Buy Like Buffett: Three Tips for Better Retirement Planning

Yesterday was Labor Day. It's a federal holiday in which Americans celebrate all of the achievements of workers. Many people celebrate by attending cookouts, parties, or just relaxing. You probably found a fun way to spend your Labor Day weekend. Now that Labor Day is over, it's a good time to do a checkup on your retirement plan. Most people work to earn income so that they can pay their bills. The goal of every worker is to earn enough money so that they can one day retire.

Here are three tips that will help you reach your retirement dream a little sooner.

1. Check your asset allocation.
   
   The end of the year is rapidly approaching. It's time to check your asset allocation strategy and re-balance if necessary. Your portfolio could have easily gotten out of balance during the year. Has your portfolio become too conservative? Your portfolio may not contain enough risk to meet your long term goals. Maybe your portfolio has become too aggressive and stocks have become too large a percentage of your portfolio. Either way you will want to change your portfolio's mixture around.


2. Increase your savings percentage.
   
   There are two ways to catch up on your retirement savings. You either have to increase the return on your investment or increase the amount that you are investing. You may not be able to control the return on your investments but you sure can increase your contribution amount. Every year that passes you should aim to increase your contribution 1%. If you invested 6% of your paycheck last year, then increase that amount to 7% this year.


3. Check your funds performance.
   
   Did you have a red hot fund that beat the performance of the market? Did you have a fund that performed poorly and lagged the market for the entire year? You should take a look at your portfolio and see what investments underperformed and which ones outperformed the market. Resist the urge to chase past performance. You may find that it works better to allocate more money to funds that underperformed recently than placing more money in the hottest funds. Sectors that have done poorly over the past few years are much more likely to rebound than it is for a hot sector to stay on fire.

What steps have you taken to retire sooner?

Mark Riddix is the founder and president of New Horizons Financial Management, an independent investment advisory firm that provides personalized investing and asset management consulting. Mark is a regular contributor to Seeking Alpha and has written financial columns for Baltimore and Washington, D.C. area newspapers. Mark publishes his own financial blog, BuylikeBuffett.com and has written the book Your Financial Playbook.