Five Financial Planning Tips to Keep in Mind as You Wrap up 2022

Introduction

Financial planning is a dynamic process that requires adjustments to be made as time goes on. Whether it is economic changes (such as increased inflation rates and market volatility) or retirement contribution limit changes, having a fluid financial plan and roadmap is critical for long-term success.

Revising your financial plan allows you to assess how well your goals and objectives are being met. With the year drawing to a close, now is an excellent time to review and make sure your goals are still in alignment with your plan and where you want to be.

Consider these Five Planning Tips as the year comes to a close.

Review your Charitable Contributions and Determine What Your Year End Gifts Will Be

A prudent financial plan and roadmap considers strategies related to your income tax, appreciated assets, and your overall potential estate taxes.

As the year comes to a close, review your charitable contributions for the year. Did you reach your goal of contributing to the charities of your choice? Did your contributions align with what you wanted them to be? If not, consider how you can adjust for next year.

If you have long-term appreciated assets, capital gains may be deferred or eliminated and there may also be tax deductions. Can you combine multi-year charitable giving tax deductions into a single year?

Now is a good time to review your estate plan and make changes so that you pay as little tax as possible.

Does it make sense to use a Donor-advised fund dedicated solely to your named charities?

Prepare and Plan Next Year's Budget

No matter your net worth, creating a budget and plan is essential to ensure that you are not spending more than necessary. A budget and financial plan are a critical part of ensuring you stay on track with your financial goals. It can help ensure you stay within your budget for the year and allow you to prioritize savings goals, retirement planning, and other considerations that are integral to securing your financial future. Ultimately, a budget and plan builds confidence in your financial situation, which can help you feel more secure and less stressed.

Max Out Your Retirement and Health Savings Account Contributions

Your Retirement Plan

If you have a company sponsored matching retirement plan, consider what it takes to reach the maximum employer match. If you are not sure what the company match is, talk to your company's HR person or benefits person. They can help you calculate what you need to contribute to get the maximum benefit. Think of the company match as free money!

Individual Retirement Accounts (IRAs)

An Individual Retirement Account is another option to consider since you can contribute to them outside your company sponsored retirement plan. There are IRS provisions regarding your contributions and your earned income limits. If you are unsure about these limits, contact us and we can advise you on the best strategy regarding the different IRAs (Traditional or Roth).

Health Savings Plan (HSA)

If you are in a HSA eligible health plan, consider using an HSA for health related expenses.

A Health Savings Plan (HSA) is a type of savings account that can pay for out-of-pocket medical expenses. It's like a flexible spending account, except it has some key differences: you can use the money in your HSA for any medical expense, including prescriptions and dental care, not just things related to your employer-sponsored health insurance.

There are tax benefits for contributing to an HSA—tax deductions for your contribution and the earnings on the HSA and withdrawals are tax free.

Determine Your Annual Gifts to Grandchildren

When creating a financial plan, it's crucial to think about how you want your assets and estate distributed after your death. This is especially important if you have grandchildren who will someday be beneficiaries of those assets.

You can devise gifting strategies that fit into your overall financial and estate planning process. We can help you understand how federal and state tax laws apply to various gifting strategies, such as annual exclusion gifts or medical and educational gifts. We can also show you how giving through a 529 college plan or UTMAs fits into your overall financial roadmap.

Sit Down with Your Financial Advisor and Revisit Your Plan and Roadmap

A financial plan is more than a spreadsheet with projections and numbers — it's a roadmap for your future, guiding you toward the most important goals in your life. No matter the state of the market or economy, a financial roadmap has already taken into consideration the myriad of market scenarios and how each scenario would affect your individual plan.

Our goal is to review your roadmap with you and make sure it's still relevant in today's economic environment, so that even if the market were to take a downturn, you wouldn't be surprised or unprepared.

Conclusion

As the end of the year approaches, it is a good time to reflect on your progress and evaluate your financial situation. This can help you assess your accomplishments, identify areas for improvement, and create a plan for the coming year. Part of this process should involve reviewing your financial goals and objectives, and determining whether you are on track to achieve them. This may involve analyzing the results you have achieved so far, and making any necessary adjustments to your plan in order to move closer to your goals. By engaging in this process on an annual basis, you can ensure that your financial plan remains relevant and effective.