Happy New Year! It’s hard to imagine it’s 2022, but here we are. Below are twenty-two ideas you can incorporate to make next year your best investment year ever!
- Create a spending plan so you can spend with confidence. Review last year’s bank and credit card statements to see if there are opportunities to increase spending or reduce expenses.
- Develop a financial plan. A well-constructed financial plan prioritizes and quantifies your goals and aligns your investments to your objectives, so your assets are working in concert for your benefit.
- Max out your 401(k) contributions. The maximum contribution jumps to $20,500 in 2022. If you’re 50 or older, you can add another $6,500 to your account.
- If you’re a high-income earner ($129,000 if single, or $204,000 if married), consider a Roth 401(k).
- Fund your IRA. The maximum contribution for an IRA is $6,000, and if you’re 50 or older, you can deposit another $1,000.
- Do you own a professional organization like a law practice, CPA firm, medical practice, architectural firm, etc.? If so, consider incorporating a cash balance pension plan. It will benefit older employees looking to contribute significant amounts of money to a retirement plan.
- Consider adding a profit-sharing plan to your 401(k) if you own a business. It will give you the flexibility to make additional contributions to your retirement account.
- If you’re self-employed, open a SEP-IRA or solo 401(k) plan.
- Give money away. The IRS allows you to give $16,000 per person per year without tax consequences to either party. For example, if you’re married and have ten kids, you can give away $320,000 every year. If you decide to give more money, it will apply to your lifetime gift tax exemption of $11.7 million if you’re single or $23.4 million for married couples.
- Give more money away. Consider donating assets to groups or charities you support. Currently, you can deduct 100% of cash donations from your adjusted gross income. In addition to donating cash, you can give appreciated assets like stocks or real estate.
- Open a Health Savings Account if you participate in a high-deductible medical plan. The maximum contribution for 2022 is $3,650 for individuals or $7,300 for couples. If you’re 55 or older, you can add another $1,000.
- Review your risk level. How much risk are you willing to accept to achieve your investment goals? A risk assessment will gauge your risk level and assess your portfolio’s holdings. You may be surprised by your results.
- Review your beneficiaries. Did you have any life events in 2021 – birth, marriage, divorce, death? If so, update your beneficiary information for your retirement accounts, life insurance policies, wills, trusts, and so on.
- Update your will or trust. Is it time to make changes to your estate plan? Does your will or trust need a refresh?
- Create an estate plan. If you don’t have a will or trust, there is no time like the present to create one. An estate plan can protect you and your family from several financial calamities.
- Review your insurance policies. If you have a mortgage, children, a non-working spouse, then insurance is a must. A term policy will satisfy most family situations. And, yes, a non-working spouse needs life insurance.
- If you’re 55 or older, consider getting a quote for long-term care insurance. A long-term care policy can protect your family assets and offset the cost of an assisted living facility.
- Invest for growth. If inflation rises and interest rates remain low, equities will perform well.
- Invest for safety. If you are worried about a stock market correction from rising inflation or interest rates, invest in short-term bonds or cash. Your money won’t grow, but it will be available if you need it.
- Diversify your assets. Allocating your assets across stocks, bonds, cash, and borders will give your account exposure to thousands of securities spread out across the world.
- Rebalance your accounts. January is an excellent time to rebalance your portfolios to your intended asset allocation target. Rebalancing once per year is sufficient for most investors.
- Watch, listen and read. Consuming investment information through videos, webinars, podcasts, blogs, or books can improve your investment results. As Charlie Munger said, “In my whole life, I have known no wise people over a broad subject matter area who didn’t read all the time – none, zero.”
I hope this list helps you improve your investment results, and I pray that you and your family receive much peace, love, and joy in 2022.
To the person who does not know where he wants to go there is no favorable wind. ~ Seneca
December 27, 2021
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.