2022 Financial Planning Checklist: 10 Things to Consider
We want you to have a great financial start to the new year. In this article, we highlight several financial planning areas with 10 things to consider in 2022.
Savings Considerations
1—Are you maxing out your retirement contributions to your employer plan?
Actions to Consider: Deferral limits increase in 2022 to $20,500 for most plans. Simple plan limits increased to $14,000, while traditional IRA and Roth limits remain at $6,000. There are catch-up contributions for those over age 50.
2—If you are in a high-deductible health plan or one is available to you, are you contributing to your Health Savings Account?
Actions to Consider: Health Savings Accounts (HSAs) are one of the best tax savings strategies around as you never pay tax on withdrawals as long as they are used for healthcare expenses. Single contributions max out at $3,650, while family plans have a $7,300 maximum annual contribution. However, HSAs are not for everyone — you need to review your healthcare expenditures and make sure you can cover the higher out-of-pocket expenses associated with the plan.
Estate Planning
3—When was the last time you reviewed your estate plan?
Actions to Consider: You might want to review your estate plan with your advisor and attorney to make sure you have all the legal documents in place to minimize taxes and lessen the burden on your family should anything happen to you, including properly titling assets such as a home or non-retirement accounts.
4—Have you checked the beneficiaries on your retirement accounts recently?
Actions to Consider: You should review your beneficiary designations on an annual basis. Your situation may have changed, and it is possible that banks and other custodians may not have the correct information on file, so it is a good idea to check.
Charitable and Family Gifting
5—Are you required to take distributions from your retirement accounts?
Actions to Consider: Required minimum distributions start at age 72. Starting at age 70 1/2, you are allowed to give directly to charity from your IRA through a qualified charitable distribution, so the income bypasses your tax return. This can also help you avoid the Medicare surcharge, depending on your income level.
6—Do you have appreciated stock?
Actions to Consider: You may want to transfer appreciated stock directly to charity or a donor-advised fund to avoid capital gains taxes and time your charitable deduction for a higher-rate year. You would then have plenty of time to disburse the funds to the charities of your choice if you use a donor-advised fund.
7—Do you make annual gifts to your family?
Actions to Consider: Annual gifting limits per person increased from $15,000 to $16,000. This is the first time we have seen an increase in several years.
Insurance
8—Do you know if your current life insurance fits your needs?
Actions to Consider: Many people are surprised to discover that their policies are much lower in value than they thought, or that their term insurance expires soon. Ask for an in-force illustration to review your coverage if you have any policy that is not a term policy. Your advisor can assist with a needs assessment to make sure you have enough coverage. You may even find out that you no longer need the level of coverage you currently have, depending on your situation.
9—Would you or someone in your family benefit from having insurance for long-term care?
Actions to Consider: Lack of healthcare planning can significantly affect your finances. Healthcare costs continue to rise, including the cost of long-term care. The U.S. Department of Health and Human Services estimated that 52% of the population will need long-term services and supports after age 65.1 Your advisor can help you review your options and determine the types of coverage that might be appropriate based on your personal situation.
ROTH IRA Accounts
10—Do you know your marginal tax rate?
Actions to Consider: You might want to consider strategic Roth conversions in lower-bracket years. If you are retired and have not started taking Social Security, you could be in an ideal situation to convert portions of your IRA to a Roth to reduce future taxes. If your children have earned income, consider opening Roth accounts for them — up to the level of their earned income or $6,000, whichever is lower. This is a great way to get a head start on their retirement savings.
As of the date of this article, Congress has not passed any new tax and/or estate legislation. However, we anticipate there will be some legislative action at the federal level in 2022. We will continue to monitor the estate and tax landscape for any significant changes that may require revisions to your financial plan.
SOURCE
1 Melissa Favreault and Judith Dey, “Long-Term Services and Supports for Older Americans: Risks and Financing Research Brief.” U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, June 30, 2015 (Revised February 2016).
