By Daniel Korleski, MBA
Our hopes that 2021 would bring an end to the pandemic and a return to normalcy didn’t quite pan out, did they? On the contrary, we saw that uncertainty could extend far beyond 2020. Concerns about inflation, potential tax changes, and long-term purchasing power have many people wondering if next year will be any better. I’m right there with you.
But 2022 doesn’t have to follow in the footsteps of the last two years. In fact, there are many ways to regain control of your finances and set yourself up for a successful 2022 and beyond! Before 2021 comes to an end, make sure your bases are covered with these 5 tips.
Review Your Taxes
One of the most important actions you should take heading into 2022 is to review your taxes and make any necessary changes in light of the potential passage of the Build Back Better Plan. This bill could have far-reaching implications for people in all tax brackets, and it’s important to review how your financial plan may be impacted. Some of the potential changes to be aware of include:
- Increased federal income tax
- New surtax on Americans making more than $10 million per year
- Increased capital gains tax
- Common tax-advantaged retirement strategies, including Roth conversions and backdoor Roth IRAs, could be eliminated or strictly regulated.
If you have significant estate assets, are planning to retire, or you are expecting substantial capital gains in the next few years, be sure to review your plan with a financial professional to ensure you are taking steps to mitigate any potential risk.
Review Your Asset Allocation & Invest With Impact
The end of the year is also a great time to review your asset allocation strategy and incorporate ESG and impact investing if desired. Given the dramatic rise of inflation over the last few months, it’s crucial that you evaluate your investments and make sure your portfolio is properly diversified. It should also be tailored to your specific risk tolerance level, ensuring that you are earning enough returns to keep up with inflation, but not overexposing yourself to risk.
If you are interested in using your funds to support environmental, social, or governmental issues (ESG), you can also consider impact investing as a way to earn returns while also promoting change on causes you care about.
Consider Charitable Donations
Charitable donations are another option that can be reviewed as year-end approaches. The holidays are a great time to give money and assets to your favorite nonprofits, churches, and organizations.
Charitable donations can be used as part of your overall tax strategy, or as part of a comprehensive estate plan. Both options provide many potential benefits, including supporting causes you care about, reducing your taxable income, and reducing your taxable estate.
Use Up Your Employee Benefits
While every employee benefit plan has its own rules and regulations, many of them expire or reset at the end of the year. You worked hard for these perks, so be sure to use them before it’s too late!
Medical and Dental Benefits
Now’s the time to take care of all your healthcare needs before your deductible resets. Dental plans in particular often have a maximum coverage amount. If you haven’t used the full amount and anticipate any treatments, make it a priority to set an appointment before December 31st.
Flexible Spending Account
Like your health insurance benefits, you’ll want to use up as much of your FSA (flexible spending account) dollars as possible by the end of the year since you are only allowed to carry over $500 each year.
Sick and Vacation Time
Depending on your company, your sick or vacation time might expire at the end of the year. Check with your HR department to learn about any expiration dates. If it does expire, fit in a last-minute staycation or take some time off to work on projects you’ve been putting off. If you need to make any trips to the doctor, schedule those appointments now to make use of paid-time-off benefits before you lose them.
Revisit Your Plans and Policies
Lastly, take another look at your estate plan and insurance coverage. If you took the time and energy to create an estate plan, check it periodically to ensure all the documents are up to date and no major details have changed.
Your insurance needs may also change as the year goes by, so periodically review your coverages and designated beneficiaries to bring them up to date to reflect your current financial situation. For example, if you paid off debt, you may not need as much life insurance coverage since your family’s liabilities have decreased. You might also want to evaluate your need for other types of insurance, such as long-term care or disability insurance.
Partner With a Professional
When you partner with our team at Cobalt Private Wealth, you’ll experience how our use of planning tools can provide financial peace of mind. After the last couple of rocky years, we can help you take back control of your finances—together, let’s achieve your New Year’s financial resolutions in 2022! Reach out to me at danielkorleski@cobaltprivatewealth.com or 719-332-3863 to schedule a meeting.
About Dan
Daniel Korleski is the President & CEO for Cobalt Private Wealth, where he helps his clients grow, manage, and protect their wealth so they can work toward a stronger financial future. With over 30 years of experience in the financial services industry, Dan has served as the managing director for Investment Trust Company, chief investment officer for the Wealth Management Group at American National Bank in Denver, and regional investment manager for the Greater Colorado Region of the Private Bank at Wells Fargo, where he oversaw the management of over $2 billion. In 2008, he was appointed by the mayor of Colorado Springs to the City’s Investment Advisory Committee. Dan holds an MBA in investment management from Midwestern State University in Wichita Falls, Texas, a Bachelor of Science in Finance from Florida State University, and is a member of both the CFA Society Colorado and The Financial Planning Association.
Dan loves to give of his time to his community and has served as Chair of the Board of Trustees of Pikes Peak Hospice Foundation, the Board of Directors of Catholic Charities of Central Colorado, President of the Broadmoor Rotary Club and Vice President of the Board for the Pikes Peak Chapter of Trout Unlimited. Dan was born and raised in Spain and is fluent in Spanish. When he’s not working, you can find him traveling around the world with his wife of 24 years, Montse, fly fishing, golfing, and hiking with his golden retriever, Curro. To learn more about Dan, connect with him on LinkedIn.
