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How Lame is This Year’s Lame Duck?

The post-election Lame Duck legislative session has a long and frequently unremarkable history. The President and members of Congress are considered a lame duck” when they have been defeated for re-election or elected for a final term (ineligible as a candidate for the next election) and meet in a post-election session.

 

On November 13, lawmakers returned to work after a six-week sojourn for election campaigning. After the Thanksgiving break, both the Senate and the House of Representatives will be in session until December 21.

 

[CLICK HERE to watch the replay of a Q&A with a Brookings Institution expert, The Lame Duck Congress,” at Politico.com, November 14, 2012.] *

 

[CLICK HERE to watch live floor video of each of the legislative bodies (when in session) at Congress.gov, 2012.] *

 

The most likely issues to be tackledif only to be legislatively kicked into first quarter of next year–are the sequestered spending cuts and an extension of all or part of the Bush tax cuts. Furthermore, without action from the Lame Duck Congress, estate, gift and generation skipping taxes will all revert to pre-2001 levels, with top rates of 55 percent and an exemption of just $1 million.

 

Other issues that could potentially be acted on include: 

  • The Farm Bill
  • U.S. Postal Service budget deficit
  • Debt ceiling
  • Medicare payments to doctors
  • Alternative Minimum Tax patch
  • Hurricane Sandy Relief Bill
  • Whistleblower Enhanced Protection Act
  • National Defense Authorization Act (NDAA)
  • Violence Against Women Reauthorization Act
  • CyberSecurityAct

 

[CLICK HERE to read,Charitable Tax Breaks Could Take Hit During Lame-Duck Session Of Congress,” at Huffington Post, November 14, 2012.] *

 

[CLICK HERE to read,Can a Lame-Duck Congress Save the Day? at NPR.org, November 16, 2012.] *

 

According to a new, post-election survey by the AARP, the majority of Americans age 50 and older would prefer that the future of Medicare and Social Security not be part of a year-end deal. Interestingly, this viewpoint crosses all party lines: 71 percent of Democrats, 67 percent of Republicans and 71 percent of Independents would rather see a separate public debate about changes to these programs starting in 2013.

 

[CLICK HERE to read,AARP Survey: Seven in Ten Older Americans Dont Want Changes to Social Security or Medicare during Lame Duck, at AARP.org, November 14, 2012.] *

 

There are several ways a Lame Duck Session can go. One thing that could happen is departing Congressional members drop the partisan stance and compromise in a parting effort to resolve issues and move this country forward. Or, both parties can resume their combatant positions of the last two years, dig their heels into the concrete and do no more than agree to postpone the nasty debate until they reconvene on January 3rd.

 

Rather than wait for Congress to work out its differences, why not schedule a year-end consultation to discuss your current financial situation? That way you can clarify your objectives and consider various options to pursue in the New Year as a way of controlling your own future. Were happy to help.

 

By contacting us, you may be offered insurance products for sale. 

 

The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Content is provided for informational purposes only and is not a solicitation to buy or sell the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

 

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What is Your New Normal?

The “New Normal” refers to everything from freakish weather systems to the global marketplace to a new sitcom on NBC.

It’s a very convenient and flexible phrase, as it can be used to describe positive changes or convey perfunctory cynicism. It can refer to any change that appears to be both substantial and long-term, such as, “ever since my son turned 14, grunted sarcasm, irrational bursts of anger, and general gloomy angst is the new normal in our household.”

See? You try it. It’s reminiscent of when “sick” meant good, “phat” meant svelte, and “far out” meant groovy. If New Yorkers wonder what the new normal will be for them after Hurricane Sandy, they should talk to post-Katrina New Orleaneans.

[CLICK HERE to watch the video, “Severe Weather: The New Normal?” at CBSnews.com, November 3, 2012.] *

[CLICK HERE to read, “Youth vote decides presidential election – again. Is this the new normal?” at The Christian Science Monitor, November 7, 2012.] *

[CLICK HERE to read, “Paul Ryan’s plan and the next ‘new normal’,” at The Washington Post, August 13, 2012.] *

What else can we expect to be the new normal going forward? One out of every five adults will be older than 65 by 2050, which should significantly slow down the consultation and check-out lines at local pharmacies. Then again, more people will buy products online or via mobile phones. Video phones may outdate audio receivers, and perhaps children will zip back and forth between neighboring houses via hover boards -Marty McFly-style from the movie Back to the Future.

