10 steps investors should take to thrive in 2022 according to experts

Virginia Brown
For Columbus CEO
Fabian Padamadan, executive director, J.P. Morgan Private Bank

We tend to think most critically about our finances at the beginning and end of the year, but midway through is a great time to reassess goals, too. Here are a few financial steps to take now to finish the year strong, according to experts.

1. Review your portfolio and continue aggressive retirement contributions.

Mid-year is a good time to review your portfolio and reaffirm financial goals. “Continue to add to your investments and make sure you’re making decisions that support your overall intentions, goals and objectives,” says Fabian Padamadan, executive director at J.P. Morgan Private Bank in Columbus.

In 2022, the federal maximum for 401(k) contributions rose to $20,500 per person. Even though the market has been volatile to start the year, it’s still generally seen by advisors as a good time to contribute. “When the market is declining a little bit, those are the times that are best to invest into the market,” says Danny Due, chief planning officer and senior wealth manager with Budros, Ruhlin & Roe, in Columbus. “Definitely don’t hesitate if the market right now isn’t cooperating because that’s actually when a lot of the assets are going on sale.”

2. Be smart with cash.

“We are seeing a lot of clients with elevated cash balances,” Padamadan says. The uncertainty created by the COVID-19 pandemic, among other global concerns, meant that many people became more reserved with their spending and saved up. “Some people say cash is king; others say cash is a drag. It all depends on your purpose.”

To determine how much cash you need outside of covering basic operating expenses, consider how much money you’d like on hand for opportunistic ideas like “buying into the market, accessing capital for a private investment or something else,” Padamadan suggests. There’s also a psychological aspect to the cash-on-hand bucket. “It’s the number that makes you feel comfortable,” he says. “I call it your ‘sleep-at-night’ money.”

Instead of keeping too much cash, Padamadan recommends putting those funds into a CD ladder. “You don’t want to lock in your money for too long too early because you may miss out on the opportunity to rein

vest those funds at a higher rate,” he says. “[In a CD ladder,] every month you have a portion of your funds coming due, so it helps you—every month you feel like you have access to a little bit of capital.”

3. Consider investing in “megatrends.”

Megatrends, according to Padamadan, are “the long-term movers, from an investment standpoint”—things like technology, health care, and sustainability. “Technology is in almost everything we do: how we use our mobile devices, how we access banking, how we trade, how we open our garage doors,” says Padamadan. “And health care is going to continue to be an area where we’re going to see continued development and expansion.” Investing in these companies and trends can pay off long-term. “There’s real-world global emphasis behind [them] that leads to investment opportunities.”

4. Take advantage of low rates while you can.

Consider refinancing and restructuring your debt while interest rates are still low, and talk with your advisor about how your family might benefit from estate-planning strategies that are potentially more lucrative when interest rates are low.

5. Consider year-end “to-dos”  now.

“One of the important things it does is it allows you to be more proactive and not to worry about being so reactive at the end of the year when you know we’re faced with all these year-end deadlines and holidays and everything else,” says Due. “You have a little bit more time to sit and reflect.”

It may be more tax-efficient, for example, to take care of some things as early in the year as possible, including funding 401(k)s, 403(b)s and IRAs. Maxing out health savings accounts is another way to reduce your tax burden while offering another savings stream, good for unforeseen future expenses, according to Due. By the end of the year, he says, some people realize they could have made more contributions had they done so incrementally throughout the year.

6. Don’t wait until December to plan your charitable giving.

To reduce their tax burden, many people lean on year-end cash charitable donations. “Cash is what you don’t want to do,” says Padamadan. Instead, assess how the timing of your annual donations might affect your tax situation and identify which gifting vehicle(s) might best support your strategy.

“You want to get positions that have the highest appreciation out of your estate,” he says. If you buy a stock for $10 and it rises in value to $100, you have to pay tax on the $90, he explains. Instead, if you transfer that stock or gift it to a charitable organization, then the organization can sell that position for $100 with no tax consequences.

7. Consider using your full lifetime transfer tax exemption.

The lifetime gift tax exclusion is at a record high—$12.06 million per individual for 2022.

Under current law, it is scheduled to be reduced significantly starting in 2026. “[We put in] a plan taking advantage of these dollar amounts and these limits today,” says Padamadan.

8. Make sure you and your family are cyber-safe.

As more of our life is handled online, the dangers of cyber theft and fraud grow. But there’s a lot you can do to protect your financial life and personal data.

Padamadan advises clients who write checks to transition fully to online bill pay, Zelle and other comparable financial platforms for payments and gifts. “There’s so much personal information on a check,” he says. “Those are important pieces of information fraudsters use to get access and steal your identity.”

When in doubt about any correspondence, check with your financial firm. “We will never ask you for any personal information over email, and in the Private Bank, we have a dedicated service team that our advisors work with that are constantly helping monitor transactions and accounts,” he says.

9. Explore ways to increase tax efficiency.

“One of the big things right now is talking to our clients about how they are going to pay for taxes,” Padamadan says. “Do you plan on just using your cash that you may have to use those taxes to pay for those taxes? “ Rather, he says, “[Consider] using a line of credit to pay for those taxes, because interest rates are still historically low.”

10. Plan a family meeting.

Two key reasons wealth diminishes across generations, according to J.P. Morgan, are a lack of communication and trust, and beneficiaries’ unpreparedness. Both can be avoided by communicating clearly at least annually with your financially connected family members, says Padamadan. “We have a whole team of individuals who help us think about multi-generational family wealth, and we work with the whole family to educate all family members on where they’re at and what help that they need to make sure that we’re thinking about things together.”

Virginia Brown is a freelance writer.

10 steps investors should take now

  1. Review your portfolio and continue aggressive retirement contributions.
  2. Be smart with your cash.
  3. Consider investing in “megatrends.”
  4. Take advantage of low rates.
  5. Consider your year-end “to-dos.”
  6. Plan your charitable giving.
  7. Consider using your full lifetime transfer tax exemption.
  8. Increase your cyber security.
  9. Explore ways to increase tax efficiency.
  10. Plan a family meeting.