Author: SynergiaFinancialGroup

In the U.S., men are investing and accumulating wealth at a greater pace than women, fueling the gender investing gap. Closing the investing gap is essential so that women accumulate enough retirement assets for their entire lives. On average, women in the U.S. have a life expectancy of 80.2 years compared to men having a life expectancy of 74.5 years, according to WorldData.info. Women must be active investors to accumulate more retirement savings to last their long lives.

If women invested at the same rate as men, there would be an extra $3.22 trillion of assets under management today, and $1.87 trillion additional capital into responsible investments, according to a BNY Mellon Study. There are numerous reasons for the gender investing gap that, as a society, we must work toward bridging:

Women’s investable income expectations are off– Many women think they need a few thousand dollars in disposable income each month before they invest. The same study found that many women believe the IRS limit for IRAs is the amount they must invest, which isn’t accurate. Also, women who describe their financial health as poor are less likely to invest.

The fix- Financial professionals can help bridge this gap by encouraging women to start investing- regardless of income and at any amount. Fund companies can market that investing consistently; even a small amount can add up over time thanks to the power of accumulation. Financial education at work and in schools are great avenues to illustrate that no income is required to start investing.

Investment strategies aren’t always designed for women- Women are motivated by an investment’s impact, for example socially responsible investments, but often have difficulty finding investment strategies that align with their values. Or, some investments they choose may not produce the consistent positive returns that help women accumulate wealth.

The fix- The financial industry must develop funds and investment strategies that align with women’s values that impact people and the planet. These strategies may produce returns that enable women to be financially confident and provide for those they love and the causes they care about. Also, fund companies must market to women by depicting confident women making an impact on our world and its people through their investing.

A gender pay gap– In 2022,for every $1 that men make, women earned 0.82 cents. The U.S. Census Bureau has found that even though Equal Pay Day has brought awareness to the gender pay gap, women would need to work three additional months to catch up to men’s pay. With less money to invest, women may invest less or not participate in the markets due to having fewer investable assets.

The fix- Companies can help close the pay gap by allowing women to participate in leadership and assess their pay and employee benefits programs to be inclusive to all. Hiring third-party consultants to review employee pay, develop programs to reduce hiring biases and pay discrepancies, and implement new policies can help bridge the pay gap.

Developing employee leave programs that benefit women and all caregivers with leave pay when they are absent from work to care for family members. Program benefits, including short-term insurance and a ‘pay bank,’ where employees donate their unused leave to benefit others, can help provide paid leave, and flexible work schedules can become policies.

Female investor confidence lags– Many women tend to feel they don’t understand investing. They also feel more comfortable saving in savings accounts or investing in property and less comfortable investing in market-driven investments, according to the BNY Mellon Study. There are also biases in marketing investments to men versus women, which can deteriorate their investing confidence.

The fix- Creating company financial education initiatives and marketing wealth-building programs to women is an excellent start. Encouraging financial professionals to specialize in working with women and encouraging more women to join the financial services industry can help. Awareness in marketing to include women in advertisements, financial education in schools, and better communication that women must invest in their futures can help female investor confidence.

Women tend to avoid risk– Women tend to feel less confident about investing in the stock market, alternative investments, and REITs. They often view investing outside their employer’s retirement plan as risky. When it comes to risk tolerance, women also have a lower tolerance to market risk than men:

• 9% of women report a high level of risk tolerance
• 49% have a moderate risk tolerance
• 42% have a low risk tolerance

Source– The Pathway to Inclusive Investment, BNY Mellon

The fix- While risk, performance, and results are part of investor reporting, it isn’t appealing to women. Instead, education and marketing directed toward women about risk, performance, and results must include the reason for investing.

While risk, performance, and results are part of investor reporting, it isn’t appealing to women. Rather, education and marketing directed toward women about risk, performance, and results must include the reason why for investing. Many women invest for a cause to make the world a better place, which requires taking some risk.

One thing that will help fix the gender investing gap is for women invest in their future by consistently saving and investing. Working with a financial professional can help women develop a financial plan and design a portfolio of strategies that align with their values and produce positive returns.