Maybe not. What seems certain is that the “new normal” is uncertainty – not knowing what the future holds. Whether it’s benefits from government entitlement programs, long- term tax reform legislation, fluctuations in the marketplace, or the extinction of loyalty in the employer/employee relationship, the new normal is simply not knowing what will happen next.

[CLICK HERE to read, “Declining Employee Loyalty: A Casualty of the New Workplace,” at Knowledge@Wharton, May 9, 2012.] *

[CLICK HERE to read, “Is the 7 Percent Return for Stocks Extinct?” at US News & World Report, August 8, 2012.]* 

Yet some things do not fit the new normal paradigm. We each have specific friends and family members we can know we can count on. We believe that long-term, diversification is one of the strongest factors to offsetting the impact of market volatility. And we know that while even the best-laid plans get waylaid, advanced and pro-active planning is one of the smartest ways to secure our future.

If you haven’t seriously engaged in advanced, pro-active planning where your finances are concerned, we’d like to help you make that your “new normal.”

By contacting us, you may be offered insurance products for sale. 

 1 “New Realities of an Older America,” Stanford Center on Longevity, April 7, 2010.

The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Content is provided for informational purposes only and is not a solicitation to buy or sell the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

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Let’s Talk Taxes

We might as well talk about taxes because that’s all anybody is going to talk about from now until the end of the year. January 1, 2013 marks the date when several tax changes are scheduled to take place if no action is taken by Congress, namely[1]:

 

·         2% payroll tax cut expires

·         33% and 35% tax rates increase to 36% and 39.6%

·         The alternative minimum tax threshold will drop to $45,000 (for taxpayers filing jointly)

·         Long-term capital gains tax rate will return to 20%

·         A 3.8% Medicare tax will also be applied to net investment income or the amount by which your adjusted gross income AGI exceeds $200,000 ($250,000 for married taxpayers)–whichever is less

·         The onset of another 0.9% Medicare surtax on wages and self-employment income over $200,000 ($250,000 for married taxpayers)

·         Dividends will start being taxed at ordinary income rates (scheduled top rate of 39.6%)

·         Limits will return on personal exemptions and itemized deductions for high-income taxpayers

 

[CLICK HERE to watch the video, “Everything you need to know about the fiscal cliff,” at WallStreetJournal.com, October 31, 2012.]

 

While taxes on income, capital gains, and dividends will be discussed and debated ad nauseam by the new Congress, there’s one tax advantage that’s not likely to get the boot: Tax-deferred compounding on retirement-oriented financial products like the traditional IRA, 401(k) and 403(b) plans, and annuities. That’s because these types of products have advantages that are beneficial for a retirement savings strategy.

 

[CLICK HERE to read about “Types of Retirement Accounts,” at IRS.gov, August 15, 2012.]

 

[CLICK HERE to read “Your Boss is Worried About Your Retirement,” at US News & World Report, October 30, 2012.]

 

[CLICK HERE to read “Asset Location, as Well as Allocation, Matters for Retirees,” at CNBC.com, September 26, 2012.]

 

Just consider for a moment. Within the next 10 years, 16% of the population–54 million Americans–will be 65 or older.[2] Think about that the next time you’re at the grocery store and see an older gentleman trying to navigate his cart around the freestanding produce stalls. In 10 years, that’s going to look like a bunch of old people playing bumper cars.

 

And when you consider all the near-retirees that report they’re woefully unprepared to provide their own retirement income, I believe it is unlikely Congress will take away the benefit of compounding without having to pay annual taxes provided through tax-deferred accounts.[3] So regardless of what happens with tax reform in the future, tax-deferred compounding looks pretty safe.

