It's no secret that 2022 has been a rough year, but the door to success is far from closed. As we near the end of the year, what are some steps investors can take to maximize their returns? (Hint: It's not checking your bank balance more often!) Read on to learn more.

2022 Year-End Financial Checklist

It's no secret that 2022 has been a rough year, but the door to success is far from closed. As we near the end of the year, what are some steps investors can take to maximize their returns? (Hint: It's not checking your bank balance more often!) Read on to learn more.

November 29, 2022

2022 Year-End Financial Checklist


2022 has been a difficult year for investors. Almost every market segment's value has declined. Even investment-grade bonds, a safe haven for conservative investors, have plunged by more than 12% as of this writing.

It's easy to let your emotions get the best of you during a challenging market and a weak economy. However, bear markets and economic downturns are not unusual, and it may be useful to keep this in mind. These occurrences are part of the economic cycle. Regardless of what the doomsayers and talking heads on financial news channels say, I am confident that the economy and market will recover and rebound in the long run.

So, what steps can investors take as the year comes to a close to maximize their returns? (Hint: it's not checking your bank account amount more frequently!)

It is counterproductive to focus just on recent results...

If you want to make the most of this competitive market, you might want to look into the ways I describe below. Some of these might be helpful, while others might not. The key is to see the opportunities in this situation so you can make smart financial decisions without losing sight of what's really important.

1. Year-End Investment Dos and Don’ts:

Check your overall allocation. Does the mix of stocks, bonds, alternative investments, and cash that you have now still make sense for your goals? If your finances have changed, you should talk to your advisor about how that might affect your investments.

You might want to rebalance your portfolio. In 2022, the market dropped sharply (as of this writing). Most likely, your initial allocation wasn't right, and you may want to rebalance your portfolio over the next few months to make sure your allocation is back to where it should be for your level of risk tolerance. Rebalancing could be a great time to lock in losses for tax planning purposes.

Don't try to repeat what worked in the past. Now is a good time to stay away from what's popular. Even when the market goes down, there are always investments or portfolio managers that did very well. Unfortunately, there is no way to know which manager or strategy will be used. Even so, pushy salespeople will still try to make money off of recent successes, brag about high returns, and try to get investors to invest in yesterday's winners.

Remember that the market goes through cycles!

It happens often that the lucky winners of one year end up being the unlucky losers of the next. Keep your long-term goals in mind and use a smart asset allocation and safe, vanilla investments to reach them. Don't keep using the same strategies that worked in the past.

TIP: Do you have extra money you don't know what to do with? You got a lot of money, right? Do you need to withdraw money because you have a big bill coming up? Talk to your advisors about any of these possibilities to come up with a good investment plan for the coming year. Also, the market is down a lot in 2022, so now might be a good time to add it to your undervalued investments.

Related: Grab a copy of Vincere Wealth's FREE “Investment Philosophy” eBook here.

2. Required Minimum Distributions (RMDs)

RMDs are for people over 72, and they may also be for people with a beneficiary IRA. If you have to take RMDs but don't, you will have to pay a penalty. If you don't need your RMDs to cover your living costs, you might want to look into QCDs or something else (see the section below on "Charitable Giving").

TIP: Talk to your financial advisors about whether you want your RMD check sent to you to spend or re-invested in your taxable account.

If you are interested in speaking with a Vincere Wealth financial advisor, click here.

3. Donating to Charities

This year, there are a lot of unique ways to give to charity!

Qualified Charitable Distribution (QCD): People who are 70½ or older can give all or part of their RMD directly to charity. A QCD can't be worth more than $100,000 per taxpayer and per year. No matter how much your RMD is for the year, you can give up to $100,000 from your IRA to charity as QCDs.

Donate stocks that have gone up in value. Even though investors' portfolio values have dropped a lot this year because of the market drop, many people still have long-held, concentrated stock positions with large capital gains that have not yet been realized. This could happen through gifts, building up shares from working for a company for a long time, or the value of a position held for a long time. If you give these securities that have gone up in value directly to charity, you don't have to pay the capital gains tax that you would have to pay if you sold them. It also lets you cut the size of a big position, which helps make your portfolio less risky.

Use a Donor-Advised Fund (DAF): A DAF is an account where you can put assets that you plan to give to charity in the future. When someone gives money to a DAF, they get an immediate tax break and keep control over how the money is invested and given to charities. A DAF can be very helpful if you have a security with no cost basis, a stock that has gone up a lot in value, or a concentrated position. In all of these cases, the tax liability can be avoided by moving the position to a DAF.

TIP: A DAF can be especially helpful when "bunching" your charitable donations, which means giving all of your donations from several years at once. This is sometimes done to save money on taxes.

For example, you can only get a tax break for giving to charity if you itemize your deductions. This year, the standard deduction for a single person is $12,950 and for a married couple it is $25,900. If you want your itemized deductions to be more than the standard deduction, you could "bundle" donations from multiple years. This may let the donor take the itemized deduction and get more than the standard deduction this year, but still spread the money out over this year and next.

4. Roth IRA Conversions

A Roth IRA conversion is the process of moving money from a traditional IRA, SEP, or 401(k) account into a Roth account. Because a traditional IRA is tax-deferred and a Roth is tax-free, any income taxes that were supposed to be paid on funds that were converted must be paid at the time of conversion. There is no cost if you leave early.

Check your personal tax situation. This strategy may make sense if the saver thinks that the delayed tax liability in a traditional account will become more difficult as retirement approaches. In that case, it might be better to pay the taxes now instead of later. It's important to remember that this may not be the best choice for you if you can't pay your tax bill now.

