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Five Retirement planning tips for Q1 2022

By Adam E. Day, Financial Advisor

Correcting mistakes or making adjustments early into a journey is much easier to accomplish and can generally yield a better result than trying to make a correction or a change late. Think about your latest road trip, if you got onto a major highway leg of the trip, heading East instead of West, as intended, but did not notice or correct for a few hours, it might leave a bad taste in your mouth for the start of your vacation. The same thing can happen with Retirement Planning and Investing. That is why at the beginning of the year, it is good to revisit and evaluate your strategy for the upcoming year and control the things we can. Here are Five ways that you can seek to enhance your Retirement Plan, for 2022.

1. Adjust your 401k Contributions: Did you receive a raise last year? Did you max out your 401k Contributions in 2021? Consider adding a boost to your contribution amount, some plans will automatically step-up your contributions 1% annually, but it is good to make sure that you are putting away proper amount into 401ks, without stressing your budget. The maximum 401K contribution amount for 2022 is $20,500, which is up from 2021’s $19,500 allowable. Catch up contributions for those over age 50 is unchanged at $6,500.

2. Adjust your HSA contributions: Similar to the 401k contribution story, HSA contribution limits have also increased. For 2022 Single plan limit is $3,650, while Family limits are $7,300. Don’t forget there is an additional $1,000 catch up contribution for those over 50.

Why we like HSAs: HSAs are tax-efficient making them an effective savings and investment account:

1. Withdrawals for qualified medical expenses are income tax-free.

2. All contributions to an HSA are income tax-free.

3. Any interest earnings and investment growth from deposits are income tax-free.

4. Additionally, HSA contributions come out before going through payroll, so they have the advantage of avoiding Medicare and Social Security Tax.

3. Consider contributing to an IRA: One way to possibly save on your 2021 taxes and put away additional savings is to an Individual Retirement Account (IRA). Finding which IRA, you are able to contribute to is important, so please contact your tax advisor to confirm. Additionally the deadline to complete IRA contributions for 2021 is April 15, 2022.

4. Consider an automatic investment plan: An additionally way to get your dollars working for you sooner is by setting up monthly automatic deposits into your investment accounts. Often the phrase “Time in the market, is more important than, timing the market.” The fact that in the years 2000-2021, the S&P 500 had a positive return for the year, 16 times and negative return only 6 years times adds some data to the phrase. However, Past performance is not guaranteed or indicative of future results.

5. Set up a Financial Review: Did you skip 2021 or maybe even 2020 for your review? Likely, you have had some change that may impact your retirement planning analysis or Envision ® plan. 2020 and 2021 were nothing short of changes, disruptions and pivots for many. It is good to make sure that your retirement plans and your portfolio are aligned for your goals.

Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the authors and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.

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