 

With tax-deferred financial vehicles such as a traditional IRA, 401(k) plan, annuity or cash value of an insurance product, you don’t have to worry about the repercussions of capital gains and dividend taxes, and in many cases the interest credited will not push you into a higher tax bracket. Taxes aren’t taken on these products until you withdraw the money. Withdrawals are taxed as ordinary income and if taken prior to 59 ½ there is an additional federal tax. And since this type of product is designed to assist with long term retirement needs, most people are in a lower tax bracket when they tap it for income.

 

The universe of tax-advantaged financial vehicles has broadened significantly to include annuities as well as life insurance products. If you’d like some ideas on retirement savings strategies, please contact us.

 

By contacting us, you will be offered information on a variety of insurance products which may be available for purchase.

 

[CLICK HERE to read about “Tax Deferred and Tax Free Accounts,” at FINRA.org, 2012.]

 

[CLICK HERE to read “Investors Increasingly Consider Annuities ‘Vital’ to Retirement Plan,” at Financial Planning, September 10, 2012.]

  

This material is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Be sure to speak with a qualified tax or legal professional before making any decisions about your personal situation.

  

The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Content is provided for informational purposes only and is not a solicitation to buy or sell the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.   




[1] “Fiscal Cliff: How Much Would Taxes Rise in 2013?” Tax Policy Center, October 1, 2012.

[2] 2010 Census Report, U.S. Department of Commerce, 2011.

[3] 2012 Retirement Confidence Survey, EBRI, March 13, 2012.

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Are Unemployment Rates Cyclical?

Some economists have labeled the first 10 years of America’s millennium the “lost decade”–at least from a financial point of view. The label stems from Japan’s woes in the 1990s when unemployment was high and economic growth contracted following an extended bubble period of high land values, low interest rates, and market liquidity. Sound familiar?

 

Japan’s growth has been so sluggish following that lost decade that it is still not considered fully recovered today–20 years later. In perhaps a stark contrast between the two nations’ cultural differences, our recent presidential election campaigns served to ignite America’s impatience for a more expedient recovery.

 

[CLICK HERE to read the article, “Which candidate leads on fixing family finances,” at Bankrate.com, October 2012.]

 

Yet when you look at unemployment in this country, every decade since the 1970s has seen a year or two when the average annual unemployment rate was over 7.0 percent. In 1976, our nation’s average unemployment was at 7.7 percent, dropping to 7.1 and 6.1 percent over the next two years. From 1980 to 1985, during the first term of the Reagan administration, unemployment ranged from 7 percent to as high as 9.7 percent. In 1992, unemployment went up to 7.5 percent. Once we reached the millennium, unemployment rates stayed at or below 6 percent until 2009. From 2009 to 2011 the average annual unemployment rates were 9.3, 9.6 and 8.9 percent. This year’s rate looks like it will end lower.

 

[CLICK HERE to read the annual average unemployment rate from 1948-2011, from the US Bureau of Labor Statistics, March 9, 2012.]

 

[CLICK HERE to read and listen to audio analysis of “A brief history of U.S. unemployment,” at The Washington Post, 2011.]

 

Anybody you ask will give you their unique perspective on why unemployment levels of late have remained high. But it does seem that unemployment rates go through inherent cycles over time just like inflation, GDP, interest rates, stock market performance and other economic factors.

 

Note that there’s nothing but a casual historical analysis of unemployment rates and a healthy dose of optimism to support this hypothesis, but perhaps we’ve met our quota for greater than 7 percent unemployment already for both the first and second decades of the millennium, and are due for lower levels until the 2020s.

 

They say you can’t control what happens to you, but you can control the way you respond. Because the Japanese culture emphasizes frugality and saving, the impact of its “lost decade” on the average Japanese family was minimized. Perhaps, moving forward, we can each devise a plan to better insulate our finances from circumstances we cannot control, and pay a little more attention to the inherent economic, market, and unemployment cycles that have affected us, and will continue to in the future.

 

If you’d like to discuss ways to implement such a plan, please give us a call.

 

[CLICK HERE to read the article, “The case for a little optimism about stocks,” at CNNMoney.com, October 26, 2012.]

