Financial Policy Changes and How They Could Impact You in the Year Ahead
As the year draws to a close, looking back at our money, income, budgets and spending through the eyes of changing Federal, State and Local financial policies is important and helpful in accomplishing both our short-term financial goals and long-term plans in 2022.
Reviewing and planning in December can help paint the most complete picture of our finances and visualize our habits. Plus, with important deadlines around savings and taxes coming at the end of the year, it’s a great time to make sure you’ve covered any upcoming bills and informed about how changes in public policy and regulations can affect your assets.
Michael Kitces, Head of Planning Strategy at Buckingham Wealth Partners and publisher of the financial planning industry blog Nerd’s Eye View, knows that talking about money and the future during the already-busy holiday season can be stressful. But with just a few pointers, you could be set up to enjoy the new year with the peace of mind knowing you’ve planned and are prepared for success.
WATCH Your Money Map: Policy changes impacting retirement planning
Be Prepared to Adjust for Changes
As you evaluate this year’s earnings and plan for next year’s investments, be sure to stay on top of new announcements and policies that can affect your personal savings and plans for retirement. For example, just last month, the IRS announced that the 2022 contribution limit for 401(k) plans will increase to $20,500, and that new cost of living adjustments may affect pension plans as well as other retirement-related savings next year.
And there are new policies still being considered and could be implemented by Congress, State/Local governments in 2022. The Securing a Strong Retirement Act, also referred to as SECURE Act 2.0, includes provisions that would require some retirement savings plans to automatically enroll participants, create a database of lost retirement accounts to reduce the number of missing participants, and make changes to qualifying longevity annuity contracts. Keeping the implications of these and other potential changes could help you make any needed adjustments in your own retirement plans.
Retrace Your Steps
When you’re looking at this year’s expenses and planning for the year ahead, it’s important to get a comprehensive sense of where your money comes and goes.
- If you get health insurance through your employer, look at your FSA or HSA options and review the policies. Will you be allowed to roll over money that’s still in the account? Are you able to contribute more before the end of the year for tax purposes?
- Evaluate how much you’re contributing to a 401(K), especially in light of changing policies. The end of the year is the time to maximize contributions to make the most of available tax deduction.
- Take some time to review your home, auto, life insurance, and retirement income policies to determine if you have enough coverage and that any relevant beneficiaries are up to date.
- Review your monthly expenses. Did you have a budget set this year for essential expenses like your mortgage, food and utilities? If not, check out our Check Off The Basics guide to ensure you understand the money you will need each year to cover the essentials.
- If you give to charity, which causes did you give to this year, and how much? Do you have receipts or documentation for tax purposes?
Look to the Future
Between maxing out contributions to retirement savings accounts like 401Ks or IRAs, and having a clear financial picture in front of you, the end of the year is a great time to think about your retirement goals and stay abreast of any policy changes. The good news is there are financial professionals that can help.
In fact, a recent research study found that consumers who work with a financial advisor (66%) are much happier in life than those that don’t (34%). So, if you’re feeling overwhelmed, talking to a financial professional can help you think through and navigate some of these policy changes. When you do, there’s a strong chance you’ll feel more financially secure and confident going into 2022.