Friday, December 14, 2012

Tired of hearing about it!

Are you tired of hearing about it yet?  We first blogged about the fiscal cliff 233 days ago (reprinted verbatim below) and unfortunately, continued political dysfunction, which we correctly cited as a key risk, has prevented any resolution.  We continue to remain hopeful that a last minute compromise will occur but that hope is waning as each day passes.   

Originally posted by Payne Wealth Partners on April 25, 2012

It is looming!!!  In his recent congressional testimony, Fed Chairman Bernanke stated, “Under current law, on January 1, 2013, there’s going to be a massive fiscal cliff of large spending cuts and tax increases.”  This is the date when the Bush-era tax cuts, the temporary payroll tax cut and extended unemployment benefits are all due to expire.  To make matters worse - since the Congressional Super-Committee failed to reach consensus last year on reducing government spending we will also see $1.2 trillion of automatic spending cuts begin on the same date.  Combining tax increases with spending cuts could push our economy back into recession.  It is anticipated that economic output would be reduced by 3.5% next year if all these things come to pass. 

We remain hopeful that a more thoughtful approach is taken regarding spending and tax cuts by Congress and the President prior to meeting the fiscal cliff Chairman Bernanke speaks of.  However, the risk of policy errors and continued political dysfunction, particularly in an election year, remains very high.  We will continue to monitor these issues closely as the year progresses.  

Thursday, December 6, 2012

FDIC Upcoming Changes for Noninterest-Bearing Transaction Accounts

The Dodd-Frank Act provided temporary unlimited deposit insurance (FDIC) coverage from 12/31/2010 until 12/31/2012 for “noninterest-bearing transaction accounts” at all FDIC-insured depository institutions.  This coverage has been available to all depositors:  consumers, businesses and government entities alike.  Without action by Congress, these accounts will lose their unlimited coverage and will no longer be insured separately from a depositor’s other accounts at the same financial institution starting 1/1/2013.  Instead, these accounts would be added to a depositor’s other accounts (in the same ownership category at the same institution) with the aggregate balance being insured up to $250,000 per depositor.
More information on what accounts are characterized as “noninterest-bearing transaction accounts” and the coverage limits on other FDIC-insured accounts can be found here:  http://www.fdic.gov/deposit/deposits/insured/print/LgPrintEng-YID.pdf.

Friday, November 30, 2012

When Markets Become Volatile, Keep Things in Perspective



When the stock market becomes more volatile, it can be easy to lose perspective.  Guard against allowing your emotions to drive your investment decisions!  In just the past few months, we’ve seen pessimism return to the markets – first with uncertainty surrounding the elections and now with concerns over the fiscal cliff.  As a result, the S&P 500 index declined by 8% from September 10 to November 15.  Now in the past two weeks it has risen by 4%.  This type of roller-coaster ride can be unnerving for some investors.  We continue to believe that Congress will come up with a solution to the fiscal cliff – the biggest question is when.  Thus, as uncertainty continues to plague the markets, remember that markets never move higher in a straight line.  Since February 2009, the S&P 500 index has fallen by more than 5% in six different months, but it has also risen by more than 5% in ten different months, and is up over 100% since its March 2009 low.  We expect market volatility to continue until there is compromise in Washington on future tax policy and spending cuts; therefore, it will be important for investors to stay balanced and not panic in the face of choppy markets. 

Wednesday, November 7, 2012

Now we better know the rules of the game

We live in a country where the transition of power (or retention of power) occurs in a fair and orderly fashion.  Compare this to much of the world where such is not the case.

The voters have spoken and in so doing have chosen the programs as offered by the administration of President Obama.  As advisors to families who have accumulated high levels of net worth, we believe that Obama policies will seek a larger share from our clients.  It is important to recognize this, and plan accordingly.

There is a window of time between now and December 31, 2012 where we still get to play by the “old” rules as to wealth transfer and income taxes.  This is an important opportunity and one that should not be missed.  We all have much to do before year-end.

