Quarterly Financial Review: 9 Updates to Make to Your Plan Now (Start of 2022)

Inflation? An earlier retirement? What dragons (and dreams) do you need to prepare for at the start of 2022? Have you adjusted your retirement plans with the latest economic data and personal developments?

As you progress toward a lifetime of wealth and security, maintaining your financial plans can be critical to your success.

9 Key Updates to Assess Now at the Start of 2022

Below is a run down of 9 key data points you should assess in your plan at least every quarter. 

Once you have made updates in the NewRetirement Planner, review your key metrics on the dashboard and in Insights. If you are on track, great. If not, then review suggestions in Coach for how to do better.

The pandemic has caused interesting shifts in people’s income and spending. This makes it more important than ever to review your cash flow.

Are you on plan? Has your income changed? Paid off a debt? Could you save or spend more now? Make sure your numbers are up to date.

It seems that while people feel pessimistic about the economy, they are acting optimistically. A Gallup poll in November found that 70% of U.S. adults believe the economy is getting worse. But, slightly more – 74% – say now is a good time to get a job (the highest rate recorded in the survey’s 20-year history). Plus, spending is up and Americans face less financial hardship now than before the pandemic.

But, what’s important is YOUR current and planned spending, income, savings, and debt.

Update your plans if you:

  • Changed your retirement date. Are you part of the massive wave of pandemic-related retirements?
  • Are still working. Wages are up (though mainly in lower-income jobs). If you have recently gotten a raise, decide if you will save or spend it and update your plans accordingly.
  • Increased spending. Overall, consumer spending was up in 2021. Was yours?
  • Saw home insurance costs rise. Since 2017, premiums are up 11.4% on average — rising faster than general inflation.Increased debt. Consumer debt fell in 2020 but has been rising through 2021.
  • Boosted savings: Savings rates have been high for much of the pandemic due to decreased spending, increased income, stimulus checks, and inheritances. Do you need to adjust your savings rates or balances?

Inflation continues to be a major headline. The Personal Consumption Expenditures inflation gauge (PCE) is up 4.7% from one year ago. The more widely known inflation measure, the Consumer Price Index (CPI), is at 6.8% for the year.

There is still hope that the rise may be temporary due to supply chain issues as we emerge from the pandemic. However, as wages rise, prices may stay high to compensate for the higher costs of doing business and inflation may persist. High fuel costs are not helping.

Historic benchmarks:

  • In 2020, the average annual inflation (CPI) was 1.4%.
  • Over the last 20 years, average inflation has been 2.24%.
  • The long-term average (from 1913 to now) for inflation rate is 3.10%.

Run inflation scenarios to see how your finances weather different forecasts.

Depending on where you live, homes have seen huge appreciation this year. The S&P/CoreLogic/Case-Shiller

According to Redfin, a dip in new listings contributed to an ongoing supply shortage and home prices hit another all-time high. The median home sale price rose 14.6% year over year to a new all-time high of $361,171 in late December.

The S&P/CoreLogic/Case-Shiller National Home Price Index surged to 18% in the year that ended in October.

Realtor.com named these 10 cities as the hottest markets: Salt Lake City, Utah; Boise, Idaho; Spokane-Spokane Valley, Washington; Indianapolis-Carmel-Anderson, Indiana; Columbus, Ohio; Providence-Warwick, Rhode Island-Massachusetts; Greenville-Anderson-Mauldin, South Carolina; Seattle-Tacoma-Bellevue, Washington; Worcester, Massachusetts-Connecticut; and Tampa-St. Petersburg-Clearwater, Florida.

Historic benchmarks:

  • The 18% jump is the highest 12-month increase since 1975 when the analysis began.

If your home value has risen, be sure to update. And, assess your numbers for real estate appreciation.

The S&P 500 showed gains of 27% at the end of 2021. The Dow was up 18.73% and Nasdaq rose 21.39%.

Historic benchmarks:

  • For the previous 10-year time period (2010–2020) the annualized (nominal) return was 13.9%.
  • The highest annual returns in that time period were 29.6% in 2013.
  • The lowest annual returns were -6.24% in 2018.

Can you bank on another year of big returns? Have you reallocated your money into your desired asset allocation and updated balances in your plan?

If you haven’t linked your accounts to update automatically, you will want to make sure your balances are current. And, everyone should update their projected rates of return.

NEW: You can now model a change to your future rates of return for each investment account. This gives you better visibility into future wealth if you plan to decrease (or increase) your investment risk. Try it now…

Healthcare inflation has flattened over the last few years.

According to Fidelity, a 65-year old opposite-gender couple who retired in 2021 can expect to spend $300,000 in out-of-pocket medical expenses throughout retirement. (The estimate is $157,000 for women and $143,000 for men.) That is only a 1.7% jump from 2020.