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One of the most noteworthy retirement savings legislation in years, the SECURE Act 2.0, is now law. The SECURE Act is one of the most significant changes to retirement savings plans since Congress allowed for the automatic enrollment of employees and the addition of Target Date funds to retirement plans in 2006.

The legislation provides changes that aim to help strengthen the retirement system and financial retirement readiness for Americans. Here’s how the Secure Act 2.0 will help Americans plan and save for retirement:

• Offer more investment options to plan participants
• Provide access to financial education
• Change the retirement plan’s required minimum distribution (RMD) to age 73 in 2023 and 75 in 2033.
• In 2024, RMDs will no longer be required from Roth IRA accounts in employer retirement plans.
• Mandated employee retirement plan participation for both full-time and part-time employees.
• Automatic enrollment and automatic plan portability. The legislation requires businesses adopting new 401(k) and 403(b) plans to automatically enroll eligible employees, starting at a contribution rate of at least 3%, starting in 2025. 

What are the main features of the SECURE Act?

• Increasing the RMD (Required Minimum Distribution) age to 73 in 2023 and 75 in 2033.
• Section 529 education savings account owners will be allowed to use retirement accounts to cover the costs of homeschooling, qualified student loan repayments of up to $10,000 (siblings included), private schools, and apprenticeships for the account beneficiary. The catch is a 529 plan must be in place for the retirement account to be used for education with no tax or early withdrawal penalty.
• New 10-Year Rule– Retirement accounts must distribute all benefits within ten years after a retirement plan participant dies or an IRA owner dies, except when the beneficiary is a spouse, disabled or chronically ill, a child who hasn’t reached the age of majority, or a beneficiary not more than ten years younger than the deceased owner.
• Employees can make contributions until their RMD age to their retirement accounts. The Act would help workers who plan to continue to work into their 70s save additional money for retirement.
• 401(k) plans will offer annuities as an investment choice to help workers help guarantee a portion of their retirement savings from market risk. Annuities are backed by the insurance company’s claims-paying ability and are an insurance product.
• Matching Roth IRA accounts. Employers can provide employees the option of receiving vested matching contributions to Roth accounts. Previously, matching in employer-sponsored plans was made on a pre-tax basis. Contributions to a Roth retirement plan are made after-tax, after which earnings can grow tax-free. Unlike Roth IRAs, RMDs from an employer-sponsored plan are required for Roth accounts until the tax year 2024. 
• Parents would be allowed to withdraw $5000 penalty-free from a 401(k) to pay for expenses related to the birth of a child or a new child through adoption.
• Emergency savings. Defined contribution retirement plans could add an emergency savings account that is a designated Roth account eligible to accept participant contributions for non-highly compensated employees starting in 2024. Contributions would be limited to $2,500 annually (or lower, as set by the employer), and the first four withdrawals in a year would be tax and penalty-free.
• Part-time workers working 500 or more hours per year for at least three consecutive years would be allowed to participate in their company’s retirement plan.

Sources: Fidelity, Kiplinger, Investopedia.

The SECURE Act aims to help Americans save more for retirement through their employer’s savings plan. Your retirement savings plan combined with strategies for your situation may help make the difference between having financial security throughout retirement, and not. Contact our office today to schedule a retirement savings and financial plan review.

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There are more ways to express your love to your partner on Valentine’s Day besides flowers, candy, or a gift. Consider what you can do before retirement that will help both of you work toward a confident financial future. Here are some financial gift ideas that your partner will love that will show your partner how much you care:

#1- Eliminating your mortgage by retirement. A mortgage is often the most significant monthly expense, and paying it off helps reduce fixed monthly bills during retirement. Paying off your mortgage early may impact your savings reserve and investments but will free up your cash for other things such as travel or healthcare. Other things to consider before eliminating your mortgage payment before retirement:

• The interest rate on the mortgage
• How your taxes will be impacted (mortgage interest deduction)
• Return on your investments if liquidating them to pay off the mortgage
• How will it affect your savings and future cash flow

Why your partner will love this gift- Paying off your mortgage early will help free up money so you can enjoy doing more with the person you love! Start planning your vacations, experiences, and more in your financial plan.