Friday, November 2, 2012

Essential Wisdom for Today's Market

We’d like to share with our reader’s a short (4 minute) webcast released by Selected Funds.  We find this to be a particularly useful resource to help navigate today's investing environment. It covers the following three essential themes that have guided some of history's most successful investors:

Stay focused on the long term - Recognize that periods of low returns for stocks have historically been followed by periods of higher returns

Remain unemotional - Avoid self-destructive behavior by controlling emotions and adhering to your investment plan

Be disciplined - Though frustrating and disappointing, short-term underperformance is an inevitable part of building long-term wealth


Click on this link and then “Play” to view webcast:
http://www.selectedfunds.com/investorcenter

Wednesday, October 17, 2012

2012 Tri-State MS Autumn Walk


For thousands of people in the tri-state affected by Multiple Sclerosis, hope has become a reality!
This fall over one thousand walkers will walk together to make a difference in the lives of those living with multiple sclerosis and their families in the tri-state.   In 2001, volunteers established the Tri-State MS Association to offer local services to the many being diagnosed with multiple sclerosis and their families, right here at home. Today Tri-State MS offers enhanced local services and specialized health care to over 1,300 families in our community touched by this devastating disease.
Payne Wealth Partners is excited to proudly support the Tri-State Multiple Sclerosis Autumn Walk on Sunday Nov 4that Romain Cross Pointe Auto Park.  Registration is at 12:30 with the walk to begin at 1:30.  There will be lunch, a silent auction and a DJ to spin some tunes. 
You’re invited to join the Payne Wealth Partners team and walk to support Tri-State MS. (Free Payne Wealth Partners t-shirt for those who join our team).  Contact us with your interest 812-477-6221 or email lawathen@paynewealthpartners.com

Friday, October 12, 2012

National Estate Planning Awareness Week

Most people don’t know that there is such a thing, but the National Association of Estate Planners & Councils is getting the word out this year that next week is the National Estate Planning Awareness Week.  A resolution was passed in 2008 creating the proclamation to bring attention to the estimated 120,000,000 Americans that do not have up-to-date estate plans. 
With so much uncertainty in the transfer tax code, income tax code, economy and political environment estate planning has never been more important.  For those with balance sheets above $5 million and complex assets like closely held businesses and real estate, planning is particularly important.  Even if you do not fit this category, there are many non-tax reasons to be thoughtful about estate planning.  If you have questions or concerns, our team of professionals is always available. 

Thursday, September 27, 2012

Stealing Social Security Benefits

Seniors’ and disabled citizens’ government benefits are reportedly being targeted by identity thieves.  Unfortunately our society is filled with conscienceless individuals quick to develop new methods of stealing another’s property.  In a recent CNN Money story which can be read here http://money.cnn.com/2012/09/26/pf/seniors-social-security-scam/index.html?iid=SF_PF_LN, certain personal information including a bank account number is being acquired and deceptively used to redirect electronic benefit payments to thieves.  At a bare minimum, it’s wise to track our accounts closely and take extreme caution when anyone is requesting our personal information.

Friday, September 14, 2012

QE3 – Is this the Answer to Economic Woes?

The U.S. Federal Reserve (the Fed) has a dual mandate for our economy - full employment and price stability.  Over the past four years our economy has clearly been producing at a level well-below its potential.  The unemployment rate has been too high for too long and inflation has consistently been below the Fed’s target for price stability. 
So what are they to do?  We received the answer on Thursday, when the Fed announced a third round of Quantitative Easing (QE3).  With QE3 the Fed is increasing their economic stimulus by purchasing $40 billion of mortgage-backed securities per month for an indefinite time period.  The goal is to apply further downward pressure on long-term interest rates, support the mortgage market (i.e. help homeowners) and to make broader financial conditions more accommodative.   Unlike QE1 and QE2, no dollar cap or time-limit was placed on this program. 
Given that QE3 supports asset values at the expense of triggering higher inflation and devaluing our currency, the ultimate outcome becomes somewhat frightening.  We’re not quite sure how this approach will create jobs.  Instead, we believe more clarity is needed on tax policy, healthcare costs and budget cuts for businesses to get comfortable hiring and investing for future growth. 

Wednesday, August 29, 2012

Pension Guarantees for State Govt. Retirees?

