• 5-Minute Article
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  • Dec 17, 2018

6 Questions to Ask an Advisor During an Annual Meeting

An annual retirement plan checkup is the chance to update your advisor about your financial situation and discuss topics that can help keep you on track.

6 Questions to Ask an Advisor During an Annual Meeting

Regular communication is key to getting the most out of your relationship with your financial advisor. That’s why most advisors conduct annual retirement plan reviews to help measure your progress and evaluate any changes to your priorities and goals.

These yearly checkups typically include an analysis of portfolio performance, which may lead to adjustments in your plan, and these meetings are also an opportunity to evaluate your overall retirement strategy, including your mix of savings vehicles and financial products. While each person’s financial needs are different, a comprehensive review of several important topics can identify areas of your plan that may require attention.

Here are six questions to ask your advisor during an annual review of your retirement plan.

Is My Portfolio Properly Diversified for Market Changes?

Markets experience regular cycles of growth and downturns, and various types of investments perform differently in these environments. Diversification, which is holding a mix of different types of stocks, bonds, and other investments, helps smooth out a portfolio’s performance during these market shifts.

During your annual meeting, talk to your advisor about the market outlook for the next year and beyond, and how those conditions might affect your portfolio. Based on that analysis, an advisor may suggest changes to keep your portfolio well diversified.

Even with proper diversification, the potential for downturns during retirement might require you to temporarily reduce withdrawals to ensure your savings last as long as you need them to. Diversifying your retirement plan with additional financial products that aren’t directly invested in the markets can offer an extra layer of income stability.

For example, adding an index-linked annuity to a portfolio can help protect retirement income from market volatility. These annuities provide the opportunity to participate in the market’s growth potential by tracking a market index that the annuity owner chooses. If that index performs well, the account earns interest up to a cap, or maximum, set by the insurance company. If the index performs poorly, the account value is cushioned from a portion of losses.

Learn more about diversification:

Is My Plan Optimized for Tax Efficiency?

Your tax liability can change in the course of a year, and any changes to your tax situation should be discussed with your advisor. For example, you may move into a new tax bracket due to a new job or a change in your salary. Eligibility for certain tax breaks also can shift with age or the makeup of your family.

As you begin the countdown to retirement, you might be ready for a more detailed discussion with your advisor about how to manage taxes on retirement income. An advisor can help examine your retirement income sources and calculate the potential tax treatment of each one. Ask your advisor about opportunities to diversify your retirement income tax strategy, such as by complementing taxable income from IRAs and 401(k)s with income sources that are not fully taxable.

Learn more about diversifying your tax strategy:

How Will Inflation Impact My Plan?

The rate of inflation varies, and during a retirement that might last decades, rising prices may result in higher-than-expected retirement expenses. At your annual review, take the opportunity to discuss projected rates of inflation and the potential impact of rising costs on your retirement.

You may decide to review strategies to keep savings ahead of rising costs without increasing exposure to volatile market investments. The right mix of products may also provide growth potential and guaranteed income.

Learn more about diversifying your tax strategy:

Am I Well Protected Against Outliving My Retirement Savings?

Life expectancies are increasing, making it especially important to preserve savings for the duration of your retirement. With this in mind, talk to your advisor about the amount of guaranteed lifetime income in your plan.

For example, an advisor can help estimate how much you may receive from Social Security. You also can examine the impact of claiming your Social Security benefits at different ages. If applicable, an advisor can help assess the impact of any pension income you might receive.

If this review reveals a need for additional guaranteed income, consider asking your advisor if an annuity can help close that gap. Annuities can provide guaranteed lifetime income that will last as long as your retirement does.

Learn more about the role of lifetime income in retirement planning:

Do I Need Additional Assets to Cover Health-Related Expenses?

Changes in your health status over the course of a year can raise new concerns about managing health-related expenses in retirement. For example, if you were counting on investment growth to cover the cost of healthcare or long-term care in retirement, you might be less comfortable with that strategy when facing potential market downturns.

Some types of life insurance with optional features can help cover medical expenses and long-term care. These optional features, or riders, provide tax-free income to help pay for medical bills or long-term care services.

Learn more about planning for medical expenses in retirement:

Should I Update My Legacy Plan?

The annual review is a good time to revisit the question of supporting your loved ones beyond retirement. For example, an advisor can assess whether retirement plans cover both spouses’ income needs in the event that one partner is no longer there. Changes in the makeup of a family, such as the addition of grandchildren, may also require a change in a legacy plan.

Learn more about optimizing your legacy plan:

Conversations Create a True Partnership with Your Advisor

An annual retirement plan checkup is the ideal opportunity to review and optimize your strategy—and to strengthen your relationship with a financial advisor. While your retirement strategy is built for the long term, it’s important to review that plan periodically to stay on track for your goals.

Spend time before an annual meeting to consider any changes in your circumstances or financial goals that might affect these six topic areas. That preparation will set the stage for a good conversation that helps your advisor address your concerns and ensure that your plan is properly designed to achieve the retirement that you desire.