#2- Deferring Your Social Security start date. Social Security retirement benefits increase a certain percentage for each month you delay starting your benefits beyond the full retirement age. However, the benefits increase stops when you reach age 70.

If you take Social Security before your full benefit age, your monthly benefit amount will be smaller, but you may receive it for a more extended period. Delaying your benefits start date can increase your monthly benefit amount, but you will receive it for a shorter period. When you start, the amount you receive determines your benefits payout for the remainder of your life.

When you and your partner decide to take Social Security benefits depends on your situation. If one partner continues to work and one starts benefits or delays benefits, it should be considered in your decision. A financial professional can help you determine an appropriate time depending on your financial situation, health circumstances, and more.

Why your partner will love this gift- Delaying social security benefits provide a more considerable monthly benefit for the remainder of your lifetime. If you pass earlier than your spouse, your spouse will receive your benefit at a higher amount since you delayed your benefits start date.

#3- Starting a staged Roth IRA conversion plan. A Roth IRA conversion plan enables you to transfer money from your Traditional IRA to your Roth IRA to take advantage of tax-free accumulation and distributions, and no required minimum distributions (RMDs) if you are 59 1/2 and the Roth IRA has been open for at least five years.

Distributions from Traditional IRAs are taxed on the contribution and accumulation at distribution and have an RMD age of 72.

A staged conversion means using this strategy over time to convert from pre-tax to tax-free dollars. This strategy often helps reduce taxes later for those anticipating a higher personal tax bracket in retirement. However, a Roth IRA conversion requires you to immediately pay all taxes due at the time since the converted funds are all pre-tax dollars.

Why your partner will love this gift- Roth IRA owners enjoy tax-free distributions, and since there is no RMD, the entire account can pass to your partner or heirs tax-free. Roth IRAs can be part of a tax-advantaged estate plan strategy, which benefits both of you. Talk to a financial professional if you have questions about a Roth IRA conversion and if it is appropriate for your situation.

#4- Including sustainable lifetime income in your retirement plan. Sustainable lifetime income using various strategies can help mitigate the risk your retirement savings won’t last your lifetime. Retirement income sustainability must consider multiple strategies to provide stable income or increases to offset inflation, market fluctuation, and other portfolio risks.

• A financial professional can help you design a sustainable lifetime income strategy that may include these investments in your portfolio, if appropriate:
• Fixed income bonds
• Fixed indexed annuities
• Dividend producing stocks
• Fixed annuities
• Other investment strategies appropriate to your situation

Why your partner will love this gift- Sustainable lifetime income starts with planning for the income you need now and the income you need in the future and planning to offset inflation and other risks, so you don’t run out of money. This type of specialized financial planning can help you and your partner to feel more secure about living the lifestyle you seek to enjoy throughout retirement.

#5- Creating an extended care plan. Planning for care while you’re healthy is essential so that you and your partner know how each wants to be cared for and how you intend to cover the expenses. Elements of a care plan may include long-term care insurance (LTCI), a medical power of attorney document, a medical directive, and other necessary documentation to share with your extended family. Your financial and legal professionals can help you understand the cost of care now and what it may be in the future, draft documentation, and help you determine if LTCI is appropriate for you.

Why your partner will love this gift- An extended care plan provides the documentation that gives your partner, family members, and caregivers permission to make decisions on your behalf and spend your assets for your care. Without a plan, others will have to decide how to pay for and provide care. An extended care plan can help relieve the stress that partners and family may feel when the time comes for your care.

As your financial professional, I can help you determine which gift is appropriate for your partner and strives to most likely leave a dynamic impression that lasts throughout this year and beyond.

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If you are someone who makes New Year’s financial resolutions and often doesn’t keep them, behavioral economics can help. Behavioral economics studies psychology as it relates to economic decision-making. Ideally, people would make the financial decisions that are appropriate and will benefit them the most.

In economics, the rational choice theory states that when presented with choices under scarcity, people will choose the option with the most personal satisfaction. However, scarcity is an economic problem that is the gap between our financial resources and wants. Scarcity requires us to decide how to use our financial resources efficiently, but often that may differ depending on our choices.