A recent survey by the Center for Retirement Research at Boston College finds retirement benefits to state employees and retirees may not be as certain as some would think/argue.  According to the researchers, many details can be legally challenged in favor of the state/employer since employment contract terms are often used generally as opposed to being clearly defined. 

Thursday, August 23, 2012

State Pension Controversy

Pension underfunding and bleak projections have caused state governments – Illinois comes to mind due to its geographic proximity to us – to discuss potential benefit reductions for future, and even current, retirees.  In fact, states like Rhode Island, Louisiana and Florida have recently decided to implement significant changes.  It’s no surprise that lawsuits have arisen in response. 

Friday, August 17, 2012

Don't Hold Your Breath

We’ve seen the markets ticking higher, with six consecutive weeks of gains. Yesterday, the S&P 500 reached its highest level since April and was within 10% of the all-time high of Oct. 9, 2007. Even so, with much of Europe on holiday and trading volume being low, there is a sense that investors are holding their breath, waiting for Europe to get back from vacation, for the next policy announcement, for the next big headline to move the markets.

Friday, August 10, 2012

Kick the Can

“Kick the can down the road” – slang…Developing a temporary, inadequate solution to a problem in hopes that it will go away or be addressed by someone else. 

Four public school districts in San Diego, California have recently sold huge long-term bonds to avoid making tough decisions today.  Payments on the Poway Unified district’s $105 million bond will not begin for 20 years.  At that time, payments totaling $982 million will be made over the following 20 years!  That equates to almost $50 million per year or $1 million per week in payments!  That’s about 20% of the district’s total current budget.  In addition, the bond is reportedly not callable (meaning it cannot be repaid early or refinanced).

How will the money be spent?  Updates include new computers, wireless data systems, alarm systems, recyclable building materials, landscaping, permanent outside eating areas, etc.  Hopefully all the updates are enjoyable and create a better learning environment since those students who remain in the district after graduation will pay dearly for it.  At the current pace, however, there may not be any upper income taxpayers in the district 20 years from now.  The Fox Business article references the following California Taxpayers Association data:  the number of California tax returns with $500,000 or more of adjusted gross income dropped from 146,221 in 2007 to 98,610 in 2009.

The full Fox Business article can be viewed here:  http://www.foxbusiness.com/investing/2012/08/08/california-school-districts-spend-1-billion-to-borrow-100-million/

Thursday, August 2, 2012

Sayonara USA?

The number of expatriates of the United States increased six fold from 2008 through 2011.  In 2008, only 231 individuals renounced their U.S. citizenship; in 2011, the same statistic measured 1,781 individuals.  Many would argue that this is partially due to the tax atmosphere here in the states. 

Thursday, July 26, 2012

A Closer Look at the Unemployment Rate

As weekly jobless claims were reported today as less than expected, it brings jobs in the U.S. back to the spotlight. Although it is refreshing to see positive data such as this, we understand that there are many seasonal factors that are at play that can cause these short-term statistics to fluctuate unexpectedly. Looking at the longer term unemployment rate we see that the rate has held at 8.2 percent, marking the 41st consecutive month that joblessness has been above 8 percent—this is the longest stretch of such high levels in the post-World War II era. Taking a closer look at this statistic reveals something interesting: The chart below breaks down the unemployment rate by levels of education. While an individual with less than a high school degree faces an unemployment rate of 13% as of May 2012, an individual who has a “college or above” level of education faces a 3.9% unemployment rate.

Friday, July 20, 2012

How Low Can They Go?

Have you been paying attention to the recent direction of mortgage interest rates?  They are moving lower!  This is great news if you’re a first-time home buyer, shopping for a new home or interested in refinancing your existing mortgage balance.  We were contacted today by a local banker, and she shared the following conventional mortgage rates with us. 
·         30 year fixed rate is 3.375% with 0 points

·         15 year fixed rate is 2.75% with 0 points
On June 20 the U.S. Federal Reserve extended “Operation Twist” through the end of 2012.  With this program the central bank is selling an additional $267 billion of shorter-term treasury securities to buy the same amount of longer-term bonds in a bid to reduce borrowing costs and help spur the economy.  The recent drop in mortgage rates can be attributed to this program, so the Fed has accomplished one of their goals.  Now we'll have to see if overall economic activity improves further.      

