4 financial goals retirees should consider in 2022

While it's always a good habit to review your financial goals at least once a year with a financial advisor, the start of the new year is an especially important time, according to TIAA Chief Planning Strategist Dan Keady, CFP®. 

Below, Keady outlines four financial goals that retirees may want to discuss with their financial advisors in the new year.

1. Review your guaranteed income to see if adjustments are needed

For retirees, guaranteed income sources, such as Social Security benefits, provide money each month for life that is immune to market fluctuations.

Social Security announces largest COLA increase in 40 years

Social Security beneficiaries received a 5.9% cost-of-living increase due, in part, to rising inflation.

The average Social Security payment for retired workers has increased slightly every year since 2016, and was $1,627 in 2021.

Source: Social Security Administration fact sheets, 2017-2021

While the 5.9% cost-of-living increase, effective January 1, 2022, is good news for retirees, it's driven by the steep rise in inflation in 2021. Inflation reduces consumer buying power, especially for those living on fixed incomes in retirement. As a result, much of the Social Security cost-of-living (COLA) increase is expected to be absorbed by the rising cost of goods and services, along with the $21.60 increase in the standard monthly premium for Medicare Part B enrollees from $148.50 in 2021 to $170.10 for 2022. The annual deductible for all Medicare Part B beneficiaries also rose to $233 in 2022, an increase of $30 from the annual deductible of $203 in 2021.1

"If you have concerns about the impact of inflation and higher healthcare costs on your income in retirement, it may be time to sit down with your financial advisor and talk about how a lifetime annuity can produce more of the reliable income you seek," Keady says. 

Annuities are insurance products that can be used to provide guaranteed income for life. A personal annuity or after-tax annuity, for example, can help you build additional retirement savings and is not subject to income rules or contribution limits like your 401(k), 403(b) or IRA. 

"For retirees, you want to be in a situation where you have a good amount of guaranteed income that is going to help shelter you from changing market and economic conditions," he says.

2. Create or grow your rainy day fund

Keady notes that a lot of retirees don't believe they need a rainy day fund, but that could be a mistake.

"Your emergency fund enables you to fund your essential needs in the event of what we refer to as an asset emergency," he says. "In other words, if investment values are down, you're better off if you're able to withdraw money from that emergency fund."

The problem is many retirees don’t think about that because they're focused on the low rate of return received from savings accounts or other locations where you may keep your rainy day fund. However, Keady points out that the cash you have in an emergency fund is also a hedge against market volatility. "You're not making money, but you're not losing money either," he says.

3. Look over your estate and legacy planning goals

The increase over the past two years in the number of people reprioritizing their financial and legacy goals has brought estate planning to the forefront once again. Prior to the pandemic, the percentage of people with estate plans had declined.

"Since the pandemic started, we've been in an environment where people are thinking not just about their legacy, but the footprint that they're leaving during their time on Earth," Keady notes.

Estate planning preparation had decreased prior to the pandemic

Prior to the COVID-19 pandemic, only 32% of Americans had a will or other type of estate plan, down from 42% in 2017.

Source: Caring.com, 2021

Getting your estate in order begins with making sure your documents such as your will, healthcare directives powers of attorney and trusts are up to date and reflect your current situation and desires. "Start by envisioning what you would want for your loved ones if you weren't here or how you want to benefit a charity you care about," Keady says. "This so-called life planning is also a really important part of reviewing your financial goals in the new year."
Sharing your plans with loved ones is also critical to ensuring your wishes are carried out in the manner you desire. Communicating your wishes could  take the form of a letter, a video, or both. "It's important to do a bit of soul searching first to make sure you're able to articulate what's important," Keady says. "While it's not a legal document, it lets people know how you feel, how you want things to be handled."
Keady adds that your financial plan and your estate plan should be aligned to support what's important to you now and after you’re gone.

4. Discuss your RMD strategy with a financial advisor

Most types of tax-deferred retirement accounts, such as 403(b) and 401(k) plans and IRAs, require you to begin withdrawing money each year, which is known as a required minimum distribution, or RMD, once you turn 72 (this date changed from 70½ as a result of the SECURE Act). These distributions are taxable income. 

If you are taking RMDs, one strategy that can help reduce your taxable income is a qualified charitable distribution, or QCD. These are donations made directly from your IRA to your chosen charity. While the gift amount won't qualify for a charitable deduction, it won't be considered taxable income either.  

A QCD effectively deducts the amount transferred to charity from your taxable income, even if you would not otherwise be itemizing deductions. QCDs count toward satisfying your RMD for the year if it has not already been met. 

"Reducing your taxable income also may be useful for nontax reasons, such as calculating your Medicare premiums," Keady points out. "In order to benefit from this strategy, you need to meet a few strict requirements, so make sure you talk to your tax and financial advisors first." 

To learn more about these four topics, and help ensure you remain on a confident path toward accomplishing your retirement goals, consider reaching out to your financial advisor at the start of the new year. 

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1 CMS.gov, Fact Sheet: 2022 Medicare Parts A & B Premiums and Deductibles/2022 Medicare Part D Income-Related Monthly Adjustment Amounts, November 12, 2021.  

This material is for informational or educational purposes only and does not constitute fiduciary investment advice under ERISA, a securities recommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on the investor’s own objectives and circumstances. 

Any annuity guarantees are backed by the claims-paying ability of the issuing company.

The TIAA group of companies does not provide legal or tax advice. Please consult your legal or tax advisor.

Advisory services are provided by Advice & Planning Services, a division of TIAA-CREF Individual & Institutional Services, LLC, a registered investment adviser.