Guide to Wealth Management: Planning, establishing good habits and setting goals contribute to financial success

As we continue to move out of the pandemic in 2022, inflation, interest rates and the economy continue to be on investors’ minds. Other factors such as tax laws and volatility could also have an impact on one’s wealth. On a positive note, experts continue to see strong corporate earnings and economic growth.

We spoke to several area wealth management professionals who offered insight on the year ahead. They also shared several helpful tips for the future, such as planning, establishing good habits and setting goals.

Jason M. Katz, wealth adviser and principal at Bartlett Wealth Management, says, “In terms of the financial markets, 2021 was a year where most investments worked well and there was very little volatility. In fact, those who were new to investing in 2021 may have come away thinking that investing is quite easy, and investments will always go up. For those of us who have experienced volatile markets in the past, we know that 2021 was an anomaly and we fully expect 2022 to be met with stock market volatility. In fact, in a typical year, the S&P 500 has about three instances of a 5% downward correction and about one instance of a 10% correction. In 2021, there was only one 5% correction, which occurred in September.”

He says, “Looking forward, we’re keeping our eye on inflation, interest rates and the economy. Inflation is elevated right now, which has a ripple effect on many areas, including interest rates and the economy. We will be watching what the Federal Reserve will do in terms of hiking short-term interest rates to cool down inflation. The economy itself is doing quite well, even though a recent poll showed only 18% of people would describe it that way.”

At Bartlett, the bottom line is that discipline is key, Katz explains, and trying to predict where the stock market, inflation and interest rates are headed is a fool’s errand. What is more important is building a financial plan that incorporates your goals and informs an appropriate asset allocation according to your cash needs and risk appetite.

John VanWeelden, president, VanWeelden Financial Group, LLC, says “Low interest rates and soaring inflation have painted a picture of everything being great on the surface for many years now. Stock markets have been going up and borrowing money has been cheap. But behind the scenes, this combination is unsustainable.”

He says the only question is, “How long can we last before everything regresses back to the mean?” Which it always does. And that’s healthy. But it’s better for this to occur more often and in a less volatile way.

“The longer we go without a healthy correction, the more pervasive and painful the eventual correction becomes. I think we’re way overdue,” VanWeelden says.

He says investors should always consider factors such as inflation and taxation.

“Inflation and taxation are, in our opinion, the biggest issues facing all of us as we consider planning for our financial futures. These are compounded by governments worldwide that are overspending, inhibiting manufacturing and distribution, and negatively impacting employment in nearly every all aspect of our global economy. Your plan should be very tax sensitive and should assume inflation is here to stay,” VanWeelden says.

He continues, “Inflation is the obvious elephant in the room. Although it has been a huge issue for years now, it is finally bubbling to the surface in such a way that it is getting noticed, as it begins to have a more tangible effect on all of our lives. Unfortunately, by the time the average person perceives it, it’s too late. That’s where we appear to be right now.”

In the short term, VanWeelden says, “I think the sticker shock of inflation could be devastating to the broad stock and bond markets. Then, over time, I think it will continue to artificially inflate the price of everything, including a lot of investments, but that’s not the same as increased purchasing power.”

Overall, he says, investors must look at income planning, tax planning, heath care planning, risk management, survivor planning and estate planning, all within a very flexible plan, which needs to be reviewed and updated every year.

“When focusing on retirement, we believe you must be extremely comprehensive. It’s not sufficient to just manage your money. If that’s all you’re doing, you just rolling the dice and hoping you happen to have retired at a really good time in history. Even worse, a temporarily good market can give you a false sense of security,” VanWeelden says.

“Right now, we’re experiencing elevated inflation and the prospect of higher interest rates, which have created volatility in the markets to start 2022. On the positive side, we continue to see strong corporate earnings and economic growth,” Katz notes.

Investors should also continue to follow laws at the federal level, which could have an impact on 2022 and beyond.

“Most of us who follow tax laws closely expected the Build Back Better plan to have passed and been enacted by now. This tax proposal went through many iterations as it moved through the House and Senate, but recently stalled. There are a few provisions in the latest proposal that could affect investors, but most of the provisions are aimed at the ultra-wealthy. There is one provision in the bill that could reduce taxes for a lot of people: an increase in the cap on the state and local tax itemized deduction from its current $10,000 level to as much as $80,000. This could yield a significant deduction on an investor’s federal income tax return, if enacted,” says Katz.

Other than the Build Back Better plan, Katz says, Bartlett Wealth Management is working with its clients to implement strategies that consider the provisions in the SECURE Act of 2020 and the impact that legislation has had on retirement accounts and required minimum distributions.

“One example of a change in the SECURE Act for IRAs was the elimination of the ‘Stretch IRA’ for non-spouse beneficiaries. In the past, a non-spouse beneficiary could be able to stretch the required minimum distributions from their inherited IRA over their lifetime,” Katz says.

Heading into 2022, the overall economic environment in the U.S. is healthy. Despite the challenges, that momentum should carry through the remainder of the year.

Katz says, “The overall economic landscape in the U.S. is quite strong. Our team at Bartlett likes to look at objective economic data as opposed to trying to gauge the economy from any news source. There are certainly challenges for companies going forward, including higher input and labor costs, but we are trying to focus our investments on those companies who are able to pass through those costs onto the consumers via price increases.”

He says, “The economy and the stock market do not always move in concert, so it is still important to make sure you have the safeguards in place in your portfolio such as cash for your short-term needs and a fixed income portfolio that could support you through any market downturns.”

When it comes to financial success, investors can take action steps, which can them toward their goals. They can also turn to a trusted adviser.

“Financial success requires good habits, a goals-oriented mindset and intentionality. Putting together a plan that details your goals and a pathway to achieving those goals is the most intentional thing you can do to create financial success,” says Katz.