Wednesday, July 11, 2012

Staying healthy can (and will) be taxing

As part of the 2010 Patient Protection and Affordable Care Act (referred to as ObamaCare) a number of new taxes will begin going into effect as early as next year.  Business owners and corporate executives should pay close attention to the changes as they will be particularly susceptible to these new taxes.
Just to name a few of the new taxes coming in 2013- there is a 3.8% Medicare “surtax” that may apply to those with modified adjusted gross income over $250,000 (if filing jointly) who also have “unearned” income, a 0.9% Medicare payroll hike for earnings over $250,000 (if filing jointly) and an increase in the threshold for deducting medical expenses as an itemized deduction from the current 7.5% to 10% for those under 65 years of age.
Examples of things to come in 2014 and after- potential healthcare penalties for employers of 50 or more employees (now deemed to be a “tax” by the Supreme Court) and for those employers offering what is deemed a “Cadillac” health care plan a 40% tax on the value of that coverage, levied against the employer.
These changes need to be navigated in context of your comprehensive wealth plan along with the help of your CPA and other advisors to minimize the impact you see from these changes- particularly if you are a business owner or corporate executive. 

Wednesday, June 27, 2012

Healthcare Reform

There has been a lot of talk by political pundits, economists, and everyone in between about the Affordable Care Act, or “Obamacare,” and its constitutionality.  According to reports, the Supreme Court is releasing its verdict as to the act’s conformity with the constitution (or lack thereof) on Thursday morning.  This debate is only one of many that the country will face in the coming years as citizens both young and old, retired and working, attempt to solve the healthcare puzzle without breaking the bank. 

Tuesday, June 19, 2012

Oppose the Investment Advisor Act of 2012 - HR 4624

Payne Wealth Partners is against the Investment Advisor Act of 2012 – HR 4624.  This bill will hurt small business owners who provide sound financial planning to consumers and who put their clients' interests first.  We believe that if enacted into law this bill would allow the foxes to rule the henhouse.

HR 4264 would strip advisor examination and oversight from the Securities and Exchange Commission (SEC), a government entity that has worked with registered fiduciary advisors for 70 years, and place them with a non-government organization called FINRA (Financial Industry Regulatory Authority), who oversees the Wall Street stockbrokers who in the past created products so confusing and with such outrageous commissions that consumers had little idea what they were being sold.

Tuesday, June 5, 2012

May 2012 Market and Planning Update


WHICH WILL YOU CHOOSE: INSPIRATION OR DESPERATION?
Taking action that will truly have a long-term impact on one’s financial situation often requires inspiration or desperation. Typically over time, poor decisions will lead you toward a point of desperation. Taking the easy way out of decisions along the way (spending too much, retiring too early, missing planning and investing opportunities, etc.) will begin to send your financial plan down a hill like a snowball toward a cliff. Desperation is the last-minute reaction that forces those individuals to take drastic steps to avoid falling off the cliff. READ MORE


MARKET COMMENTS & OBSERVATIONS
Although still positive for the year, the S&P 500 index declined 6% during the month of May as tensions increased over European debt problems. Both developed international and emerging markets stock indexes declined sharply in May and they have both experienced a more than 20% decline in the past 12 months. Many emerging countries (China for example) are very dependent upon selling their exports to Europe, so concerns about further economic weakness across Europe has led to the decline in stock prices. Just as we saw in April, out of the five financial market indices represented below, only the two bond indexes posted positive gains for the month.  READ MORE

Tuesday, May 29, 2012

Government Payments to Households Grow

The Census Bureau recently released figures that show 49.1% of the U.S. population lives in a household that received some type of government benefit or assistance in the first quarter of 2011.  This figure has ballooned since the early 1980’s when it measured 30% and since 2008 when it measured 44.4%.   

