Christine Benz: Hi, I'm Christine Benz for Morningstar.com
If you're trying to decide if your portfolio needs a tuneup, start with the very big picture: Is your plan on track? To answer that question, you need to take a look at whether your portfolio's current balance--combined with future additions or subtractions and a reasonable rate of return given your investment mix--is likely to help you reach your financial goals.
A holistic retirement calculator like T. Rowe Price's Retirement Income Calculator is a quick way to take stock of where your retirement plan stands, factoring in a lot of different variables like Social Security and the tax treatment of your investments. If you're using such a calculator, don't assume the strong gains of the past decade will necessarily continue. If you have a balanced portfolio, a 5% return assumption is reasonable; if your portfolio is more equity-heavy and you have a very long time horizon, you might take it up to 6% or 7%.
If you're still accumulating assets, your savings rate should be a key focus. The old rule of thumb that you should be saving 10% of your income is outmoded; most people saving for retirement should earmark at least 15%--and ideally 20% or more--of their income for savings.
If you're retired and in withdrawal mode, a major gauge of your plan's viability is your withdrawal rate. A 4% initial withdrawal in retirement, with annual inflation adjustments thereafter, is a reasonable starting point for sustainable portfolio withdrawals. But if your portfolio is particularly conservative or you expect to be retired for longer than 25 or 30 years, you'll need to employ an even lower starting withdrawal.
Thanks for watching. I'm Christine Benz for Morningstar.com.