The story below is a preview from our November/December 2021 issue. For more stories like it, Subscribe Today. Thank you!
How lifestyle choices can affect your finances – plus other great tips for 2022 financial preparation.
It used to be breadwinners would grind through 30 years or more in the same job to earn a pension, work to ensure their children had better opportunities and strive to accumulate money to transfer when dead. Those days are gone. People see wealth differently today.
Quality of life has become a primary focus. That’s changed how families and business owners view money, prioritize investments and seek help to make smart decisions. Amassing wealth has taken a back seat to enjoying life while you’re living it.
This modern mindset is causing a shift in everything from financial advisor expectations to technology solutions.
Smart Money Habits
Younger people tend to have challenges with the basics. Things like how to open an IRA are issues many struggle with before simply asking someone who knows. Questions are about the foundational aspects of getting started with investing for the future.
These individuals in particular are looking for answers about how to create an envisioned lifestyle. It’s not about being rich, superior or having an easy life with no worries. It’s more about having enough to afford simple pleasures and ultimately, a fulfilling retirement. Many plan to continue working into senior citizen years.
Most people who are affluent tend to be more educated about financials, budgeting and where their money is going. Typical queries from this group include “I’ve maxed out my 401(k), what should I do next?” Questions are about strategy.
Those under the age of 50 are allowed to contribute up to $19,500 to a 401(k) before maxing out. Older adults can do catch-up contributions for an additional $6,500. Depending on income level, individuals may be eligible for tax-free contributions to Roth IRAs. Beyond that, lower risk options include municipal bonds, fixed index annuities and universal life insurance. HSAs (health savings accounts) are a tax-free investment option for reducing tax liability with out-of-pocket medical expenses.
Real estate can be a good investment for both younger and older adults, but this comes with risk. It’s important to understand the market, maintenance costs and how to leverage tax benefits in this sector.
No matter one’s age, basic smart money habits are about the same for everyone. Invest 10% to 15% of what you make. Have a plan that includes diversified holdings to reduce risk. Capitalize on pre-tax retirement savings vehicles, or in the case of a Roth, tax free disbursements later in life. Be as consistent as possible with a dedicated long-term strategy. This is standard advice people hear but often fail to implement.
There’s room, however, to get a lot more thoughtful – and creative – with tax liability concerns. Individuals, families and business owners can save a lot of money by considering how investments may affect taxes owed before the year ends. Once a new calendar year begins, there’s little you can do to fix large capital gain liabilities or money moves that trigger a higher tax bracket. Tax law involves subjective interpretation, but that only works when advice is based on current law language.
Want to learn more tips for your 2022 financial planning, including tech and apps to try? Read the full article in our latest issue, on newsstands now, or for free in our digital issue linked below!
The story above is from a preview our November/December 2021. For more stories, subscribe today or view our FREE digital edition. Thank you for supporting local journalism!