by Patrick Huey, CFP®, CAP®, ATP
Owner and Principal Advisor, Victory Independent Planning

America Saves Week is Feb. 21-25, and since I’m writing this with Valentine’s Day also in mind, here are some wealth management and financial planning tips I’m telling my clients that I love for 2022.

1) Get ‘recession ready’

Relax, that isn’t a prediction for the coming year. Truth is, you need a plan for dealing with the inevitable changing of the business cycle now and always. The process of identifying your goals, objectives, resources and constraints is fundamental to proper execution during trying times.

Go back to your financial plan and review it. Make sure that your spending, tax and inflation assumptions are still valid. Run a few alternate scenarios to make sure your overall asset allocation has enough margin for error. If it doesn’t, then adjust your plan accordingly by trading off spending or reallocating for the long term. If it does, feel free to sit back and enjoy the show, preferable with someone special.

2) Be anti-social

Investors, even professionals, suffer from a host of mental shortcuts known as biases. Cognitive and behavioral researchers have identified numerous common ones, including confirmation bias: considering only information that validates a certain point of view. Unfortunately, serving up only information that you like or search for is how social media algorithms are built. Making major decisions based on biased information can lead to a lifetime of heartache.

3) Know an HSA from an FSA

If you’re lucky enough to participate in a health plan with an HSA (Health Savings Account) option, congratulations! Here’s how to make that work for you for years to come.

Many people make the mistake of using the HSA to dip into for current medical expenses, ignoring this benefit for the future. Stop treating that HSA like a Flex Spending Account (FSA) and make it a retirement asset instead. Current estimates are for the average couple to spend around $285,000 out of pocket over the span of their retirement. So, it’s clear that most of us will incur significant expenses later on that an HSA is uniquely positioned to address given the tax deferred growth and tax-free distributions for qualified medical costs.

If you’re a high or moderate-income earner and can pay out of pocket now for your medical expenses, you should. That allows you to effectively contribute an extra $3,650-$7,300, depending on age and marital status toward retirement where you will need to pay for medical care anyway. And if you don’t use the funds for healthcare, you can access the funds without penalty for general income after the age of 65. You can make the case here that you should fund your HSA before any other account that doesn’t have a match, because no other retirement account offers the potential for tax deferred growth and tax-free distributions. Be sure to have a healthy relationship with your HSA!

4) Give like you mean it

Too many people aren’t optimizing their giving because they tend to be what we call “checkbook philanthropists,” giving when asked instead of developing a strategic plan to maximize their impact in places they are most passionate.

Clients will spend days deciding how to give money to children or other family members as part of their financial and estate plans, but they might only spend a few minutes developing a similar plan for charitable organizations.

A Donor Advised Fund, with its formal structure, encourages clients to think more strategically and plan their charitable giving. Even those of modest means who have charitable intent can benefit from bunching their future contributions into a single tax year and taking advantage of the full current year deduction.

That strategy recently helped me keep a client out of the 22% tax bracket and avoid capital gains, a continuing issue as the market has been grinding higher. Have a strategic vision and make the love you give do as much as the love you get!

5) Forget tax ‘season’

The complexity and ever-changing regulations make tax planning a year-round activity. So, update all of your sources of income, including pension, wages, social security and retirement account distributions.

Then gather the current taxes you’ve had withheld and run a calculation to see if you have withheld too much or too little. Keep in mind that after a big run up in the stock market things like capital gains may alter the equation. You can always withhold more, if necessary, on any income you will receive in December, especially on things like IRA distributions.

The IRS has a decent withholdings calculator or have your tax preparer do the calculations for you. Either way, having a withholding review periodically before end of year might keep you from an unexpected tax bill in 2022 or from extending the government an interest free loan. I’m sure we’d all love to forget about taxes, but unfortunately they require more attention these days instead of less.

This February, with affection in the air, I’m sharing the love and these five tips with my clients, bringing confidence and clarity to their financial lives.

Patrick Huey, CFP®, CAP®, ATP is an independent advisor representative of Dynamic Wealth Advisors dba Victory Independent Planning, LLC. All investment advisory services are offered through Dynamic Wealth Advisors.