The start of the new year is always a good time to reflect on the past year, how your financial situation may have changed, and your future goals. Maybe 2022 is the year you’ll retire, or maybe not. Either way, you can review your investment strategy and prepare for 2022 and beyond.
We Saw Record Highs in 2021 – What Will We See in 2022?
The S&P 500 index logged 64 new highs in 2021 as of November.[1] But how long can this last? According to a recent Allianz survey, 54% of American investors see the stock market heading for a crash.[2] There are a few major reasons why we could see a market correction soon, including high inflation and new COVID variants. 20% of all dollars were created in 2020[3] and our government spent trillions. We’ll likely see more printing and spending in the future. This could mean continued higher inflation and potential tax increases. Consider how a major market correction around the time you retire could affect your finances for the rest of your life and make a plan. This could include rebalancing your portfolio, exploring alternative investments, or working to inflation-proof your retirement savings.
Prepare for the Tax Rates of the Future
Your retirement plan should include not only an investment strategy but also a tax minimization strategy. There are several tax-increasing proposals on the table, and it’s important to prepare. One potential option is to convert funds from a traditional IRA, 401(k), or similar qualified retirement account into a Roth IRA, no matter your income. In this case, you would pay tax on the funds converted and then be able to withdraw them tax-free later on, similar to a Roth 401(k). Keep in mind that Roth IRA conversions are now irreversible and that money can’t be withdrawn penalty-free until five years after it’s converted, and typically not until age 59 ½.[4] A Roth conversion could be one way to plan for the tax rates of the future.
What Can You Expect From Us?
You’ve done a great job earning and saving; now it’s our turn to help you prepare for the next phase of life. During the bulk of our adult lives, our investment strategies are built around the “accumulation of wealth.” Now that you’re at or near retirement, the goal is to protect what you’ve saved, maintain a reasonable rate of growth, and create an income stream that will last as long as you do. We can help you create a comprehensive retirement plan that’s tailored to you. Schedule a time to meet with us to plan for 2022 and beyond.
[1] https://www.kiplinger.com/investing/stocks/stocks-to-buy/603814/where-to-invest-in-2022
[2] https://markets.businessinsider.com/news/stocks/stock-market-outlook-american-investors-stocks-crash-allianz-covid-inflation-2021-10
[3] https://www.oxfordgoldgroup.com/news/strategist-almost-20-percent-of-all-u-s-dollars-were-created-in-2020-alone/
[4] https://www.irs.gov/retirement-plans/designated-roth-accounts-in-plan-rollovers-to-designated-roth-accounts
Please Note: Epstein & White is a tradename. All services provided by Epstein & White investment professionals are provided in their individual capacities as investment adviser representatives of Mercer Global Advisors Inc. (“Mercer Advisors”), an SEC registered investment adviser principally located in Denver, Colorado, with various branch offices throughout the United States doing business under different tradenames, including Epstein & White. Information contained herein is for informational and illustrative purposes only and general in nature. It should not be considered investment advice or a recommendation to buy or sell any type of securities or insurance products and no investment decision should be made based solely on any information provided herein. We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas.
Investment in securities carries a risk of loss, including loss of principal amount invested. Different types of investments involve varying degrees of risk. It should not be assumed that diversification or asset allocation protects a portfolio from loss or that such will produce profitable results. An annuity’s guarantee is subject to the claims-paying ability of the issuing insurance company.
