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10 essential financial planning considerations for the second half of 2022

As we approach the second half of 2022, it’s wise to revisit your financial plan, assess your goals, and seek out new opportunities for financial wellness. Here’s our “top 10” list to help get you started.

Elderly woman sitting on a swing on a porch using a handheld tablet device.Benchmarking your financial goals at the start of the year through comprehensive financial planning is key on your path to financial wellness. But just as important are periodic year-round reviews of your financial portfolio, which can help you maximize your estate, tax, and philanthropic giving plans, and might even uncover new beneficial planning opportunities. Here’s our “to-do” list as we enter the second quarter of 2022.

1. Assess your portfolio strategy

2022 has presented investor concern over inflation, interest rates, and Russia’s invasion of Ukraine. Market volatility has reigned for much of the year so far, as markets assess prospects in the face of these challenges. Recent market action can give you the opportunity to reaffirm risk tolerance and confirm cash reserves remain at appropriate levels. Additionally, you can assess if this is an appropriate time to consider strategically rebalancing your portfolio. Your review could include evaluating strategies for navigating a potentially volatile interest rate environment, managing historically extreme valuation gaps between large-cap stocks relative to other markets, and considering the cost/benefit of utilizing alternative investments.

2. Measure progress toward financial independence

While the past few years have been difficult on numerous fronts, investors have generally made good strides growing their overall net worth, even considering the recent market pullback. After such a period of performance, it can be beneficial to review your current assets versus levels necessary to support financial independence. With this analysis in hand, decisions can be made on savings rates, investment policy, progress on “next-level” goals, and wealth transfer strategies. In many cases, it can also be a good opportunity to reflect on the positive changes and celebrate the outcomes of a disciplined financial strategy.

3. Adjust retirement plan savings for increased limits

The IRS has increased retirement plan elective deferral limits from $19,500 to $20,500 for 2022. If you’re 50 years old or older catch-up contributions remain at $6,500, resulting in a $27,000 combined limit. It’s easier to adjust your salary deferral elections earlier in the year, so it’s best to double-check your progress toward these limits sooner rather than later.

4. Review exposure to company stock

If you’re an executive holding company stock or stock-based awards, this is a good time to review exposure relative to your overall balance sheet. With significant deviation among public stock performance over the past year and at the start of this year (depending on industry, country, etc.), performance between the company and the rest of your financial assets may have differed as a result.

5. Check on education funding

While markets have done well, education costs continue to increase. If you own a 529 education savings account, you may benefit from a review of current funding relative to anticipated needs for beneficiaries and adjust as warranted. Needs can change based on choice of schools, available scholarships or aid, and other factors that affect net needs from plans. Remember that balances can also be shifted among certain family members.

Starting in 2023–2024, student financial aid (i.e., FAFSA) applications will no longer count grandparent-owned 529 plans when considering resources. Therefore, when deciding whether a parent or grandparent should own a new 529 plan, there may be advantages to choosing the grandparent level.

6. Review buy-sell agreements

Businesses have seen their value increase over the past few years, so it’s important that privately held business owners revisit any buy-sell agreements and include a confirmation that all parties agree on the stated price and/or the mechanism to set price in the future.

If you’re relying on insurance to help fund obligations, revisiting coverage in light of any changes is also appropriate.

If your buy-sell agreement involves insurance and is structured as a redemption agreement, a recent court case may impact how company interests are valued at an owner’s passing. If this could apply to you, discuss the implications with your advisors.

7. Review your estate plan

Review the key tenets of your estate plan and confirm they still align with your wishes. This includes trustees, personal representatives, financial and healthcare powers of attorney, guardians, and distribution provisions.

8. Plan now for sunsetting estate tax exemptions

If your family is considering wealth transfer strategies, you should be actively developing and implementing your plan now. While legislative proposals in 2021 dropped any near-term changes in estate tax laws, the current estate exemption is still scheduled to drop in half in 2026. If you’re considering wealth transfer to minimize future tax bills you may benefit from doing so sooner rather than later. Check with your advisor.

Many transfer strategies may benefit from leveraging today’s relatively low interest rates while they last. This could include intrafamily notes to lock in today’s rates for an appropriate length of time. It could also include considering grantor retained annuity trusts (GRATs) and other related vehicles while the hurdle rate to transfer upside remains low.

9. Don’t forget the estate planning “freebies”

While opportunities currently remain to transfer larger amounts of wealth over the next few years, don’t forget the simpler options as well:

The annual exclusion gift limit has increased to $16,000 per person.

Medical expenses can be paid without limitation, as long as you pay the medical provider directly.

Education expenses can also be paid with no limit as long as you issue payment to the institution and not an individual.

10. Plan for philanthropic giving

Donor-advised funds (DAFs) and family foundation balances have swelled in recent years due to accelerated gifting for tax purposes and strong market performance. If philanthropic giving is in your plan, this may be a good time to review your strategic plan for the funds moving forward.

Families and their advisors should watch the progress of the Accelerating Charitable Efforts (ACE) Act. If passed, this legislation could result in fundamental changes in how foundations and DAFs are funded and managed.

Not sure where to start?

As with many financial topics, these planning concepts shouldn’t be considered as individual silos. Your advisory team can work with you to tie those that apply into your broader plan. Contact your relationship manager to discuss further. If you don’t currently work with us, reach out to speak to one of our advisors — we’re happy to connect.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all of the information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment.

Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.

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