Revisiting Your Annual Financial To-Do List

Many of us tend to think of our larger financial plans at the beginning of the year as part of our New Years’ resolutions, but these often get pushed aside throughout the year as life gets in the way. As we quickly approach the start of a new year, now is an excellent time to revisit your financial goals and objectives to determine if you did all you can to maximize progress on these efforts in 2022 to ensure you’re set up for success in 2023.

Could You Be Contributing More to Your Retirement Plan?

Did you change jobs or receive a raise in 2022? Don’t forget that you have options to use your extra income to help you fund your retirement, such as opening an Individual Retirement Account (IRA) or an investment strategy.

In 2022, the contribution limit for a Roth or traditional IRA remains at $6,000, or $7,000 for those making “catch-up” contributions. Catch-up contributions allow people aged 50+ to save more in their 401(k)s and IRAs than the usual annual contribution limits. The idea is to make up for the years they didn’t save enough, probably when they were young.

For IRAs, there are limits to how much you can invest.

• Your Modified Adjusted Gross Income (MAGI) determines your eligibility to make contributions to a Roth IRA, as well as how much you can contribute (varies if you are single or married filing jointly).
• With a traditional IRA, you can make contributions if you (or your spouse if filing jointly) have taxable compensation, but income limits are one factor in determining whether the contribution is tax-deductible, according to thefinancebuff.com.

Additionally, if you have extra money accumulating, you can also consider using these dollars in an investment strategy which can help you achieve your short and long-term goals.

Pay attention to asset allocation.

Tax-efficient asset allocation is one factor that must be considered when maintaining your investment strategy. Asset allocation involves dividing your investments among different assets, such as stocks, bonds, and cash. The allocation that works best for you changes at different times in your life, depending on how long you have to invest and your ability to tolerate risk. All asset classes don't move at the same pace or in the same direction and that's why having the right mix is important. Meet with your financial advisor to review your investment strategy to ensure it is still on pace for your objectives and goals for the year, and your tax advisor on the implications of these decisions.

Review your withholding status.

Adjustments should be considered if:¹

• You recently married or divorced.
• You have a new job.
• Your earnings have been adjusted.
• You tend to pay the federal or state government at the end of each year.
• You tend to get a federal tax refund each year.

Did you get married or add a child or new dependent?

If so, now may be an excellent time to review the beneficiaries of your retirement accounts and other assets. The same goes for your insurance coverage. Additionally, retirement accounts may need to be revised or adjusted. It can be a good time to meet with your financial advisor to chat about your financial plan as a whole and adjust goals based on your new situation.

Make a charitable gift.

Did you make a sizable donation in 2022? You may be able to claim the deduction on your tax return, provided you follow the Internal Review Service guidelines and itemize your deductions. If you have dollars allocated for charitable giving, don’t wait until the last minute to portion those out.

Consider the tax impact of any substantial transactions.

Did you sell any real estate? Start a business? Maybe you had a good amount of commissions or bonuses come your way? Or you sold an investment that is held outside of a tax-deferred account? All of these factors will impact your financial position. Consulting with your tax and financial advisor will ensure you are on the right path to handling these proceeds (taxes and how to invest or use those dollars to help you get closer to your end financial goal).

If you are retired and in your seventies, remember your RMDs.

In other words, don’t forget about your Required Minimum Distributions (RMDs) from retirement accounts. In most circumstances, once you reach age 72, you must begin taking RMDs from most types of these accounts, according to irs.gov. Your financial advisor can help you choose which investments to liquidate to meet your RMD. They can also assist you in how to re-invest these funds if you do not have plans for them.

It is a good financial practice to periodically revisit your financial plans throughout the year, and what better time to start fresh than the start of a new year. Don’t be afraid to ask for help from professionals who understand your individual situation!

If you do not have a financial advisor, we would welcome the opportunity to meet with you discuss your goals and aspirations. Even if you already have a financial advisor from another firm, we can also review your current investments, objectives, and risk tolerance to make sure you are on track. Let’s connect.