Bringing together our best ideas for a more profitable new year

One of my great privileges is to participate in a panel discussion with some of my colleagues as we brainstorm about financial planning ideas for the coming year. Lyle Benson, Michael Goodman, Scott Sprinkle and I talked for two hours recently on an AICPA panel offering free continuing education for other advisors. I always learn a great deal, so I thought I’d share some of our conversation with you.

Counseling People in Times of Crisis

All of us on the panel work with clients as we find our way through this longstanding pandemic. Not only do we need to think about how best to help our clients, but we also need to think about how to keep our own equilibrium as we balance remote work, family issues, health scares, cancelled plans—I know you know what I mean.

So not surprisingly in mid-January with Omicron surging that meant more of us were back working remotely, although some of us tried going back to the office at least on a hybrid basis. It varies depending on what part of the country you live in and how your local team is coping. That’s harder to manage in a nationwide, multi-office firm, but all firms have their challenges now.

We hear about the Great Resignation. Are we seeing it in our practices? You bet. Clients call wanting to talk about leaving work sooner than planned. They want to know if they walk out today, will they have enough money to live the life they’ve envisioned?

But it’s not just clients. Our teams are approached regularly about other opportunities. Are we making our cultures attractive through continued learning, infusing fun into ongoing challenges or sharing a vision that’s compelling and engaging? We also have team members who are just about ready to retire. That’s a big step and we want to spend time with them as they envision life after work.

To do all of that, we have to take care of ourselves. These past couple years of enforced self-reflection have helped us reevaluate what’s important to us as we balance home life with work opportunities and challenges. Each of us on the panel have different ways to manage our lives, from music to stand-up paddle boarding to golf or even just savoring a fine glass of scotch.


All of us on the panel just shake our heads when it comes to tax because so much is up in the air. Last year we thought we’d have massive change with President Joe Biden’s proposed legislation. This year—who knows. It may be no change. It may be something smaller than originally anticipated.

The types of issues we’re discussing with clients include that the lifetime estate tax exemption went up to $12.06 million per person this year. If you have a taxable estate, you may be able to shift more assets to irrevocable trusts for future generations. The gift tax annual exclusion amount increased from $15,000 to $16,000 per person. That can also effectively shift assets out of your estate to those who may need a little help.

Charitable giving has a few changes too. The 100% Adjusted Gross Income deduction from the CARES Act is over. We’re back to using 30% for appreciated stock or 60% for cash gifts for current deductions. Otherwise there is a five-year carry-forward period to apply those deductions in the future.

Donor Advised Funds continue to be very popular. They are easy to set up and administrate. We’re also seeing many people over age 70½ make charitable gifts from their IRAs (“qualified charitable distributions,” or QCDs). QCDs must be made directly to a charity (not a Donor Advised Fund) and each person can gift up to $100,000 a year. That money bypasses taxable income, which can be helpful if you are trying to pay less in Medicare premiums.

We did see a few issues last year as people wrote checks from their IRAs to charities. If the charity didn’t cash those checks by December 31, then you may not have taken the full required minimum distribution from your IRA. There is a 50% IRS penalty for what you should have taken but didn’t. Here’s a really quirky twist: If the check comes from the custodian to the charity, it has to be issued by December 31, but it’s OK if it’s cashed after that. Go figure.

Also be sure to tell your CPA or tax professional if you made Donor Advised Fund contributions. Otherwise you may miss that deduction. Tell your CPA or tax professional about non-deductible IRA contributions or Roth IRA conversions, too. Those get reported on IRS Form 8606, and we see people miss telling their CPAs about this more than you might think. If we catch it later, you’ll have to amend your return to get it right. It’s the only way the IRS knows you already paid tax on those contributions.

Beyond that, capital gains strategies are what many of us are talking to clients about. While we may not have massive tax changes in 2022, it’s a fairly good guess that taxes may go up eventually. So if you have stock that is overweighted or you are thinking of selling a business, you may want to take the gains and pay the tax. It’s a trade-off between getting your risk tolerance right and paying tax. 


Well, that’s a perfect lead into the investment area. With the Federal Reserve fighting inflation and feeling that the economy is in better shape, we’re going to see higher interest rates probably starting in March. The market is already in some turmoil anticipating those actions. This is partly to counter inflation and partly about getting rates back to a more “normal” level. You may remember Jay Powell (chairman of the Fed) lowered rates to essentially zero at the start of the pandemic. At some point we want those rates to go up so that cash and bonds pay more. But it can be bumpy on the way there.

Remember that when interest rates go up, bonds tend to go down. The rates go up, but the values go down. In general, the longer the maturity (or duration) of the bond, the more exposure you have to interest rate changes. The old rule of thumb is that for every 1% change in rates, bonds move inversely by their duration. So if you have a 20-year bond and interest rates go up by 1% by the end of the year, you could be looking at a 20% drop in value. So many people are staying shorter in maturity. Probably less than 10 years, although there are many strategies that mix short- and longer-term bonds to find the best risk/reward trade-off.

The stock market can get riled up with interest rate changes, too. That’s in part what we’re seeing early this year. Higher interest rates affect different styles of stocks in various ways. As rates go up, financial service companies may do better because they can charge more in fees. Tech companies may not do as well because much of their earnings can be tied to the future. Those firms with very high valuations may find that those values come back down, but it could be a mistake to count them out. A balanced portfolio is what all of us on the panel continue to advocate.

