Bob's Blasts

Bob's Blast
December 2021


2022 Planning
We wanted to point out a few important planning numbers and changes for 2022:

•    401K, 403B, most 457 and the government’s Thrift Savings Plan limits have increased to $20,500 with catch up contributions of $6,500 for anyone age 50 or older.  (Total of $27,000 if age 50 or older)
•    SEP IRA limits have increased to $61,000.  SIMPLE IRA limits have increased to $14,000 plus $3,000 for anyone age 50 or older.   
•    IRA and Roth IRA limits remain the same at $6,000 plus $1,000 if age 50 or older.  2021 contributions may be made up until April 15, 2022.   
•    Health Savings Accounts (HSA) limits have increased to $3,650 for an individual plan or $7,300 for a family plan with an additional $1,000 if age 55 or older.   
•    529 contributions can be deducted from Ohio taxable income up to $4,000 per year, per beneficiary (same as 2021).  Be sure to check if you are using a plan outside of Ohio as limits may have changed.
•    The annual gift tax exclusion is increasing to $16,000 per recipient.  This means that you can gift anyone up to $16,000 in 2022 without having to file anything with the IRS.   A married couple is able to gift anyone up to $32,000.  
•    If you’ve been funding your Roth IRA by making non-deductible IRA contributions and then converting to your Roth IRA, this may be eliminated in 2022.  If you haven’t made your 2021 contribution yet and then converted, you may want to do so before December 31st as it may not be allowed in 2022.  If you were planning to do this with your 2022 IRA contribution in January, you may want to hold off doing it right away as it may be disallowed next year.  
•    There’s also been a proposal to reinstate the state and local tax (SALT) deduction above $10,000 for 2022 and beyond.  While not yet passed and facing an uphill battle in the Senate, there is a possibility of a higher deduction amount in 2022.  With this possibility, we suggest holding off paying property taxes until January if you haven’t already paid them.  You may also want to hold off paying anything that would be an itemized deduction until 2022 if you typically take a standard deduction. (gifts to charity, mortgage interest, large purchases that would result in sales tax above your current local tax withholding)  

We will pass along anything that results from this latest proposed spending bill which may also have tax implications.  Much uncertainty remains as the bill has passed the House but is getting resistance in the Senate.    

After 2019 and 2020 produced equity returns well above historical averages, 2021 appears on track to finish a run of three straight years of strong performance.  It’s important to recognize the headline news of the S&P 500 Index and Dow Jones Industrials is not necessarily reflected in all asset classes.  How long this can continue is anyone’s guess.  We don’t expect the next three years to look like the last three, but there’s still a positive with interest rates near zero and economies accelerating some strategists are constructive on equities.  We continue to watch inflation readings as this may cause the Federal Reserve to slow things down which may cause stocks to become more volatile.  Low interest rates and an increase in inflation continue to provide a challenge for bonds.  We continue to explore alternatives to bonds and anticipate discussions next year with you on our strategy to deal with these obstacles.

Please keep us informed of any changes in your life, especially upcoming cash needs, so we can ensure they are sheltered from market declines.   

We appreciate another year of working together and look forward to many more.  

Happy holidays to you and your families!  

This material is meant for general illustration and/or informational purposes only.  Views expressed in this newsletter may not reflect the views of Royal Alliance Associates, Inc.  It is our goal to help investors by identifying changing market conditions.  However, investors should be aware that no financial advisor can accurately predict all of the changes that may occur in the market.   This material should not be relied upon as investment advice.  Investors should note that there are risks inherent in all investments, such as fluctuations in investment principal.  Past performance is no guarantee of future results.  There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. This article contains forward looking statements and projections.  Neither Royal Alliance Associates, Inc nor its representatives provide tax or legal advice.  If you don’t wish to receive marketing emails from this sender, please reply to this email with the word REMOVE in the subject line.