11 tips to spring clean your retirement investments

The arrival of spring triggers a sense of optimism, a fresh start and a time to sweep out the cobwebs. As you spring clean your house, don't forget about your finances. This is the perfect time to take stock, review and set new financial goals to keep you on the path to retirement.

Too many people do not take ownership of their financial future, says Andrew Rafal, president of Bayntree Wealth Advisors in Scottsdale, Arizona.

"A financial spring cleaning starts with organizing what you have – assets and liabilities, reviewing your estate plan, understanding your insurance policies, creating and modifying your budget and shredding old documents," he says.

There are several areas of your personal finances that should be reviewed periodically, says Neil Krishnaswamy, certified financial planner at Exencial Wealth Advisors in Frisco, Texas.

"These don't all have to be done at one time, but you may want to make sure none of these areas go too long without being reviewed and potentially cleaned up," Krishnaswamy says.

Here are 11 tips to get you started.

Examine your debt. There is "good" and "bad" debt. Generally, high-interest credit card debt falls into the bad category, while student loans and home mortgages fall into the good category as they have the potential to help you increase your long-term level of financial security.

Take an active role in understanding your debt and how it could offset your long-term plan of financial independence, Rafal says.

"Eliminate high-interest debt as soon as possible, such as credit cards," Krishnaswamy says. "It may be less urgent to pay down other sources of debt such as home mortgage with a low, fixed interest rate."

Many financial experts recommend the goal of being debt-free by retirement. However, debt can be used intelligently in retirement, Krishnaswamy says.

"Examine your overall debt ratio, which can be as simple as looking at your total liabilities divided by your total assets," he says. "There's no magic number, but if you can keep your debt ratio at 25 percent or under, it may be a very reasonable and manageable load to carry, even in retirement."

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Track spending and create a budget. Develop an accurate monthly estimate that includes all spending – annual taxes, vacations, phone bills, holidays, internet fees and cable, says Willie Schuette, advisor and financial coach at the JL Smith Group in Avon, Ohio.

"This will help you to see what is going out and should give you a better understanding of where you can make adjustments and hopefully, save money," he says.

Assess financial progress. Investors should do this each year,saysEllen Jordan, senior vice president at Bryn Mawr Trust in Bryn Mawr, Pennsylvania. Having a financial advisor will help many investors accomplish this.

"Consider working with a financial advisor that will provide you with clarity and understanding of what you have saved today, and what you want your retirement to look like," Jordan says.

The path to creating real wealth is to focus on living within your means, Jordan adds. "Avoid the temptation to spend money you don't have," she says.

Pay yourself first and max out retirement contributions. If you are 50 years or older, take advantage of the catch-up contributions to individual retirement account or 401(k) plans. In 2017, the contribution limits for 401(k) plans: $18,000 annual contribution and $6,000 catch-up. For the self-employed it's even greater: SEP-IRA $54,000 and solo 401(k) plan $60,000, Jordan says.

Make saving for retirement automatic. "Investors can set up automatic annual increases to their contributions levels," Rafal says. "This type of set-and-forget type planning is instrumental in long-term investing success."

Adjust your paycheck withholding level. A lot of people have too much tax withheld, they get a nice-sized refund and feel like this a windfall, Schuette says.

"It is not, it is your money. You simply paid too much and gave the government an interest-free loan," he says. "The goal should be not to owe any money or receive a tax refund come tax time – that means you are withholding just the right amount."

Check your credit report. If you find errors in the report, work to correct them quickly.

"Credit scores are a key factor in the amount of interest you will pay for loans such as a mortgage or for a car," Schuette says. "A low score can cost you thousands over the course of a loan."

Review your investment in stocks and bonds. As you get closer to retirement, consider moving toward a more balanced portfolio to reduce risk and volatility, Jordan says.

"Once you stop working, you are shifting from a saver to a spender, and declines in market value can be more emotionally unsettling," she says.

Start to dream about retirement. Asking yourself questions and developing answers can help you develop a solid financial plan. Krishnaswamy suggests considering these questions:

  • When do you want to retire?

  • What lifestyle do you want in retirement?

  • How long a retirement, or life expectancy, do you want to plan for?

  • How willing are you to adjust your spending during retirement?

  • How much do you want to leave to family and charities when you're gone?

  • How do you intend to fund potential long-term care expenses in the future?

Consider establishing lines of credit. These include home equity, asset-based and through a reverse mortgage.

"All have various benefits and limitations but can be used intelligently to provide flexibility and liquidity during retirement," Krishnaswamy says.

Clear the financial paper clutter. Over time, financial paperwork and receipts tend to accumulate.

"If you invest in a decent scanner, you can convert all your paper into electronic form and clean up your clutter," Krishnaswamy says.

"Some financial documents you'll still want to keep in hard copy form, maybe even in a safety deposit box such as estate planning documents, life insurance policies," he says. "But many other financial documents it's fine to keep electronically."

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