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Year-end review and 2022 updates

Market and personal finance updates for you

A year of transition.

There were a lot of changes in the world during 2021, including some changes at Edelman Financial Engines as well. As we begin a new year, our founders Ric and Jean Edelman transition to their next chapter. At the same time, we welcome personal finance expert Jean Chatzky and award-winning journalist Soledad O’Brien to the family and look forward to the new Everyday WealthTM radio show and podcast.

While some things may have changed, our fundamentals haven’t. Our mission and our legacy remain the same, and the core principles that our founders established are still the foundation of our financial planning philosophy. In the new year, the torch has been passed to the dedicated Edelman Financial Engines team of planners, who ensure that you will always have a consistent and unified approach to planning for your best financial future.

After all, we wouldn’t be here without you. You are the reason we come to work every day. We celebrate your successes with you and sometimes we share your heartbreaks too. We believe the trust you place in us is our greatest asset, and we will continue to honor that trust every day by always acting in your best interests.

Thank you for the privilege of serving you, and all the best of health, happiness and prosperity in 2022.

From a new president in January to a new strain of the coronavirus in December, 2021 was a year of continually adjusting to a changing world. But through it all, our principles and commitment to you remains the same. The trust you place in us remains our greatest asset.

From a new president in January to a new strain of the coronavirus in December, 2021 was a year of continually adjusting to a changing world. But through it all, our principles and commitment to you remains the same. The trust you place in us remains our greatest asset.

Market review

Overall, markets generally had a very positive year, driven largely by robust corporate earnings and optimism over the economic recovery.

But it didn’t always seem like smooth sailing along the way. There were short bouts of volatility amid an otherwise strong year for stocks. Let’s take a closer look at some of the key issues the markets grappled with in 2021: supply chain issues, inflation, the Federal Reserve and the coronavirus.

It probably won’t be a big surprise to learn that many of the concerns investors had during the year were fallout from the Covid-19 pandemic. We saw economies around the globe begin to open for business again, at various rates of speed and efficiency. Due to slowdowns in manufacturing and logistics, and a widespread labor shortage, the usual system of making and shipping things (commonly known as the supply chain) faced ongoing obstacles in 2021. So, as the economic recovery gathered speed and people began spending money again, there were often not enough goods and services available to meet increased demand.

That’s why in 2021 we heard a lot about rising inflation (higher costs for the things you buy). Inflation can often be viewed as a sign of a growing economy; however, investors were concerned about how fast inflation could rise and what changes the Fed could make in response.

Since the pandemic began, the Fed relied on policies to help the economy recover, such as buying bonds and keeping interest rates low. But if the Fed believes the economy is growing too fast, it will try to slow things down by reducing or reversing policies. So, investors watched the Fed very carefully during 2021 for signals that interest rates could go up or that the bond market wouldn’t get the same support. Then, after its December meeting, the Fed indicated that it would reduce the pace of its bond-buying program by the end of March and raise interest rates three times in 2022. This remains a subject that markets will monitor closely.

Finally, the emergence at the end of November of the omicron variant, a newly identified strain of the coronavirus, resulted in some rocky days for markets. This news introduced significant new uncertainty for investors, with each subsequent day’s news resulting in market movements.


Stock markets made

strong gains

in 2021


was a major theme for consumers and the Fed

Markets experienced bouts of


in the second half of the year

What does this mean for you?

In terms of overall portfolio return, U.S. and global stock markets generally delivered strong gains for the year, despite some bouts of uncertainty. That won’t happen every year, of course, but if you step back five, 10, 20 years or longer, you see that the returns you can get from investing can more than offset inflation or higher interest rates. The watchword is patience: Take a longer-term view, even if you’re in or approaching retirement. Don’t make decisions based on fear, and as always, talk to your Edelman Financial Engines planner if you have any concerns.


When stock indexes like the Dow Jones Industrial Average or the S&P 5001 start showing volatility, it often makes the news – and we know that can raise questions for you. That’s why we wanted to provide deeper context.

Especially toward the end of 2021, markets experienced short flurries of volatility, which is when stock prices move higher or lower very quickly amid uncertainty. There’s no one reason why it happened. A combination of factors contributed, including questions about when the Fed could slow down its purchases of bonds or raise interest rates; higher inflation; and the new omicron variant of the coronavirus emerging as an area of concern.

It’s important to know that volatility is a normal part of stock market activity. Markets tend to look ahead to the future, and they can move suddenly when faced with new information. Investors use projections about where the economy, employment and companies are heading, which can make them seem jumpy if something unforeseen happens to change their projections.

Should you be concerned when volatility happens? The short answer is: probably not. We’ve seen stock market volatility many times before, including during March and April 2020 when Covid-19 led to a significant economic shutdown. Stocks were very volatile for a while when the coronavirus first hit, but by the end of the year, they had recovered to new highs in many cases. The S&P 500 ended 2020 up more than 18% – a good reminder to always keep a long-term perspective.



is normal for markets

Staying invested and


is the best course of action2


monitor your portfolio

and rebalance when needed

What does this mean for you?