That’s where behavioral economics comes in. Sometimes we make rational decisions, and other times, irrational decisions about our financial resources. Here is a few examples of behavioral economics, rational, or irrational decision-making when it comes to our finances:

• Budgeting- buying a coffee shop latte twice a week versus daily spending, which is more than your budget allows.
• Debt– paying off credit card debt and not using credit versus making payments but accumulating more monthly debt.
• Investing– consistently investing each month versus occasionally investing, depending on market performance.
• Herd mentality– spending and investing based on your financial situation versus spending and investing in keeping up with your peers.

When it comes to keeping New Year’s financial resolutions, understanding behavioral economics may help you make confident financial decisions in the following areas:

Personal debt- Working toward eliminating personal debt such as credit card, auto, or other personal loans.

Investments- Determining appropriate investments for your goals, risk tolerance, timeline, and situation.

Retirement Savings– Regularly contributing to your retirement savings accounts and maximizing contribution amounts based on your age and timeline until retirement.

Insurance– Reviewing, updating, and purchasing insurance coverage for your situation to offset the risk that can derail your financial goals.

Money Management– Develop a monthly budget to help you understand your cash flow and where you can make objective improvements.

Seek investment help– Working with a financial professional for comprehensive financial planning and working toward it. Behavioral economics is the psychology that can help you be mindful of the consequences of your financial decisions in the New Year. Start by writing down your financial resolutions, thinking about them, creating your plan, working toward them, and revising. It may help to discuss your financial resolutions with an accountability partner, such as a spouse, close friend, or financial professional.

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Financial wellness is a state of being when one is in control of their finances, can cover expenses, and save for future goals. Consider financial wellness as your relationship with money; it can be either healthy or unhealthy. Financial wellness is essential to being financially secure and meeting your goals. Here are ten tips to help you develop financial wellness this year:

Tip #1- Check that your income and spending are in balance. You must be aware of your spending patterns, limit your use of credit, and be mindful of not spending more than you make. Review your online banking, bill payments, and credit card statements to ensure you’re not overspending.

Tip #2- Develop a monthly budget. A monthly budget helps you track exactly where your money is going so you aren’t living paycheck to paycheck due to overspending. Budgeting can help you save for retirement and create a plan to pay off debt. A budget can also help you learn to live without wants because you can see where your hard-earned dollars are going.

Tip #3- Save money to cover unforeseen emergencies. Ideally, save three to six months of living expenses in an emergency savings account. Once you reach six months of emergency savings, continue saving in your emergency fund until you reach another milestone, such as one year of living expenses.

Tip #4- Consistently save for retirement and other goals. Invest in yourself by automating your monthly 401(k), IRA, or Roth IRA retirement savings contributions. Save for different purposes through automatic savings account contributions through payroll or other bank apps into an account set up for a specific financial goal.

Tip #5- Discuss significant financial decisions with others. Before making financial decisions or purchasing big-ticket items, discuss the pros and cons of your decision with others before spending. Discussion can help determine if the financial decision aligns with your budget and goals.

Tip #6- Regularly monitor and adjust your financial plan. You should have a written financial plan that aligns with your goals and timeline. Self-monitor your progress toward your goals and adjust your financial plan as necessary as your life changes. 

Tip #7- Educate yourself. Financial literacy is the confluence of the economic, credit, and debt management knowledge necessary to make financially responsible decisions that are integral to our everyday lives. The more you know about personal finance, the more likely you are to make comprehensive financial decisions.

 Tip #8- Work with a financial professional. Working with a financial professional can help you determine strategies appropriate for your goals, risk, and timeline. They can also help you develop a budget, create a financial plan, save for your child’s education, and keep you on track toward your goals.

Tip #9- Don’t let your emotions impact your financial decisions. Weighing out the pros and cons of financial decisions before making a final decision is essential to financial wellness. When it comes to investing, emotions can be tricky since investors don’t always make rational decisions. Financial decisions require evidence and reasoning to make the most thoughtful choice so that you don’t regret your decisions later.

Tip #10- Save money in small ways. Look for discounts, promos, and coupons on items you regularly buy. Also, consider negotiating a reduced price for memberships and subscriptions such as internet, gym, and streaming channel services.

Financial wellness is essential for many reasons since it can impact your mental and physical health and overall quality of life. By improving your financial wellness, you can build wealth for a more financially secure future.

