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If you want to thoroughly review your portfolio and plans, take these key steps. I recommend doing these exercises over a series of sessions rather than doing them all at once.
Step 1: Gather your documents
This could be your current investment statement, plus Social Security and pensions. Pro Tip: Set up a My Social Security account to understand your benefits and earnings history.
Step 2: Ask and answer: How am I doing?
To find out if you’re on track to achieve your financial goals, check your current portfolio balance and your savings rate. Count your contributions across all accounts. A good baseline savings rate is 15%, but higher-income people should aim for 20% or higher.
Also consider other goals you want to achieve, such as college funding or a down payment on a home. Are they realistic? Make sure you don’t neglect your retirement.
If you’re retired or about to retire, a key measure of your overall plan’s viability is your withdrawal rate — your planned portfolio withdrawals divided by your total portfolio balance. The 4% guideline is a good starting point, but try to reduce it if you can.
Step 3: Review your long-term asset allocation
Is your total portfolio of stocks, bonds, and cash aligned with your goals? High-quality target-date series, such as Vanguard and BlackRock’s LifePath Index Series, can help benchmark asset allocations. My model portfolio can also help.
For younger investors, a portfolio that is heavily or even entirely biased toward stocks makes sense.
If your portfolio is heavily stock-based and you’re less than 10 years away from retirement, a shift to bonds and cash is even more urgent. Please be aware of the tax consequences when rebalancing.
Step 4: Assess fluid reserves
It’s crucial to keep some cash on hand to ensure you don’t have to dip into your investments or resort to credit cards in a financial crisis.
For retirees, I recommend holding cash portfolio withdrawals for six months to two years.
For those who are still working, having three to six months of living expenses in cash is a good place to start.
Step 5: Assess reallocation, industry positioning and holdings
Your exposure to a broad range of asset classes largely determines the performance of your portfolio. But it’s also worth looking at your positioning within each asset class. Market strength has expanded recently, but growth stocks and the funds that own them have outpaced value by a wide margin over the past decade.
Finally, check your industry positioning, allocation to foreign stocks, and actual holdings.
Step 6: Identify streamlining opportunities
Why have a large number of accounts and assets when a more compact portfolio can do the job?
If you change jobs, you may have multiple 401(k)s and rollover IRAs. Consider consolidating into an IRA. If you have several small cash accounts, you may lose a (slightly) higher profit.
Can you reduce the number of holdings in your portfolio? Index funds and ETFs provide pure asset class exposure and substantial diversification within a single portfolio. I also like target-date funds for smaller accounts to provide diversification without any maintenance obligations.
Step 7: Manage tax efficiency
At this point, if you think you need to make changes, be sure to consider taxes and transaction costs. Concentrate all sales in your tax-sheltered account so you don’t incur tax costs and often avoid transaction costs as well. In your taxable account, review the tax implications and/or obtain tax advice before executing a trade.
Also check that you are managing your portfolio with an eye toward tax efficiency. Do you contribute to your tax-sheltered vehicle? Are your taxable accounts as tax efficient as possible? For many people, this is as simple as holding stock ETFs and/or municipal bonds and bond funds for a taxable account. Finally, consider tax-efficient withdrawal sequencing.
Step 8: Rule out other risk factors
For those who are neither wealthy nor qualified, the risk of uninsured long-term care is a significant factor Medicaid. Have a plan in place in case you have significant long-term care expenses down the road.
Another common risk factor is providing help to a loved one. In this situation, it’s often helpful to speak with a financial advisor and/or estate planner to learn how to help without jeopardizing your financial future.
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This article is provided by The Associated Press morningstar. For more personal finance content, visit https://www.morningstar.com/personal-finance.
Christine Benz is director of personal finance and retirement planning at Morningstar.
Related links
1. 5 Smart Ways to Diversify Your Portfolio in 2026
https://www.morningstar.com/portfolios/5-smart-ways-diversify-your-portfolio-2026
2. 8 reasons why you might need to shake up your investment portfolio
https://www.morningstar.com/portfolios/8-reasons-you-might-need-tweak-your-portfolio
3. An investment guide for every stage of life
https://www.morningstar.com/personal-finance/an-investing-guide-every-life-stage
