Quarterly Financial Review: 9 Updates to Make to Your Plan Now (April 2022) | NewRetirement (2024)

Madeleine Albright (1937-2022) was on to something when she said, “I am an optimist who worries a lot.” Whether it is geopolitics or your future finances, successful planning requires both optimism and worry. You want to visualize an optimistic future (grandkids, a visit to all of the national parks, a fishing boat, financial security), while ensuring that you account for unknowns that could put your dreams at risk.

You see, worry is essential to good planning. And, addressing those worries leads to confidence and peace of mind. It is reassuring to know you can deal with whatever comes your way, when your plans account for what you might be up against.

Have you adjusted your retirement plans with the latest economic data and personal developments?

9 Key Updates to Assess in April, 2022

Below is a rundown 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 Planner Overview and in Insights. If you are on track, great. If not, then review suggestions in Coach for how to do better.

1. Your spending, income, and debt

At a macroeconomic level, consumer spending is slowing, which could make economic expansion more difficult. On a more personal level, wages are increasing. But, the rise in income is not necessarily keeping pace with the rise in costs as inflation remains high.

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

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.

Update your plans if you:

Changed your retirement date: Are you part of the massive wave of pandemic-related retirements? Or, are you someone who perhaps retired early and is jumping back into the job market? (Data from the government’s monthly Job Openings and Labor Turnover Survey shows that while Americans quit en masse, they are overwhelmingly moving on to new jobs for better pay or benefits.) What’s your retirement age?

Got a raise: Wages are up. If you have recently gotten a raise, decide if you will save or spend it and update your income plans accordingly.

Are spending more or have tightened purse strings: In response to a survey on inflation, NewRetirement subscribers are either cutting discretionary spending or, they say they have enough wiggle room in their budget to spend more.Update your spending.

Added or paid off debt. During the last three months of 2021, credit card balances increased by $52 billion to $860 billion—the largest quarterly increase in the 22-year history of the data, according to the Federal Reserve Bank of New York’s quarterly report on household debt and credit. Be sure to model your debt and assess your pay off strategies.

Savings: The US savings rate—how much money Americans were putting away after paying their bills—was 6.3% of their income in February. That’s slightly up from 6.1% in January, but still much lower than 2019’s annual 7.6% rate or 2020’s unusually high 16.3%.

Are your savings on track? Do you need to adjust your savings rates or balances?

2. Inflation

In Q1 2022, inflation continued to run at the fastest pace in 40 years. The Personal Consumption Expenditures inflation gauge (PCE) rose to 6.4% in February, up from 5.2% in January. The more widely known inflation measure, the Consumer Price Index (CPI), was at 7.9% in February.

And, economists are increasingly concerned that higher inflation will persist.

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 inflation rate (from 1913 to now) is around 3.10%.

Run inflation scenarios to see how your finances weather different forecasts. However, remember that you want to account for a long term average – not short term highs and lows.

3. Housing appreciation

According to Forbes, “The housing market appears to be operating without brakes as home prices continue to climb–the median listing price shot up in March to a record-high of $405,000, mortgage rates continue to tick up, and buyers are not backing down.”

However, many housing experts warn that while homebuyer demand may continue, home prices could falter amid inflation, rising interest rates, and geopolitical uncertainty.

• In February, the S&P CoreLogic Case-Shiller showed a whopping 19.2% annual home price gain to start 2022.
• This is dramatically higher than the average annual appreciation of around 4%.
• Remember that with housing, location is everything and the long term average where you live may be higher or lower than the average.

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

4. Asset values

The major indices returned wild gains in 2021 (the S&P 500 was up 27%, the Dow 18.73% and the Nasdaq 21.39%). However, the year to date returns in 2022 show losses. For year to date on April 4, 2022: the S&P 500 was down 4.27%, the Dow down 4.14%, and Nasdaq down 8.55%.

The war in Ukraine, the end of the pandemic, the threat of new variants, the job market, weather events, and countless other variables could continue to impact the financial markets in good and bad ways.

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.

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.

5. Medical cost inflation

PwC’s Health Research Institute (HRI) is projecting a 6.5% medical cost trend in 2022, slightly lower than the 7% medical cost trend in 2021 and slightly higher than it was between 2016 and 2020.

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 was 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.

6. Social Security

Beginning last January, Social Security paychecks showed a Cost of Living Adjustment (COLA) of 5.9%. This was 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 your start age, benefit and COLA are up to date in the Planner.

7. Interest rates

While still on the low end, interest rates are rising. On April 1, 2022, the average 30-year-fixed-rate mortgage interest rate is 4.34%.

Historic benchmarks:

• 3 months ago, the average 30-year fixed-rate mortgage interest rate was 3.76%
• 6 months ago, the average 30-year fixed-rate mortgage interest rate was 3.18%
• 9 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.

8. Life expectancy

The current life expectancy in the U.S. is 79.05 years, a 0.08% increase from 2021.

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

9. Taxes

It is tax time. Here are a few tips as you wrap up your returns:

• Did you collect all stimulus you were eligible for? If not, use the Recovery Rebate Credit.
• Are you impacted by the expanded child tax credit? For 2021, the total credit for eligible families rose to as much as $3,600 for each child under 6 and up to $3,000 for ages 6 to 17.
• Can you benefit from the child and dependent care credit? The dollar amount of qualifying expenses nearly tripled, and the percentage of those expenses that can be applied to the credit rose to 50 percent from 35 percent.
• You can deduct up to $300 in cash contributions ($600 for joint filers) to qualifying charities for the 2021 tax year, even if you don’t itemize deductions. People who take the standard deduction usually can’t do this.

Be sure to build a long term plan for minimizing taxes over your lifetime. Use tax insights in the NewRetirement Planner.

Recent Enhancements to the NewRetirement’s Planning Services

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. The NewRetirement Classroom

Last quarter we rolled out the Build Your NewRetirement Plan class, an 8 week session designed to help you create an accurate plan, gain insight into whether your resources align with your retirement dreams, and get ideas for how you can do better.

We are now adding more in depth thematic classes on 16 different financial planning topics.

Learn more about the NewRetirement Classroom…

2. Updates to Tax Modeling

The following updates to the NewRetirement tax modeling may have impacted your projections:

1. State taxes were set to 3% for Free Planner users. (This change does not impact Plus subscribers whose projections are based on the state income tax rate for where you live.)

2. RMD tables were updated with the latest 2022 tax laws.

3. Taxes on Social Security are now more accurately projected on all plans. This change is likely to be noticeable if you are 10 years from retirement and in the middle income range.

Log in to view your tax projections…

3. It’s Easier to Try Out Different Possible Retirement Dates

1. Anywhere you want to use retirement age in your calculations (income, contributions, etc…), specify “retirement age” as your “start” or “stop age.”
2. Next, assess your “chance of success” and other insights for any retirement age you are considering.
3. Discover the right time for you to retire.

Log in now to try different retirement ages…

4. Link Retirement Savings to Your Work Income, Including Employer Match

The NewRetirement Planner now enables you to link your retirement savings to your work income. You can specify a dollar amount, percent of income, and employer matching. This powerful enhancement makes your retirement plan more accurate and easier to maintain.

Try it out…

5. 2022 Tax and Benefits Updates Were Made to the Retirement Planner

The NewRetirement Planner was updated to use the latest figures available from the federal government for 2022 federal tax rates, Medicare estimates, and Social Security wage limits, as well as state tax rates.

Log in to see if your projections have changed…

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