TIP: Since the market has gone down in value this year, 2022 may be the best year to convert Roth IRAs, since the tax burden may be lower than in years when the market has gone up.

5. Beneficiary Updates

Beneficiaries on retirement accounts and insurance policies aren't part of a person's will. So, even if you have an estate plan, you should check your beneficiary designations to make sure that your money goes where you want it to.

This year, a family member who was a beneficiary on your account may have died. Did you want to change the people who would get your money because your family had changed? Talk to your advisor or insurance agent to let them know what's going on and figure out what you should do.

TIP: It's not unusual for a couple to have been divorced for years but not change the person who gets their money. It's a good idea to take the time to make sure everything is right. If you don't, you might make a mistake that costs six or seven figures and can't be fixed.

Tim Uihlein is a resident guru at Vincere Wealth for all things related to insurance and estate planning. Connect with him here.

6. Estate Planning

If a loved one died this year, you should talk to a financial planner or estate attorney about your plans and make any changes you need to your will, power of attorney, health care proxy, etc. Usually, if you want to save for retirement and get a tax break, you have to join the state's plan.

TIP: Those who have recently changed their estate plans and set up trusts should make sure that their investment accounts reflect the new plans.

7. 529 Contributions

If you live in one of the 20 or more states that offer a full (or partial) deduction for contributions to the home-state 529 plan, opening a tax-advantaged 529 college savings account could save you taxes right away. But people from a few states can take advantage of the deduction by putting money into a 529 plan in any state.

If you haven't already, give someone a gift using your Annual Gift Tax Exclusion. You can give up to $16,000 tax-free to a single person each year. If you don't use your gift allowance for 2022 by January 1, you'll have to use your allowance for 2023 instead.

TIP: Take advantage of the "superfunding" feature of your 529 plan. With this plan, you can give a tax-free gift to a 529 account over the course of five years. With the election, a married couple can put up to $160,000 into a 529 plan for each child as long as they don't give the beneficiary any other gifts during the five-year period. If they don't give the beneficiary any other gifts, they don't have to worry about gift taxes.

8. Tax Loss Harvesting

Tax loss harvesting is a strategy that involves selling securities at a loss to cover a capital gains tax bill. Most of the time, the federal tax rate on short-term capital gains is higher than the rate on long-term capital gains. This plan could be used to limit how much tax is paid on short-term capital gains.

Donate the cash from the sale of a stock that lost money: This is especially important in 2022, when stock prices have dropped everywhere. This "tax loss harvesting" strategy helps investors by letting them take a loss when they sell a stock that has lost value. The loss can be used to cancel out any capital gains or up to $3,000 in regular income for the year. This is in addition to the tax break you'll get for giving money to charity with the money from this sale.

TIP: It's usually not a good idea to sell an investment for tax reasons, even if it's losing money. A plan for investing must also be in place to back up the sale. Don't let taxes get in the way of your investment decisions.

9. Employer Retirement Plan

Evaluate this year's contributions by: Reviewing how much money you have put into your employer's retirement plan this year. If you have the financial means, it is worthwhile to contribute the maximum amount to your 401(k)/Roth or 403(b) plan (b). In 2022, those limits will be $20,500 before any employer match, or $27,000 if you are 50 or older.

Keep in mind next year's contribution limits: the contribution limit has been raised to $22,500 for 2023. Catch-up contributions will also be increased to $7,500, allowing those aged 50 and up to save up to $30,000. Make the necessary changes to your plan to ensure you are contributing as much as possible.

Traditional vs. Roth: Consider whether it makes sense to use your Traditional or Roth 401(k) option (if available) for the coming year.

Examine your investment portfolio and lineup: Consult with your advisor to see if any changes are necessary. This is especially true if your company recently changed 401(k) providers.

TIP: Do you have any old retirement accounts from a previous employer? To keep your assets organized, now could be a good time to consolidate them into an IRA.

10. Budget Expense Goals

Investors always need to look at their costs and make plans for the future. Because of the way the economy is right now, this is even more important than it was in the past.

Cash Flow Management for Retirees: This is especially important for retirees, who need to figure out how much cash they will need in the next year and work with their financial advisor to make sure they can meet their cash flow needs.

Mitigating the risk of a sequence of returns: Make sure your savings account has enough money in it. For people who work, 3-6 months is a good rule of thumb. Retirees may want a bigger cushion to protect themselves from the risk of getting lower or negative returns when they take money out of their investments early in retirement. This is called the "sequence of returns risk." The order or sequence of the returns on your investments can have a big impact on the total value of your portfolio and, by extension, on your ability to keep living the way you want to in retirement.

TIP: Since the market is down this year, retirees should rethink their "safe withdrawal rate" and make sure they have enough cash on hand.

Wrapping Up: 

Without a doubt, 2022 has been a challenging year, but victory is still within reach. I urge you to consult with your advisors before the year ends to go over this checklist and anything else that may be on your mind. Taking these measures will put you in a stronger financial position for the upcoming year.

If you're interested in an investment advisory or financial planning relationship, please consider Vincere Wealth Management.

Schedule a FREE 1:1 session here to connect with a #VincereWealth Advisor.


I hope this information was helpful! If you have any questions, feel free to reach out to us here. I’d be happy to chat with you. 

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This post is just for informational purposes and is not meant to be legal, business, or tax advice. Regarding the matters discussed in this post, each individual should consult his or her own attorney, business advisor, or tax advisor. Vincere accepts no responsibility for actions taken in reliance on the information contained in this document.

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