
Financial Planning: Tariff Time
The International Trade Administration defines a tariff as “a tariff or duty is a tax levied by governments on the value including freight.”
A topic that has been consistently making headlines is inflation, and you are likely wondering how you should take action. To help you address this issue and set your financial expectations appropriately, we have compiled a checklist that covers key issues related to high inflation.
Some of the topics we will cover include:
Do you need to reassess your living expenses in light of high inflation?
If so, consider the following:
If working, are you concerned about the ability of your earnings to keep up with high inflation?
If so, consider ways you might increase your income (e.g., ask for a raise, change jobs, develop new skills, pursue additional credentials, etc.).
If retired, are you concerned about your retirement income’s ability to keep up with high inflation?
If so, consider the following:
Do you need to review your asset allocations in light of high inflation?
If so, consider the following:
Are you concerned about your fixed-income portfolio’s ability to manage the effects of high inflation?
If so, consider the following:
Do you need to review your cash holdings?
If so, consider the risks with holding too much cash during times of high inflation. Be mindful of where you keep your emergency fund, and be sure to explore other options (e.g., high-yield savings and checking accounts, short-term CDs, etc.) that may offer better growth on your idle cash. Consider investing any surplus cash, as waiting for rates to rise before putting your cash to work may expose you to market timing risk.
Do you need to review your debts in light of high inflation?
If so, consider the following:
Have your taxable accounts been experiencing increased levels of volatility due to high inflation?
If so, consider ways you might rebalance your portfolio at a reduced tax cost (e.g., harvesting short-term losses, selling securities at reduced capital gains, etc.), but be mindful of wash sale rules, as well as the $3,000 ordinary income offset limit on capital losses.
Do you need to review your current (and anticipated) income tax brackets in light of high inflation?
If so, consider the following:
Are you reconsidering any of your financial goals (e.g., retirement) or risk tolerance in light of high inflation?
Do you need to reassess your life and disability insurance coverage in light of high inflation?
If so, consider the following:
Do you need to reassess the coverage amounts for any other insurance policies (e.g., homeowners, renters, auto, etc.) in light of high inflation?
If so, consider the effect inflation may have on the replacement cost of your vehicles, home (including any vacation or rental properties), and other goods. Review your coverage amounts to ensure they are adequate for your needs.
Do you need to review your gifting and/or estate plan in light of high inflation?
If so, consider the impact inflation may have on your existing plans for transferring assets to the next generation.
This checklist was prepared and first distributed by fp PATHFINDER.
The International Trade Administration defines a tariff as “a tariff or duty is a tax levied by governments on the value including freight.”
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