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While you never know your needs as you age, the first step is thinking about your financial situation and health today so you can plan for your later years. With a one in four chance of making it to our 90th birthday, being independent and thriving as we age is something to pursue. Here are some things you may want to consider as you plan for your later years:

Stay socially connected to others. According to the National Institute on Aging, research has shown that older adults with an active lifestyle areless likely to develop certain diseases. Participating in hobbies and other social activities may lower the risk of developing health problems, including dementia, heart disease, stroke, and some types of cancer. Adults that continue to be socially active also have a longer lifespan.

Save for retirement and other goals. Consistently saving for your financial goals and retirement by implementing appropriate strategies can help your financial situation when you retire. Critical steps will help determine if you can retire on your timeline and have enough retirement savings to last your lifetime. Retirement savings benchmarks and a comprehensive plan with the help of your financial professional are the first steps toward knowing if you’re on track to pursuing your goals.

Maintain a healthy lifestyle. Good health as one ages must start long before retirement. Those enjoying good health in retirement have taken steps along the way; good nutrition, exercise, no smoking or excessive alcohol use, maintaining a healthy weight and monitoring their health with yearly checkups. Maintaining a healthy lifestyle may help ensure your assets will not prematurely liquidate for health-related care and expenses that could have been avoided.

Plan for future care. With the cost of care increasing year over year, considering how the cost of care if you need it, will impact you financially is important. As you age, you may need help with the following:

• Personal care
• Household chores
• Meals
• Healthcare
• Getting around/transportation

During financial planning, your financial professional can help you determine the impact of self-funding the cost of care at 100% versus purchasing long-term care (LTC) insurance. The LTC policy may cover some home based services. Your financial professional can help you understand LTC policies and riders, how much they cost, and when the policy starts to pay for care after a set waiting period.

Being ready to retire on your terms. Having the ability to decide when you want to retire from your profession and being financially prepared will help you determine what is best for your situation. Being ready comes from achieving all you want in your career and looking forward to the next chapter of your life. Preparing to retire on your terms starts with a plan, then working toward your goals.

Money management. Managing your money and following a budget can help you feel financially secure today and may reduce the risk of running out of money in retirement. It’s important to follow your unique financial plan, revise it as you age, and start spending down your retirement assets. Managing your money may also include a strategy to offset inflation risk as you age.

Aging in place. On a broader definition, aging in place means living independently in a home that is right for your needs. Aging in place can mean downsizing to a smaller home, living in an assisted or LTC facility, living near or with family members or having professional care at home. It’s important to develop a plan and share it with your family so that when the time comes, they know what you prefer. If you’re still working and nearing retirement, planning the subsequent decades of your life is crucial. It starts with a healthy mindset, body, and financial wellness.

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Social Security Retirement and Supplemental Security Income (SSI) benefits will increase by 8.7 percent in 2023, the most significant increase since the 1980s. The last time the cost-of-living adjustment was higher was in 1981 when the increase was 11.2%. The increase, due to inflation, will result in a Social Security benefits increase. For example, someone receiving $1,681 per month in 2022 would receive an an extra $146 per month, for a total of $1,827 per month in 2023.

Social Security benefits are adjusted yearly for inflation based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W index measures the monthly price change in a market basket of goods and services, including food, energy, and medical care. With the current inflationary prices, the Social Security COLA adjustment may feel like little for many Americans receiving monthly benefits.

Social Security funds through a payroll tax of 12.4 percent on eligible wages; employees and employers each pay 6.2 percent, and self-employed people pay the full 12.4 percent. The maximum work income subject to the Social Security tax is currently $147,000 for 2022 but will increase to $160,200 for 2023.

There’s good news for Medicare beneficiaries regarding inflation; their monthly cost will go down in 2023. Medicare premiums for Part B will be $164.90 a month in 2023, down $5.20, or about 3% less than in 2022. The annual deductible for all Medicare Part B beneficiaries will be $226 in 2023, which is $7 less than the 2022 deductible of $233.