 

[CLICK HERE to read “Unemployment Rate and Stock Returns,” at CXOadvisory.com, May 3, 2012.]

 

The information and opinions in these links are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Advisors Excel.  It is given for informational purposes only and is not a solicitation to buy or sell any products mentioned.  The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

 

This material is not intended to provide any tax or legal advice or provide the basis for any financial decisions.  Be sure to speak with a qualified tax or legal professional before making any decisions about your personal situation.

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Will the President Make You Rich?

In a word: No. The fact is that while an American president can be influential in setting policy in this country, Congress actually passes the laws. It’s a pretty good system. Congress is comprised of many more elected officials, which means there’s an inherent checks and balances system whereas no one person, administration or party can run the course with its own political agenda.

 

In fact, three faculty members at Wharton Business School agree that regardless of who holds the top office in the country, the future is likely to look much like the present for the foreseeable future. In a recent article, Wharton finance professor Franklin Allen observes that, “The notion in the political debate is that if you just do something a little bit differently, things will get much better. But it doesn’t work like that.”

 

He further adds that while both candidates say their policies would create jobs, he believes unemployment in this country is undermined by a much more serious problem than economic setbacks. Allen argues that many of today’s jobless must be retrained to procure new employment; a lengthy and expensive process that he says is currently inadequate.

 

[CLICK HERE to read the article, “Back to the Future: What’s at Stake for the Economy in the Obama-Romney Contest,” by Knowledge@Wharton, September 12, 2012.]

 

In its Election Report published in September, UBS Wealth Management Research claims that fundamentals matter more than party control when it comes to the markets. The report offers an overview of market performance over time based on which party was in office, but states that “While this type of analysis makes for fun cocktail party conversation, it tends to grossly oversimplify the investing landscape. We believe a better approach is to determine the outlook for corporate earnings and market valuations.”

 

While the nation’s commander may not be able to improve the markets per se, there are sectors in which his policies are more likely to influence performance than others. For example, a Romney administration may be more supportive of domestic drilling and less regulation in the energy sector, whereas Obama has pledged his allegiance to renewable power sources. On the other hand, Romney’s commitment to repeal and replace Obama’s health care and financial regulation initiatives may put a temporary strain of uncertainty within those industries.

 

[CLICK HERE to read the report, “Election Watch 2012,” at UBS Wealth Management Research, September 11, 2012.]

 

[CLICK HERE to read the report, “Exchange Election 2012: UBS invites preeminent thinkers to discuss the day’s most critical investment issues,” at UBS Wealth Management Research, Fall 2012.]

 

[CLICK HERE to read the article, “How the Election Might Affect the Stock Market,” at US News & World Report, October 17, 2012.]

 

In its mid-year election analysis, LPL Financial Research asserted that congressional elections would likely be more meaningful than the presidential one this year. The report states that “the party that emerges in control will forge the decisions that will represent one of the biggest shifts in the federal budget policy since World War II.”

 

[CLICK HERE to read the article, “Midyear Outlook 2012,” at LPL Financial Research, May 22, 2012.]

 

And if you haven’t heard from him in awhile, Vanguard founder and former head Jack Bogle is still making headlines (at age 83) with his message that investing is about choosing well and staying the course–no matter the economy, no matter the fundamentals and certainly no matter who is in the White House. In a recent interview, Bogle explains his view that the difference between trading and investing is to “own Corporate America and hold it forever.”

 

[CLICK HERE to read the article, “Jack Bogle: Forget trading, start investing” at Marketwatch, October 17, 2012.]

 

Obviously, there’s a lot of press around the election this year and what it means for taxpayers, investors, job hunters and homebuyers down the road. But the important message here is that your first priority should be to manage money toward fulfilling your personal goals–not beating the market benchmarks and not avoiding taxes. When was the last time you really thought about your actual goals, and do they need a reality check? Call us to help you gain the right perspective going into 2013.

 

If you are unable to access any of the news articles and sources through the links provided in this text please contact us to request a copy of the desired reference.

