A new year can bring about a new mindset and optimism, but it’s also important to have a plan to deal with the challenges we could face. We could see high inflation, a volatile market, and higher taxes, and it’s important to have a plan in place to address these concerns. Here are some ways to be prepared for 2022.
How Will You Deal with Inflation?
Inflation can eat away at your retirement savings and could negatively affect the market. The last time the inflation rate was over 5%, the U.S. was in the Great Recession.[1] Consider the long-term impact of inflation on your savings – how much could your purchasing power decrease over the next 20 years? For example, after 20 years with a 2% inflation rate, $1,000,000 would only have the buying power of $672,971.[2] There are ways to plan for and protect yourself against the risk of inflation.
Review Your Current Investment Strategy
Your risk tolerance may have changed as you’ve gotten closer to retirement or have retired, and your investment plan should take this change into account. While we saw record highs in the market in 2021, there’s no telling what could happen in 2022 or beyond. It can be hard to chart a course when you consider market volatility, increasing average lifespans, low interest rates, and other potential retirement risks. Review your investment strategy and prepare for 2022 with your trusted advisor, who can base a plan on your specific situation.
Create a Long-Term Tax Minimization Strategy
April 15th seems far away but start getting ready to file now. Gather all of your important documents and review any opportunities for deductions you might have. Also, think beyond your taxes for the 2021 tax year to the coming decades – we could see taxes increase, and now is the time to create a long-term tax minimization strategy. This could mean converting part or all of your traditional 401(k) or IRA to a Roth IRA, pursuing tax-efficient investing strategies, and/or creating an estate plan that helps you pass more of your wealth on to your loved ones. There’s no one solution that fits everyone, but there are ways for anyone to create a tax minimization strategy.
Planning for your future is more important than ever, as is having a dedicated team to help you throughout retirement. We can help you address all areas of retirement planning, such as investing, healthcare, income, and taxes. Make 2022 the year you plan for your future, starting with a complimentary financial review. Sign up to schedule a time to speak with us in the new year. We look forward to it!
[2] https://www.buyupside.com/calculators/inflationjan08.htm