Historic benchmarks:

  • The average medical cost inflation rate from 2010–2020 is 3.31%.
  • From 1935 through 2021, the average medical care inflation rate was 4.69% per year, significantly higher than the average general inflation rate over the same time span.

Update your medical costs and inflation assumptions.

Beginning this month, Social Security paychecks will show a Cost of Living Adjustment (COLA) of 5.9%. This is a huge bump over the modest 1.3% increase that was awarded in 2021.

Historic benchmarks:

  • The average annual increase is around 3%.
  • The highest COLA was 14.30% in 1980.

Be sure to adjust your monthly paycheck amount in the Planner.

While still historically low, interest rates are inching upward. On Jan. 3, 2022, the average 30-year-fixed-rate mortgage interest rate was 3.706%.

Historic benchmarks:

  • 3 months ago, the average 30-year fixed-rate mortgage interest rate was 3.18%
  • 6 months ago, the average 30-year fixed-rate mortgage interest rate was 2.84%.
  • The highest rate of 18.63% was seen in 1981.
  • The lowest rate was 2.66%, seen in 2021.

Use this information to forecast future real estate transactions, as well as a general economic indicator impacting asset prices, inflation and more.

The average life expectancy in the United States has fallen. However, on this measure it is much more important to assess yourself individually.

Make updates to your expected longevity in My Plan if your health condition has changed.

Congress is considering a long list of possible tax updates, making it difficult to plan.

However, you may want to assess your Roth conversion opportunities using the Roth Conversion Explorer.

Recent Enhancements to the NewRetirement Planner

At NewRetirement, we are committed to providing you with tools and services to achieve a more secure future.

We listen to every suggestion and try hard to prioritize what is most important. Recent improvements have included:

1. Introduction of Online Courses Starting with: Build Your NewRetirement Plan
Learn how to create an accurate plan, gain insight into whether our resources align with your retirement dreams, and get ideas for how you can do better.

The 8-week course will begin on Jan. 11, 2022, and will be offered on Tuesdays at 1 pm Eastern and 7 pm Eastern. Or, watch recordings at your leisure.

Sign up now…

2. Model a Future Change to Your Rates of Return
You can now model a change to your future rates of return for each investment account. This gives you better visibility into future wealth if you plan to decrease (or increase) your investment risk.

Try it now…

3. Plan by Month, Not Just Year
You had been waiting for this. All dates in the NewRetirement Planner can now be specified by month. This is a significant enhancement. Your outcomes may be different and your plans will be more accurate.

See how your plan changes when you specify months.

Log in now…

4. Help Center:
Have you checked out the Help Center the NewRetirement Planner? You will find FAQs, guides, and video tutorials for how to do things in the Planner, and a new video series covering financial fundamentals.

Check out the Help Center…

5. Fast Edits When Exploring Custom Roth Conversion Strategies
Now, in addition to 1) using the Roth Conversion Explorer and/or 2) modeling Roth conversions in money flows, you can also make fast edits to your documented Roth conversion amounts and immediately review taxable income charts.

Try the Roth Conversion Explorer…
Model or update conversions with Money Flows…

6. Exclude Specific Accounts from Automatic Withdrawals to Fund Expenses
Get more control over how your money is modeled by excluding any specific account from drawdowns to cover expenses.

The Planner defaults to taking first from income, followed by tapping accounts in this order: taxable savings, tax-deferred accounts, Roths, then HSAs.

You can now exclude specific accounts from withdrawals. (And, use “Money Flows” to direct money to a specific expense.) It also excludes the account from RMDs and consideration in the Roth Conversion Explorer.

Log in now to model excluding accounts…

Of the new retirement planning content published in Q4 2021, these are the ten posts that resonated the most:

Many of these 11 year-end tax tips for retirement are worthwhile to consider at any time. Long term tax planning can help you keep more of your own money.

Read more…

Get details on average historic returns and a framework for making your rate of return projections. This is info you need for a more secure future.

Read more…

Explore why de-cluttering is the ultimate retirement and estate planning task. 7 compelling reasons to clean out your closets this year.

Read more…

Use this checklist of 24 wise things to do before each year’s end to set yourself up for a great year and a secure future.

Read more…

If you want a secure retirement, you need to go about estimating retirement expenses. Get 9 great tips for succeeding at this difficult task.

Read more…

Run don’t walk toward life after retirement. Research says it will be the best time of your life. Explore 7 tips to make sure you are ready!

Read more…

Estimating your longevity with a best life expectancy calculator is a great way to improve your retirement financial and lifestyle projections. Explore the best tools.

Read more…

Out of pocket retirement health care costs can be outrageous. Use these 12 surprising tips for a healthier and wealthier retirement.

Read more…

Putting yourself in the mindset of your 80-year-old-self could really improve your life today and for the future. Find out why.

Read more…

Get insights for the best way to use your money from other people who have faced this decision. What are the pros and cons of paying off mortgage vs. investing?

Read more…

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