 

The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Content is provided for informational purposes only and is not a solicitation to buy or sell the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

 

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Carpe Diem and Other Relevant Clichés

Have you thought about when you will retire, or what you will do with all that spare time? If you’re a baby boomer, that may still be a foreign idea. Like many, you may be well entrenched in your career, in your highest earning years, with the kids out of the house and perhaps still paying for college.

Do you even want to stop working? Well, maybe the job you’re at right now. Perhaps it’s time to start thinking about where ideally you’d like to be in 5 to 10 years. That sounds like a question you’d ask a twenty-something fresh out of college. However, that question may be far more relevant for today’s pre-retirees.

[CLICK HERE to read the report, “When Baby Boomers Delay Retirement, Do Younger Workers Suffer?” by The Pew Charitable Trusts, October 8, 2012.]

[CLICK HERE to read the article, “Successful baby-boomer entrepreneurs,” at CNNMoney.com, May 22, 2012.]

[CLICK HERE to read the article, “Older entrepreneurs find new niche in startups,” at USA Today, March 11, 2012.]

After all, young adults don’t have a lot of options. They have to get a job–and for many these days that means any job they can find. For the majority of young people, their careers meander for awhile until they begin to focus on what they really want to do, and what they’re good at (not necessarily the same thing). So asking a 25-year old where he wants to be in five years may be asking him about his wildest dreams.

Asking someone in their 30s or 40s may not be much better. Those are the years when you finally get a foothold in your career aspirations and are less inclined to make a change to pursue new interests or opportunities. Not to mention that reliable income the key to raising a family and paying the mortgage.

However, for someone mid-career and middle age, not so much. You have options. You have resources–albeit perhaps not as robust as you may have hoped for by this age. But still, owning a home, making a good salary and having the knowledge and experience to know that you could find another position if you needed to–that’s no small matter. That’s called success.

The fact is, you may well be in the prime of your life. Now is when you can set yourself up for a truly positive and empowering future. You may be on the “treadmill” now, as referenced by a recent New York Times article, but high-earning years combined with reasonably good health, equal strength and empowerment.

[CLICK HERE to read the article, “Will I Ever Get Off This Treadmill?” at the New York Times, October 10, 2012.]

You don’t have to be 27 to seize the day–and many 27-year olds don’t have the confidence, experience, and resources to do so. “Carpe diem” should be the anthem of today’s pre-retirees. You’ve weathered difficult times and learned first-hand that economics are cyclical–much like life experiences.

If you’re ready to “take the bull by the horns,” “grab that brass ring,” and every other cliché previously attributed to energetic youth: Now is the time. Consider converting and/or repositioning the wealth you’ve accumulated to set your course for a brighter, more fulfilling path to the future.

Every industry out there is working hard to cater to your generation, your needs and your retirement, so we’ve lots of tools designed for just that purpose. Let’s get started taking advantage of them.

[CLICK HERE to read “Boomers Are ‘The Most Valuable Generation’ For Marketers, Nielsen Report Finds,” at Huffington Post, August 17, 2012.]

[CLICK HERE to read the article, “Baby boomer band reunites after years, revives memories of an era,” at the Boomer Cafe, October 1, 2012.]

The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Content is provided for informational purposes only and is not a solicitation to buy or sell the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

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Have We Reached “The Tipping Point”?

In New York City between 1990 and 1999, the homicide rate dropped 73 percent, burglary 66 percent, assault 40 percent, robbery 67 percent and vehicle hoists 73 percent.1 Fascinated by the question of why change so often happens as quickly and as unexpectedly as it does, author Malcolm Gladwell wrote of this and many other instances in his 2002 book titled, The Tipping Point: How Little Things Can Make a Big Difference.

 

Wouldn’t it be great if a bunch of small improvements in our economy added up to a tipping point whereas growth and jobs and real estate values rose exponentially over the next year? Perhaps that’s a bit overly optimistic, but let me share some recent news that may just have the power to create a tipping point for our economy.

 

[CLICK HERE to read interview, “What is the Tipping Point?” at Gladwell.com.] 

1[CLICK HERE to read the report, “What Reduced Crime in New York City,” at the National Bureau of Economic Research, retrieved October 5, 2012.]

