Routine Annual Checkups

As an investor, take time out to review your portfolio and its performance at the end of each year. When you get closer to retirement, it's a good idea to build some extra time into this annual check up to monitor your progress toward retirement, spot deficiencies and take corrective action.

Review performance

You can't judge performance in a vacuum. Check the performance of each fund you own against its benchmark index and peer group.

Negative performance is not necessarily bad — if it's been a bad year overall. And positive performance may not be all that good, if your fund lagged its competitive universe by a mile. You're not looking for home runs, but if you spot a fund that consistently lags both measures, it may be time to investigate.

A fund's portfolio manager is required to discuss the reasons for performance in the fund's annual report. Read it carefully and keep a long-term view on performance. It's generally not a good idea to make quick decisions on buying or selling a fund.

Check asset allocation

If the funds in your retirement portfolio have strayed from their target allocations — that is, the allocations you selected for them in your overall plan — consider rebalancing to bring them back on track.

For example, if your plan calls for a 50/50 split between stock funds and bond funds and they ended the year divided 47/53, simply exchange enough bond fund shares for stock fund shares to return your portfolio to 50/50.

It's a good idea to rebalance at least annually to maintain your desired level asset allocation. You can rebalance by cutting back on the positions that are larger than their target and adding to any positions that are smaller than their target amounts.

Rebalancing keeps your plan on target and helps you manage risk. It's also an easy way to position your investments for a cyclical change in market performance.

Rebalancing in your tax-deferred accounts has no tax consequences. However, there may be tax implications to rebalancing a taxable account, so consult a tax professional for guidance before you act.

It may be a good idea to adjust the risk level of your asset allocation as you near retirement. Give yourself a window of three to five years to prepare your portfolio to generate income and to weather volatility as your need for income comes closer.

Review your contributions

Look at the amount you contributed to all tax-deferred accounts in the prior year. Commit to raising your contribution in the year ahead. Take advantage of today's higher limits on contributions — and catch-up contributions available to anyone age 50+ on many tax-deferred plans. Limits change frequently, but not necessarily every year.

AARP Financial Inc. does not provide tax advice. Please consult a tax advisor for information pertaining to your particular situation.

The information and content provided herein is general in nature and is for informational purposes only. It is not intended, and should not be construed, as a specific recommendation, or legal, tax or investment advice, or a legal opinion. Individuals should contact their own professional tax or investment advisors or other professionals to help answer questions about specific situations or needs prior to taking any action plan based on this information.

The Financial Advisors are investment adviser representatives of AARP Financial Inc., an investment adviser.

While AARP endorses the services provided by AARP Financial Inc., AARP does not offer financial products or services itself and cannot recommend that you or any specific individual should purchase any particular product or service. AARP Financial Inc. is an investment adviser and a subsidiary of AARP.