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By Christine Benz | 09-25-2017 11:00 AM

Look Ahead to Your Retirement

In Week 3, it's time to simplify your investment life by streamlining your portfolio and creating helpful documents that every investor should have.

Christine Benz: Hi, I'm Christine Benz for Morningstar.com. In our special series, 21 Days to Improve Your Financial Life, we're going to help you improve your financial well-being, one day and one job at a time.

Week 3 is all about looking forward--up to and into your own retirement. I often speak to groups of retired investors, and one of the key messages I try to impart is the virtue of simplifying their investment lives. Simplifying a financial plan is an absolutely worthy goal at any life stage, but I think it's particularly important for older adults. Our portfolios often get more complicated as we age, but as we get older we may have less of a desire or an ability to manage a complex financial plan.

I have a few key tips for simplifying. One of the first--and it sounds like a joke but it really isn't--is to see if you can't consolidate your investment strategy onto a single 4 by 6-inch notecard. If you can't cram your basic strategy onto the card and explain it in a way that a layperson could understand, that's an indication your strategy could be too complicated for its own good.

I'm also a big believer in creating a basic investment policy statement--that's a document that spells out what you’re trying to achieve with your investment portfolio and how you'll select and monitor your investments. Having an investment policy statement helps ensure discipline; if you've gone to the trouble of writing out an IPS, you'll be less likely to override it at the wrong time. Having an IPS also makes you less susceptible to trendy investment types that you probably don't need.

Retirees should also draft a retirement policy statement, a document detailing how they'll approach generating cash flows from their portfolios. Such a document can be used in conjunction with an investment policy statement. We've created templates for both investment and retirement policy statements on Morningstar.com.

Thanks for watching. I’m Christine Benz for Morningstar.com.

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