 

Jobs

The U.S. unemployment rate fell to 7.8 percent last month, boosted by 873,000 previously out-of-work Americans who found jobs. That’s the lowest rate in nearly four years. New revisions to previous jobs reports show that employers added 146,000 jobs per month from July through September, up from 67,000 previously reported in those months–indicating that better progress was happening all along. We just didn’t know about it.

 

[CLICK HERE to read the “Employment Situation Summary” at the U.S. Bureau of Labor Statistics, October 5, 2012.]

 

Manufacturing

Much has been discussed in the news particularly about manufacturing jobs, of which many were outsourced overseas over the last decade, much to the nation’s detriment. The September jobs report revealed 16,000 jobs were lost during that month. However, the Manufacturing Report on Business from the Institute for Supply Management (ISM) revealed that economic activity in this sector expanded in September after contraction throughout the summer months.

 

You can learn more about the role of manufacturing in this country from the Chief of the U.S. Census Bureau’s Manufacturers’ Shipments, Inventories and Orders Branch (commonly known as the M3 Survey) at the link below.

 

[CLICK HERE to view the presentation, “Manufacturing in the U.S.,” at Census.gov, October 2012.]

 

[CLICK HERE to read the “September 2012 Manufacturing ISM Report On Business,” at ISM.ws, October 3, 2012.]

 

Home-Based Work

On October 4, the Census Bureau also released a report on the increase of people working from home. Over the last 10 years, this demographic has increased by 4.2 million in the U.S. In some cases, the Great Recession has given rise to a nation of entrepreneurs, albeit by virtue of necessity.

 

But in many cases, companies are taking advantage of technology to decrease expenses and allow more employees to work from home. Nearly 10 percent of all workers work from home at least one day a week, according to the report. Interestingly, the survey also revealed that median household income was significantly higher for people who worked at home ($74,000) compared to people who worked onsite for their company ($65,600).

 

[CLICK HERE to read “Census Bureau Report Shows Steady Increase in Home-Based Workers Since 1999,” at the Census Bureau, October 4, 2012.]

When you consider steady income the one key factor that can boost home buying, consumer spending and investing, it does seem possible that a cluster of short-term but positive jobs reports could indeed be our tipping point.

 

If you’re feeling positive about your future income prospects, please contact us to help you get your money working harder for you.

 

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Tax Plans: Obama vs. Romney

Oh, there’s nothing like a good brouhaha to stir up a presidential election. If you’re a fan of political mudslinging, grandstanding rhetoric and muckraking media, you must be thoroughly enjoying this pre-election season.

A big part of the presidential campaign platforms is tax reform at both the personal and business level. Tax changes present an opportunity to stimulate the economy, lower–or raise–the nation’s deficit, and promote job growth.

There’s tons of analysis of the Democratic and GOP plans on both sides. However, ambiguity over exactly what deductions and credits would be changed or eliminated creates a wide net of speculation about which plan would benefit whom–and which would be best overall for the country. To summarize:

President Obama’s tax plan:

  • Extend the Bush tax cuts only for taxpayers earning less than $250,000 each year
  • Increase the number of tax brackets from five to seven tiers
  • Extend the reduced payroll tax scheduled to expire this year.
  • Raise the tax on long-term capital gains and qualified dividends to 20 percent
  • Retain the additional 3.8 percent Medicare cap gains tax for taxpayers earning more than $250,000
  • Impose a 28 percent cap on the total amount of itemized deductions across all tax brackets

Mitt Romney’s tax plan:

  • Reduce individual income tax rates by 20 percent for all tax brackets
  • Increase the number of tax brackets from five to six
  • Eliminate tax breaks, incentives and “special interest” loopholes
  • Repeal the alternative minimum income tax
  • Eliminate capital gains, dividend, and interest taxes on investments owned by taxpayers who earn less than $200,000
  • Impose a long-term tax rate of 15 percent on investments for higher-income investors
  • Repeal the additional 3.8 percent Medicare tax on capital gains

For more detailed analysis of the two candidate’s tax reform plans, check out the links below.

