three times more than those who don't," notes Ready. And the best way to prepare for retirement, he says, is to meet with a financial advisor who can help you tailor your plan.

Speak to Wells Fargo Advisors to figure out the best plan for you.

This post is sponsored by Wells Fargo.

Wells Fargo Advisors, LLC is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.

Find out more about Sponsored Content.

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