Time for Your Mid-Year Financial Checkup!
It’s hard to believe that 2022 is half over! If you made any financial resolutions this year, now is a great time to revisit them and evaluate your progress. It’s also a great time to review your financial plan, make adjustments, and update your records. To help you get started, we’ve compiled a short list of items to include in your mid-year review:
1 – Revisit your financial and life goals.
Did anything change since you first created your goals? If you got married or had a child recently, consider how your needs may have changed and whether you need to reprioritize. As you review your goals, consider your spending and saving habits. Are you saving enough to achieve your goals according to your preferred timeline? If not, look at areas where you can cut your spending to save a little more.
2 – Fund your tax-advantaged retirement accounts.
You may already be contributing to your retirement plan, but are you contributing the maximum? In 2022, the contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the Thrift Savings Plan (for federal employees) is up to $20,500. If you are over 50, you may also be able to make an additional catch-up contribution of up to $6,500. If you have a traditional or Roth IRA, the contribution limit is $6,000, with the ability to contribute up to an additional $1,000 if you’re over 50. If you haven’t been contributing at all to your employer plan, you may be missing out on an employer match. Consider contributing, or increasing your contribution if you can. Your contributions lower your taxable income, which can benefit you at tax time.
3 – Think ahead to funding your healthcare in retirement.
Do you use a high-deductible health plan? If so, you may be eligible to contribute to a health savings account, or HSA. HSAs offer a triple tax advantage: Like a 401(k) or traditional IRA, contributions to an HSA reduce your taxable income, and you can invest your contributions, which grow tax-free. Qualified withdrawals for medical expenses are also tax-free. If your employer offers matching, you can save even more if you contribute enough to qualify for the matching funds.
HSAs can help you pay for qualified medical expenses now (or help you cover your deductible), but if you are able to pay for your healthcare expenses without tapping your HSA, you can save toward covering those expenses in retirement, which can be costly. The 2022 Retiree Health Care Cost Estimate from Fidelity found that a 65-year-old couple retiring today will need an average of $315,000 to cover healthcare expenses.
4 – Review your investments.
If you work with a financial advisor but haven’t met with them in more than a year, it’s time to schedule an appointment. Your advisor can update you on all aspects of your portfolio, including the progress you’re making toward your goals. You can also discuss any changes in your appetite for risk, whether you’re properly diversified, and whether you should rebalance to maintain your investment strategy.
5 – Review your insurance needs.
You may already have a life insurance policy, but if your family has grown or you are recently divorced, you may either need to update your beneficiaries or consider whether you have the right amount of insurance for your needs. While you’re at it, it never hurts to review other policies you may have, including car insurance and your umbrella policy.
While these five items offer good ways to start your mid-year financial checkup, you may also have other things to review, such as your emergency fund or any outstanding debt. Your financial advisor can be a great resource in helping you understand your full financial picture. Also, if you have time, you can get an early start on organizing your taxes for next season. Your tax professional will likely be less busy now and better able to answer your questions.
Getting organized now can help you stay on track toward achieving your goals, and prevent a year-end scramble to catch up when you’d rather be enjoying the holidays with friends and family.