2022 has been a year for the record books in many ways - The financial world and investment markets have experience numerous record breakers, and many of those have not been good. Even in a year like this with lots of negative noise and news, we still want to stay on track toward our financial goals. As a financial advisor, there are several key steps I recommend that every one should consider each year.
3 Simple Steps to Stay on Track Toward your Goals!
1. Increase the Amount You are Setting Aside for Your Goals.
This may seem counter-intuitive in a volatile market environment, but one simple step is to increase the amount you are investing for retirement, college expenses, etc by 1% at the beginning of each year. For example - if you currently invest 4% of your salary into your 401(k), change your allocation to 5%.
Using this technique can have a big impact on your savings over time without much pain in the short term. Investing an additional 1% of a $6,000 monthly salary would mean putting an additional $60 per month into your investment or retirement account. Making this small change every year can add up to big results down the road. Read more about this simple tool - called Dollar Cost Averaging HERE.
2. Maximize your Retirement planning with Tax-Advantaged Investment Accounts
Prior year Traditional IRA and Roth IRA contributions can be made all the way up until the tax filing deadline—April 18 this year. The same holds true for Health Savings Accounts. Don't miss the opportunity to save additional funds and decrease your future tax bills!
For self-employed individuals who want to maximize their annual contributions, Simple IRA salary deferrals can be made all the way up until 30 days following the end of their tax year. For many businesses, this results in a contribution deadline of January 30th. Each year has its own contribution limits, so contributions missed in one year cannot be made up later.
In 2023 contribution limits for retirement accounts are increasing. If you make monthly contributions to a Traditional or Roth IRA you will want to increase those amounts so that you can make the maximum contributions. For individuals under 50 years of age the new limit is $6500/year. For 50+ the amount is $7500. Employer-sponsored plan (401(k), 403(b), etc) limits are increasing as well, so you may want to increase your payroll deduction if you plan to meet the maximum limit.
3. Revisit Your Goals
A navigation system will only get you where you want to go if you put in the correct destination. Your financial advisor should be like your navigation system, telling you which turns to take and which moves to make to get you where you want to go.
However, you have to make sure that your advisor is aware of where you want to go and when you want to get there.
Your financial plan should be ever-evolving - continuing to change as you navigate your ever-changing life.
Take some time in this new year to think through your goals and how they may have changed over the past 12 months. If your goals and time- horizons look different this year, then your financial plan should be updated.
As you look forward to the year ahead, take advantage of every opportunity available to improve your financial health and advance along your True Wealth journey. Make small changes, take advantage of time-sensitive opportunities, and revisit your future goals.
Accomplishing these tasks now can go a long way towards making 2023 (& beyond!) a huge success.
Andy Anderson, CFP®