Medicare Advantage and Medicare Part D prescription drug plans will also go down in 2023, but deductibles for hospitalization costs under Part A will be going up. Starting in 2023, Medicare will negotiate directly with drug manufacturers for the price of ten specific high-spending brand-name Medicare Part B and Part D drugs that don’t have competition. Medicare will announce the first ten drugs in 2023. However, the price change will be effective in 2026.

Medicare will continue to negotiate prices directly with drug manufacturers in the future on the following schedule:

• 5 Part D drugs in 2025 (effective in 2027).
• 15 Part B and Part D drugs in 2026 (effective in 2028).
• 20 Part B and Part D drugs in 2027 (effective in 2029).
• 20 Part B and Part drugs in 2028 and every year after.

Contact our office if you have any questions about Social Security benefits and how they may impact your financial plan today or in the future.

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Marriages can end for many reasons; infidelity, stress, personality changes, and finances. Divorce can be difficult for children and extended family and devastating to your finances and assets that you’ve accumulated together. Couples participate in financial planning, personal budgets, and savings and spending plans when marriages are going well. It is vital to continue financial planning for yourself now while starting the divorce process and after your marriage ends.

Financial professionals can assist you with divorce planning and discuss with both spouses (at the same meeting if amicable) the adverse effects of fighting over assets. Divorce can be a significant financial event making it vital to plan appropriate asset distribution strategies for both spouses to avoid financial loss. They will review tax, insurance, retirement, and other areas of knowledge within their specific application for divorce. Here’s the list of financial information you need to gather as you start divorce planning:

Financial information:

• Two to three years of personal tax returns
• Bank statements
• HSA information
• Business tax returns- if applicable
• Retirement savings account statements- 401(k), Roth IRA
• Investment account statements- individual and joint
• Stock certificates
• Life insurance policies
• Disability insurance policies
• Homeowners, auto, and umbrella insurance policies
• Long-term care insurance policies
• Credit card statements
• Loan information

Legal documents:

• Your will
• Your estate plan
• Power of Attorney (POA) documents
• Advanced Healthcare Directives

Personal property:

• Primary homes, vacation homes, and acreage
• Investment properties
• Cars, ATVs, and recreational vehicles
• Antiques, art, jewelry, and collectibles
• Tools, firearms, recreational equipment (camping or sports gear)
• Safety deposit box contents
• Family photos or other items of significant sentimental value
• Household items

If you can successfully plan for your divorce without fighting over assets, you as a couple can both win. You win by keeping the assets you acquired before your marriage intact as you work toward dividing them as you start your single lives financially secure. While financial professionals don’t work through the legal asset division or the legal process, they can help you prepare your financial information for your legal professionals.

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During an economic slowdown, times can be challenging for many, often leading to layoffs, inflation, and rising interest rates. Economists suggest that the U.S. economy is not in the clear and may be approaching another recession in 2023, according to an Associated Press article. Knowing the signs of a recession is essential to help you determine when to cut spending. You can also look for extra cash by using these tips to help you survive tough economic times:

Understand your cash flow. Cash flow tracking is how your cash comes in and goes out each month- and to what. You may have bills that pay automatically at different times of the month. It may help to schedule your bill payments on one or two dates each month to help manage your cash flow. Use your paydays or investment disbursement dates to determine when works best so that you’re managing your cash appropriately for your situation.

Cut your expenses. While your finances may have thrived over the past few years, now is the time to determine where your money is going and eliminate unnecessary items. You may have to make some tough decisions. Still, it’s vital to get your expenses manageable in case you become unemployed or have an income-altering event occur.

Get ready for an emergency. If you have additional money, create an emergency fund that equals one, two, or three months of your expenses. Next, work toward fully funding up to six months of expenses in a savings account used only for your emergency as a cushion in case an emergency comes along at the worst possible time.

Go back to the basics. Make a list of things you pay for by subscription or membership to determine which can reduce to a lower rate or subscription level. You may have upgraded some subscriptions, such as an internet package, or streaming channels without commercials, for example. Determine where you are willing to cut back to save money.

Avoid the temptation to borrow. You may be tempted to use your credit card or borrow against your home or other assets for projects, etc. Or you may be looking at financing a new car. With interest rates likely increasing in 2023, you’ll pay more to borrow. Avoid the temptation to borrow now and finance once rates decline as they always do.

