Important Year-End Financial Strategies

by By Michael Vaughn, CFP®

Most of us entered 2021 with a lot of hope—hope that the new year would bring an end to the pandemic and life would go back to normal. Instead, we saw the uncertainty continue and extend even further. Concerns about inflation, potential tax changes, and long-term purchasing power have many people wondering if next year will be any better. I understand your concerns. But 2022 doesn’t have to follow in the last two years’ footsteps. 

There are plenty of strategies to regain control of your finances and set yourself up for a successful 2022 and beyond. Consider these 5 tips to cover your bases before 2021 comes to a close.

1. Review Your Taxes

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.

2. Review Your Asset Allocation & Invest With Impact

The end of the year is also a great time to review your asset allocation strategy. 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. 

3. 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.

4. 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.

5. 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. 

And considering President Biden just passed the bipartisan Infrastructure Investment and Jobs Act, (1) and the Build Back Better plan may also soon be passed, (2) changes could soon occur nationwide (3) that may affect your financial picture.

Partner With a Professional

Our goal at Pinnacle Family Advisors is to make your wealth work for you and not the other way around. We can help you take back control of your finances after a rocky couple of years, and together let’s achieve your New Year’s financial resolutions in 2022! Schedule your complimentary introductory meeting by emailing me at [email protected], calling (417) 351-2942, or using my online calendar.

And given that the holidays are upon us, check out my short 3-minute video on tips to save during the holidays!

About Michael

Michael Vaughn is a CERTIFIED FINANCIAL PLANNER™ professional and Vice President at Pinnacle Family Advisors (PFA) with 20 years of industry experience. Before joining the PFA family, he served clients with investment management and retirement planning at The Mutual Fund Store for 14 years. Michael graduated from Missouri State University with a bachelor’s degree in business administration and management and earned his CFP® certification in 2004. He also served 20 years in the Missouri National Guard, retiring in 2007 as a Major. He currently volunteers on the board of directors for Good Dads and Fellowship of Christian Athletes. Michael is married to Lori and they have two daughters. To learn more about Michael, connect with him on LinkedIn.