So what are we doing? Many of us are going back to basics to make sure we’re prepared for whatever is next. We’re checking emergency reserves to make sure we have what we want in liquidity. If stocks move into a recession (and we have no idea if that’s what’s coming), we want to have the appropriate level of cash equivalents that we can use while stock recover. The last three years the S&P 500 has returned over 25% annually. It’s highly unlikely that will continue, recession or not.

We’re  also reviewing Investment Policy Statements. Do we have the appropriate level of risk? With the significant run-up in the market over the past several years, some people may want to de-risk and decrease the amount of stocks they own. We also want to talk about being tax-savvy about where we hold those stocks and bonds (asset location). That can vary depending on objectives, size of the portfolio and other factors.

If we’re bumping up against the upper limit of our targeted allocations (we generally use +/- 10% around each asset class band), then we want to talk to our clients about reducing the overexposure. And that sometimes involves taking capital gains. While that conversation can meet with some resistance, taking profits off the top is often the right strategy so that risk doesn’t get out of control.

Overconcentration is another issue we want to tackle with clients. That can happen because a corporate executive has purchased stock at a discount over the years or has retention requirements or just fell in love with the stock. That can put the client at risk should something negative happen to the stock or that industry. So we try to diversify where we can.

On top of that, the larger indices (like the S&P 500) have a concentration of 30% or so in the top 10 stocks. That can compound the issue. I like to use software to “see inside” all funds, ETFs and individual holdings to get a real understanding of where we may have concentration issues. The solution? Pare back where necessary and have a talk about taking capital gains. (If you can rebalance in retirement accounts, you can potentially avoid taking gains, but that’s often not entirely possible.) You can also discuss gifting appreciated shares if that fits with clients’ objectives.

Everyone is worried about inflation. There are portfolio hedges you can use to varying degrees of success. Holding stocks is one way to hedge. Owning inflation-protected bonds like TIPS (Treasury Inflation-Protected Securities) and I-bonds helps. We usually hold TIPS in retirement accounts to avoid the phantom income. Some alternative investments, like private lending, can help diversify the risk of bonds. Real estate or commodities are other hedge-like investments to consider, depending on individual circumstances.


There are SOOO many ideas that apply to retirement planning right now. First, did you know the IRS came out with new RMD (required minimum distribution) tables in January? Make sure you’re using the right tables to calculate what you owe because it’s less than it was using the old tables. Here’s a tip: If you have an inherited IRA, you need to go back to when you inherited it, recalculate the factor from the table, and then apply the “minus one” for each year you’ve held the IRA. It’s a bit tricky.

There are also new amounts for what you can contribute to plans like 401(k)s. You’ll find my tax cheat sheet here for reference. Stay tuned for another article I’m writing on What’s New in 2022 for more on changing IRS thresholds.

Market realities pose interesting challenges for retirees. Higher inflation is one of the scenarios that can really erode purchasing power in a retirement portfolio. We are talking to our clients about changing assumptions in retirement models, including a period of higher inflation or lower rates of return going forward. Some of that is already considered as we run probability analyses (Monte Carlo simulations) to test both inflation and rates of return. But it still merits a conversation or perhaps a revised projection.

Another relatively new client conversation revolves around non-spouse inherited IRAs. Since the SECURE Act, if you inherited an IRA (and you’re not the spouse), you have 10 years to take that money out. If it’s a Roth IRA you inherited, those distributions aren’t taxed, so you can wait until later to pull out the money (and let it continue to grow tax-free). But with traditional IRAs, you may need to plan when to take distributions around your own income stream patterns. We tag inherited IRAs as a “2020 Inherited IRA” or a “2021 Inherited IRA” so that we can keep track of how long we have to take out that money.

The pandemic has brought new realities to how clients are spending money in retirement. Often a top goal was travel or family experiences. Much of that has been postponed and people are rethinking how they want to approach that going forward. Pandemic realties are also changing how people view retirement communities and the associated costs of staying home longer. Long-term care insurance is harder to get with more restricted acceptance policies. Costs for online streaming and other “at-home” activities may be much higher and harder to track. So taking time to review what we’re spending might be in order.

Sequence of withdrawal of assets is an issue we review for clients in retirement. For example, when to tap Health Savings Accounts (while you are waiting to take Social Security can be helpful) and tracking the five-year periods for each Roth IRA conversion so you don’t hit penalties for withdrawing money too soon.


Protecting your assets can involve several aspects: cybersecurity, natural disaster preparedness or insurance needs. We encourage clients to check their credit rating at the major credit agencies and freeze their credit to prevent identity theft. I’ve written another article you can find at about what to do to prepare for the next fire, flood, hurricane, mud slide—you name it. A “go bag” has helped many people when they had to leave their homes quickly. Much of what you need can be kept on your phone or a secure online account.

A few tips on reviewing insurance include making sure you don’t have too little or too much coverage. If your net worth has increased dramatically over the years, you may have too little “umbrella” or personal liability coverage. Your disability coverage may cap out at work and you may need to investigate outside additional coverage. If you are in retirement, you may not need your disability or life insurance (or less of it). I also like to look at lifetime maximums for long-term care insurance. It may not cover everything indefinitely. That should be built into your retirement projection.

Enjoy Your Precious Life

Everyone is so tired of this pandemic, and yet it’s important to find things that bring you joy or teach you new ways of looking at life or taking advantage of this “time out” from what we thought we would be doing. That may include cleaning up our lives or developing new hobbies or just spending time with the people we love.

My colleagues on the financial planning panel are my friends, too. We have fun, support each other through trying times, and continuously learn from each other. Not a bad way to go through life. I hope you got something out of our shared thoughts on financial planning for 2022. And we enjoy sharing our wisdom with you!

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