By Brian Bloxom, ChFEBCSM
The past year came with a lot of hopes. Hope that the pandemic would end and life would go back to normal. But as 2021 has shown us, uncertainty can extend far beyond 2020. Concerns about inflation, potential tax changes, and long-term purchasing power have many people wondering if next year will be any better. I get it. But 2022 does not have to follow in the footsteps of the last two years. There are many ways to take back control of your finances and set yourself up for a successful future. Make sure all your bases are covered before the new year with these 5 tips.
1. Review Your Taxes
One of the most important actions you should take heading into 2022 is to review your taxes and make any necessary changes in light of the potential passage of the Build Back Better Plan. This bill could have far-reaching implications for people in all tax brackets, and it’s important to review how your financial plan may be impacted. Some of the potential changes to be aware of include:
- Increased federal income tax
- New surtax on Americans making more than $10 million per year
- Increased capital gains tax
- Common tax-advantaged retirement strategies, including Roth conversions and backdoor Roth IRAs, could be eliminated or strictly regulated.
If you have significant estate assets, are planning to retire, or you are expecting substantial capital gains in the next few years, be sure to review your plan with a financial professional to ensure you are taking steps to mitigate any potential risk.
2. Review Your Asset Allocation & Invest With Impact
The end of the year is also a great time to review your asset allocation strategy and incorporate ESG and impact investing if desired. Given the dramatic rise of inflation over the last few months, it’s crucial that you evaluate your investments and make sure your portfolio is properly diversified. It should also be tailored to your specific risk tolerance level, ensuring that you are earning enough returns to keep up with inflation, but not overexposing yourself to risk.
If you are interested in using your funds to support environmental, social, or governmental issues (ESG), you can also consider impact investing as a way to earn returns while also promoting change on causes you care about.
3. Consider Charitable Donations
Charitable donations are another option that can be reviewed as year-end approaches. The holidays are a great time to give money and assets to your favorite nonprofits, churches, and organizations.
Charitable donations can be used as part of your overall tax strategy, or as part of a comprehensive estate plan. Both options provide many potential benefits, including supporting causes you care about, reducing your taxable income, and reducing your taxable estate.
4. Use Up Your Employee Benefits
While every employee benefit plan has its own rules and regulations, many of them expire or reset at the end of the year. You worked hard for these perks, so be sure to use them before it’s too late!
Medical and Dental Benefits
Now’s the time to take care of all your healthcare needs before your deductible resets. Dental plans in particular often have a maximum coverage amount. If you haven’t used the full amount and anticipate any treatments, make it a priority to set an appointment before December 31st.
Flexible Spending Account
Like your health insurance benefits, you’ll want to use up as much of your FSA (flexible spending account) dollars as possible by the end of the year since you are only allowed to carry over $500 each year.
Sick and Vacation Time
Depending on your company, your sick or vacation time might expire at the end of the year. Check with your HR department to learn about any expiration dates. If it does expire, fit in a last-minute staycation or take some time off to work on projects you’ve been putting off. If you need to make any trips to the doctor, schedule those appointments now to make use of paid-time-off benefits before you lose them.
5. Revisit Your Plans and Policies
Lastly, take another look at your estate plan and insurance coverage. If you took the time and energy to create an estate plan, check it periodically to ensure all the documents are up to date and no major details have changed.
Your insurance needs may also change as the year goes by, so periodically review your coverages and designated beneficiaries to bring them up to date to reflect your current financial situation. For example, if you paid off debt, you may not need as much life insurance coverage since your family’s liabilities have decreased. You might also want to evaluate your need for other types of insurance, such as long-term care or disability insurance.
Partner With a Professional
At Sentinel Wealth Partners, we can help you take back control of your finances after a rocky couple of years. Together, we can achieve your financial New Year’s resolutions in 2022! Reach out to us today by calling our office at 703-832-0164, sending an email to [email protected], or using our online calendar.
About Brian
Brian Bloxom is an Independent Financial Advisor, Chartered Federal Employee Benefits Consultant (ChFEBCSM), and Chartered Retirement Planning Counselor (CRPC) with 25 years of experience in financial advising. He founded Sentinel Wealth Partners to serve retirees, individuals approaching retirement, and individuals managing complex retirement plans such as company plans or federal benefits plans. His expertise and dedication to helping his clients achieve their goals make him a trusted resource that will help you feel confident in your customized retirement plan. Brian’s mission is to be available to his clients—all the time. He’s here to solve your problems, relieve your anxiety, and give you optimism for retirement. Because ultimately, your retirement should be about well-deserved enjoyment, and not about stress or anxiety. When he’s not working, you can find Brian spending time with his wife, Jessica, and their two sons, Spencer and Preston. He enjoys coaching soccer, serving in his community, golfing, and relaxing at his vacation home at Lake Anna, VA. To learn more about Brian, connect with him on LinkedIn.