The S&P 500, the Dow and other indexes each represent just one segment of the financial markets. The Dow is just 30 stocks, and the S&P 500 represents the largest companies in the U.S. The investment strategy we implement for you and all our clients includes diversifying your portfolio across different asset classes. Some of you, for example, may have a much larger proportion of bonds than stocks. The bottom line is that we invest for the long term on your behalf – even if you are retired and taking income, your money needs to be invested for the long term to account for a long life expectancy. We continuously monitor markets and make sure your portfolio is rebalanced as needed. This is the same strategy we have implemented for our clients for the past 35 years. Why? Because we believe it works.2

Looking ahead to 2022

No one can say for certain how markets will perform in 2022. But if you are concerned about stock volatility and performance, here’s what you need to know.

Will volatility continue? If you’ve shrugged off the short bouts of volatility in 2021, good for you! You already know markets can go up and down due to uncertainty. It’s very likely that we’ll continue to see some more volatility in the new year as markets react to developing news, especially about omicron, Fed policy and legislative developments. But this is completely normal for markets; a certain amount of volatility is to be expected.

Will we see a market correction? Unfortunately, no one has a crystal ball to predict how markets will behave. The key is to focus on the long term and not the day-to-day or even month-to-month blips. Long-term investors think in terms of decades.

If you are aged 60 or older, you could be concerned about how well your portfolio may be positioned in case of a market drop. It’s likely your planner has put your investments in a portfolio appropriate for your age and risk tolerance. If you have any questions about your portfolio or if anything has changed, check in with your planner.


Keep enough in

cash reserves

Your portfolio should reflect the

appropriate level of risk

Speak to your financial planner

about any changes in your situation

What does this mean for you?

If there is a correction in 2022, how can I prepare for it?

The short answer is: before it happens. To be prepared you should ask yourself – and your Edelman Financial Engines planner – three questions:

1. Do I have enough cash in my emergency reserves to weather a downturn?

2. Does my portfolio reflect the appropriate amount of risk for my situation?

3. Do I need to change my portfolio based on changes to my financial situation or goals?

If you have as much in cash reserves as we’ve recommended for you and your portfolio allocation has the right mix of stocks and bonds based on your investment horizon and risk tolerance, then there should be no need to be concerned. But as always, please talk to your planner if anything has changed.

The bottom line is you shouldn’t react emotionally to current market activity, in no small part because you know that we are monitoring market performance and your portfolio for you. But if your situation has changed, or if you have any questions or concerns, we’re here for you!

Steps you can take now

As we navigate our way through 2022, we do it together. Continue working with your Edelman Financial Engines planner to ensure your financial plan is up to date and on track.

Here are some steps you can take now to help protect your financial security in the new year:

If you are working, contribute the maximum amount to your retirement plan, if possible. You can save an extra $1,000 in your 401(k) plan in 2022. The IRS raised the contribution limit in 2022 to $20,500, up from $19,500. (The catch-up limit for employees 50 and older remains unchanged at $6,500.) Review your contributions to take advantage of the increase.

Keep enough in cash reserves (six to 24 months of living expenses). Maintain an appropriate savings plan and revisit income projections to ensure you can weather any short-term turbulence and stay on track for your long-term goals.

Now is a good time to review or update your estate plan. Let your financial planner know if you want to talk more about estate planning or need an estate attorney near you.

It’s possible the Fed will raise interest rates more than once in 2022. If you have been considering refinancing your mortgage, talk to your lender, or ask an independent mortgage broker to shop rates for you. This will help you learn whether it’s worthwhile to refinance. And be sure to talk to your Edelman Financial Engines planner before making any decisions.

To prevent identity theft, we encourage you to file your taxes as soon as you have all necessary tax reporting documents and are ready to move forward.3 Typically, you can expect to receive your 1099s toward the end of February. Always consult with your Certified Public Accountant regarding your own tax situation and filing requirements.

Be sure your beneficiaries on life insurance,4 IRAs, annuities and retirement accounts are up to date and in line with what your estate planning attorney recommends.

Remain vigilant about online security. Check your credit report for fraudulent activity or incorrect information. Change your passwords for every online account and update them regularly to prevent thieves from accessing your accounts.

1 An index is a portfolio of specific securities (common examples are the S&P, DJIA, NASDAQ), the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. Past performance does not guarantee future results.

2 Investing strategies, such as asset allocation, diversification, or rebalancing do not assure or guarantee better performance and cannot eliminate the risk of investment losses. There are no guarantees that a portfolio employing these or any other strategy will outperform a portfolio that does not engage in such strategies. Funds and ETFs are subject to risk, including loss of principal. All investments have inherent risks. There can be no assurance that the investment strategy proposed will obtain its goal. Past performance does not guarantee future results.

3 Neither Financial Engines Advisors L.L.C. nor its affiliates offer tax or legal advice. Interested parties are strongly encouraged to seek advice from qualified tax and/or legal experts regarding the best options for your particular circumstances.

4 Neither Edelman Financial Engines nor any of its affiliates, or their advisors, sell insurance products. Edelman Financial Engines affiliates may receive insurance-related compensation for the referral of insurance opportunities to third parties if individuals elect to purchase insurance through those third parties.


Have questions? Connect with your planner.