[CLICK HERE to read the article, “Obama vs. Romney: Key Differences in Taxes, Regulation,” at AdvisorOne.com, September 12, 2012.]

[CLICK HERE to read Mitt Romney’s plan for jobs and economic growth, “Believe in America,” at MittRomney.com, 2011.]

[CLICK HERE to read the President’s Budget for Fiscal Year 2013 at WhiteHouse.gov, February 13, 2012.]

[CLICK HERE to read the white paper, “On Distributional Effects of Base-Broadening Income Tax Reform,” at the Tax Policy Center, August 1, 2012.]

Corporate Taxes

As for corporate taxes, both candidates favor reducing the tax rate to help America become more globally competitive. Romney would like to reduce the current 35 percent rate to 25 percent and change to a “territorial” payment system, extend the write-off of capital expenditures for an additional year, lower the payroll tax, and create a robust investment tax credit.

Obama supports our current “worldwide” tax system (we’re the only developed country to still use this system, wherein multi-national companies pay taxes in their host countries and the balance of the U.S. tax they would owe had those revenues originated here). However, he proposes reducing the corporate tax rate from 35 percent to 28 percent for all industries except manufacturing (25 percent).

[CLICK HERE to view the Fox news video report, “Scott Hodge on America’s High Corporate Taxes,” at YouTube.com, September 10, 2012.]

[CLICK HERE to read the White House report, “The President’s Framework for Business Tax Reform,” at Treasury.gov, February 2012.]

Regardless of who wins the presidential election, any real attempt at tax reform in the next year or two would be a tremendous undertaking given our current slow moving economy, stalled employment, and budget deficits–not to mention the likelihood that Congress will remain divided. As always, we recommend you regularly revisit your portfolio and insurance products to see if there are ways to be more tax efficient.

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The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Content is provided for informational purposes only and is not a solicitation to buy or sell the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

If you are unable to access any of the news articles and sources through the links provided in this text please contact us to request a copy of the desired reference.

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Oops, I Did It Again

September was a tough month for the GOP presidential campaign, marked by a series of unfortunate utterances by Republican candidate Mitt Romney. The most damaging of all was an hour-long video of him speaking at a private fundraiser, which came on the heels of misspoken comments about recent foreign policy. 

 

You’ve probably heard the highlights in the news already, but if you’re interested in seeing the video in its entirety, you can view it (and a full transcription) at the links below.

 

[CLICK HERE to view “Full Secret Video of Private Romney Fundraiser” at MotherJones.com, September 18, 2012.]

 

[CLICK HERE to read “Full Transcript of the Mitt Romney Secret Video,” at MotherJones.com, September 19, 2012.]

 

Is It True About the 47 Percent?

Yes, apparently the statistic Romney quoted in the video is true: 46.4 percent of American households did not pay federal income taxes for the 2011 tax year. But as we’ve heard from various analysts since the release of the video, that number appears a lot less dramatic in context.

 

According to the Tax Policy Center of the Urban Institute and Brookings Institution (comprised of nationally recognized experts in tax, budget, and social policy who have served at the highest levels of government), nearly two-thirds of those households did have payroll taxes taken out of their paychecks, which is the tax used to fund entitlement programs such as Social Security and Medicare. Among the remaining 18.1 percent that did not pay any taxes–payroll or otherwise–just over 10 percent were elderly. 

 

[CLICK HERE to read “Mitt Romney’s 47 Percent: Doing the Math,” at the Harvard Business Review Blog Network, September 18, 2012.]

 

[CLICK HERE to view analysis of “Who Doesn’t Pay Federal Taxes?” at the Tax Policy Center, 2012.]

 

[CLICK HERE to read, “Half avoid taxes, get U.S. help, but many not poor,” at Associated Press, September 18, 2012.]

 

In a recent report from National Public Radio (NPR), congressional correspondent David Welna pointed out that in 2009, half a dozen of the nation’s 400 wealthiest households also paid no federal income taxes thanks to tax breaks for investment losses. Furthermore, he points out that the biggest reason why so many households pay no federal income tax is due to the earned-income tax credit (EIC)–a subsidy for low-wage workers–which was enacted by Congress in 1975 (during President Ford’s term). 