Look toward the future. While we don’t know when the tough times may end, look into the future to see what money is coming in and going out for the next three months. If there may be more going out, it’s time to cut more expenses or find new sources of money. Finding new money may include a part-time gig, selling a large ticket item, or a new job with more pay.

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Making contributions to your tax-deferred retirement accounts may help to lower your tax bill. Below are seven items to consider doing before 2022 ends:

1. Max out your tax-deferred retirement savings contributions. Tax-deferred retirement accounts like 401(K)s, 403(b)s, 457 plans, and IRAs fund with pre-tax dollars. Any contributions made before the end of the year will help lower your taxable income.

For the 2022 tax year, you can contribute up to $20,500 to your tax-deferred retirement savings account or $27,000 if you’re 50 and older. The maximum IRA contribution is $6,000; if you’re 50 and older, you can contribute $7,000 before December 31, 2022.

2. Take your required minimum distributions (RMDs). If you’re over age 72, you must take RMDs from your tax-deferred retirement accounts by the end of the year. If you forget, you may be subject to a 50% penalty on the portion of your RMD you failed to withdraw. If you turn 72 in 2022, you have until April 1, 2023, to take your first RMD.

3. Contribute to a Roth 401(k). If your employer offers a Roth 401(k) and you haven’t maxed out your traditional 401(k), you can make after-tax contributions to a Roth 401(k) up to the $20,500 limit and up to $27,000 if you’re age 50 and older. To maximize your Roth 401(k) contribution, you must subtract the amount you contributed to your traditional 401(k). Then contribute the remainder to your Roth 401(k) before December 31st, 2022.

At age 72, Roth 401(k)s are subject to RMDs, but all contributions and earnings can be withdrawn tax-free as long as the account has been open at least five years and you are at least age 59 1/2.

4. Contribute to a 529 College Savings Plan. You may deduct state taxes for contributions you make to a state-sponsored plan. Even though there is no federal tax deduction for 529s, the money in these accounts grows tax-free and can be withdrawn to use toward qualified education expenses like tuition, room and board, and books. Many states offer a state income tax credit or deduction up to a certain amount for parents or grandparents that contribute.

5. Maximize your flexible spending account (FSA) contributions. Think of FSAs as employer-sponsored accounts to help you cover certain out-of-pocket healthcare costs. Employee contribution amounts are limited to $3,050 per year per employer. If you’re married, your spouse can put up to $3,050 in an FSA with their employer.

Any funds that remain in your account on December 31, 2022 generally are required to be used by that date or you may forfeit any remaining funds. Your employer may allow you a grace period of 2 1/2 months to use any remaining funds or they may allow you to carry-over $610 for the next plan year.

6. Contribute the max to a Health Savings Account. HSAs allow pre-tax contributions, much like your pre-tax retirement savings. However, when used later for health-related expenses, including future long-term care expenses, the contributions and accumulation are tax-free upon withdrawal.

You may contribute to an HSA only if you have a High Deductible Health Plan (HDHP) that is ‘HSA eligible’ that only covers preventive services before the deductible. For 2022, the minimum deductible for an HDHP is $1,400 for an individual and $2,800 for a family.

7. Share your wealth through charitable giving. If you’re in search of a way to reduce your tax bill and give back to the community, there are many strategies that you can use to support charities that are important to you:

• Donor-Advised Funds allow you to donate cash or securities, which are non-refundable to a non-profit organization. 
• A qualified charitable distribution, or QCD, allows you to distribute funds from your IRA to an eligible charity (a 501(c)(3) organization) as long as you’re 70 1/2 years of age or older. Since the gift will go directly to the charity, you can exclude the dollar amount of the gift from your taxable income of up to $100,000 each year. However, there are some exceptions, so it’s a good idea to consult a financial professional or tax advisor before pursuing this strategy. 
• Real Estate: If you have a property you no longer need, you can donate it to charity. 
• With a cash gift, you’ll receive a tax deduction equal to the amount of cash you donated minus the value of any products or services you received in return.

I can help you with maximizing your contributions and using these strategies effectively. Remember that the deadline for contributions to many of these strategies is December 31, 2022, so contact me today.

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