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Dream Again

Close to Retiring? Make Sure You're Ready

Fine-tune your plan as retirement nears.

Over the years, Ann Middleman, a 64-year-old marketing consultant, has been diligent about contributing to her retirement accounts and adjusting her asset allocation to match her risk tolerance. Now that she's just a few years away from retirement, she is again adjusting her retirement portfolio to better reflect her appetite for risk. "I moved from a growth strategy to an income strategy," she says. "I'm staying away from riskier investments, even though they could have higher returns."

As you get closer to retirement, it's time to assess at least these components of your plan for retirement:

Assess your goals.

Your life situation may have changed since you laid out your original vision for retirement. You might have decided to work part-time. Perhaps your children or extended family have moved away and you'd like to travel more to see them.

Whatever your goals, your retirement plan should take them into account. If it doesn't, you may need to adjust your contribution rate to reach your new target.

Review your asset allocation.

The tolerance for stock market risk often declines, and the desire for income-producing assets often heightens, as an individual gets closer to retirement. The key is making sure your assets are appropriately diversified to the level of risk with which you are comfortable.

Get an idea of the asset allocation that may support your retirement goals and your tolerance for risk by taking our Investor Profile Quiz.

Check your progress.

Estimate how much you can afford to withdraw each month once you're retired. A good rule of thumb is to begin your first year of retirement by withdrawing no more than 4 percent of savings and adjusting this amount in future years to help offset inflation. Test whether this guideline would work for you: If you were to withdraw this amount, would you be able to fund the life you want in retirement?

If you determine you don't have enough savings to cover the income you'll need in retirement, you may have a savings gap. In that case, consult a financial professional. He or she can suggest ways to help increase your contributions, adjust your asset allocation and help you develop a strategy that suits your unique needs.

Identify any retirement savings gaps.

Use our interactive retirement planning tool. It can help point out potential shortfalls and suggest possible solutions to close them.


Insurance products and plan administrative services are provided by Principal Life Insurance Company a member of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.

t1110060c15 [From Winter 2011 Plan Ahead. Get Ahead.]

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