 

President Reagan further expanded the EIC as part of the 1986 Tax Reform Act, stating that “Millions of working poor will be dropped from the tax rolls altogether.” President Clinton also expanded the EIC during his administration, and then President George W. Bush initiated the child tax credit–which raised the percentage of Americans who paid no federal income tax to 36 percent by the end of his presidency.

 

[CLICK HERE to read/listen to the NPR report, “Why Some Are Exempt From Federal Income Taxes,” at National Public Radio, September 19, 2012.]

 

Perhaps less focus should be on Romney’s comments about the 47 percent of Americans not paying taxes and more on his point that people “should take personal responsibility and care for their lives.” While taxes are designed to help pay for programs like Social Security and Medicare, they were never designed to provide for 100 percent of a retiree’s income or health care expenses. That’s where the importance of independence–versus being “dependent on government”–comes into play.

 

And that’s where we can help. We can offer you strategies that may help cover a greater portion of your income and medical expenses in retirement, based on your specific needs and financial situation. Contact us to find out more.

 

 

The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Content is provided for informational purposes only and is not a solicitation to buy or sell the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

 

If you are unable to access any of the news articles and sources through the links provided in this text please contact us to request a copy of the desired reference. 

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The Fed Steps Up

Five million Americans have been out of work for more than six months. Less than half of the eight million jobs lost during the recession have been restored. In his press conference announcing the latest plan by the Federal Reserve to help improve the U.S. economy, Fed Chairman Ben Bernanke made it clear that the committee’s focus is to generate jobs in this country.

This latest effort by the Fed will buy $40 billion in mortgage-backed securities every month until it sees substantial improvement in the unemployment rate. 

 

[CLICK HERE to view the video, “Press Conference with Chairman of the FOMC, Ben S. Bernanke” at YouTube.com, September 13, 2012.]

 

[CLICK HERE to view an infographic on “How Quantitative Easing Works,” at The Wall Street Journal, September 14, 2012.]

 

A key point in the Fed’s statement was the open-ended nature of the bond purchases – for as long as necessary until there is evidence of “ongoing sustained improvement in the labor market.”  This a significant departure from earlier policies that specified the amount of bonds that would be purchased, and reinforces the committee’s pledge to do whatever it takes for as long as it takes to spur sustained growth in employment.

 

Note, however, that the Federal Reserve has limited tools in its tool chest to impact change in job numbers. In his own words Bernanke admitted, “I want to be clear; while I think we can make a meaningful and significant contribution to reducing this problem, we can’t solve it. We don’t have tools that are strong enough to solve the unemployment problem.”

 

Reactions

Much as Mario Draghi, President of the European Central Bank, announcement last July he would do “whatever it takes” to save the Euro, Bernanke’s words gave an initial positive boost to the market and surprised economists with the boldness of the Fed’s intended moves.

 

Michael Gapen of Barclays observed that, “These moves indicate the accommodation switch has been ‘turned on’ and the data have to tell the committee when to stop.” Joel Naroff of Naroff Economics commented that, “the Fed is admitting that its best bet to improve growth is by continuing to help this [housing] sector. By keeping mortgage rates down, the members are betting that housing starts will accelerate, creating more jobs and income.”

 

[CLICK HERE to read the article “Debt crisis: Mario Draghi pledges to do ‘whatever it takes’ to save euro,” at The Telegraph, July 26, 2012.]

[CLICK HERE to read “Economists React: “Bold Shift in Fed Policy,” at The Wall Street Journal, September 13, 2012.]

 

[CLICK HERE to read the article, “Stocks extend Fed rally,” September 14, 2012.]

 

Please feel free to reach out to us if you have questions about what the Fed’s latest round of QE means for you. We’re happy to look at your portfolio within the context of these moves and consider the best way to position your assets for the foreseeable future.

 

The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by our firm. Content is provided for informational purposes only and is not a solicitation to buy or sell the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

If you are unable to access any of the news articles and sources through the links provided in this text please contact us to request a copy of the desired reference.