Friday, May 25, 2012

European Heads of State Clash

There has been a great deal of posturing and positioning this week amongst European leaders as they hold their 18th summit of the past two years.   The strong countries are being pushed to help their weaker neighbors, while Greece is being called upon to stick to the austerity measures they previously agreed to or risk being cut-off from aid.  The most recent heated discussions centered on issuing joint Euro bonds to raise money for Greece, Spain, Italy and Portugal.  But joint-country borrowing is not finding any support from Germany, which is one of the few European countries still seeing its economy in positive territory.  This strategy is extremely unpopular amongst German leaders and their citizens who are afraid of being drug into a recession.

Policy makers need to create economic growth initiatives, not just force cost cutting on already weak economies.  They also need to have a stronger fiscal union to provide true support for their monetary union.  The European Central Bank should be ready to provide liquidity to the banks as government debts will certainly require further restructuring, and although austerity is important, creating economic growth is more important.  Unfortunately it may take a real crisis, like Greece leaving the European Monetary Union and defaulting on its debts, for the parties to find common ground for a solution.  The deeper this crisis goes, the more volatility we’re likely to see in the prices of risk assets.   

Friday, May 18, 2012

In Perspective: Facebook

In its normal fashion, the investment marketplace has focused 110% over the recent days on the Facebook Initial Public Offering.  The investment markets and news outlets feed the public frenzy that often occurs surrounding the next market phenomenon and for Facebook it is no different. 
The big secret that many seem to forget…In five, ten and twenty years, looking back at Facebook’s IPO will reveal no measurable impact on one’s financial life as he sees it.  While many individuals focus on “the next big thing” in the investment marketplaces, no attention is given to the bigger financial decisions that will impact one’s life long-term! 
The bigger picture will always be more important than the biggest phenomenon on which the media outlets want you to focus.  The tough part is shifting attention away from the glitz and glamour of “the next Facebook deal” and shifting attention toward a meaningful long-term plan by answering the following question:  Do I have a platform to evaluate my progress towards my future financial goals? 

Saturday, May 12, 2012

What is to be done?

One of the market experts we follow is Jim Swanson who is the Chief Investment Strategist for MFS Investments.  He typically provides an interesting and insightful perspective on global events.  We especially enjoyed reading his comments on the recent European elections and have decided to share them with you. 

Posted: 10 May 2012 02:14 PM PDT by Jim Swanson

"The fault, dear Brutus, is not in our stars,
But in ourselves, that we are underlings."
-Julius Caesar by William Shakespeare
The recent elections in Europe have created a new crisis of confidence in the world markets. Last year, fear of contagion raged, as bank failures spread throughout eurozone. This year, we are experiencing a different kind of contagion. Voter backlash has swept two austerity-imposing governments from power and now threatens other eurozone regimes that have tried to impose their harsh brand of fiscal authority in an effort to appease European creditors.

In France, the president has been thrown out. In Greece, newly elected legislators from the left-of-center party are demanding a reversal of what they are calling the "barbarous" austerity measures agreed to by the former government.
With more elections on the way, politicians are now taking a fresh look at the timing of budget cuts that are being implemented with the eurozone in the midst of recession. They seem to have concluded that growth and austerity are incompatible. But, is that really the case, or is it rather a case of who or what is fueling the growth that will enable a country's economy to be lean at the same time that it is prosperous?

Wednesday, May 2, 2012

Social Security Board of Trustees Report Released

The 2012 annual report on the financial status of the Social Security Trust Fund was recently released by the Social Security Board of Trustees.  Under the current system, the Board’s long-range projections indicate the combined OASDI (Old-Age and Survivors Insurance and Disability Insurance) Trust Funds may be exhausted in 2033.  It’s noteworthy that this projection is 3 years earlier than the Board projected within its 2011 annual report.  It is estimated that only 75% of scheduled benefits will be available for recipients once the Trust Funds are exhausted. 

The report urges legislators to act soon to increase the program’s solvency and provides the following options for the combined Trust Funds to remain healthy for the full 75-year projection period:

1.    Permanently increase the payroll tax by 2.61% (split equally at 1.305% each for employee and employer),
2.    Immediately reduce scheduled benefits by 16.2%,
3.    Create more revenue, or
4.    Some combination of these options.

Our view is that Social Security will certainly remain in place, but lawmakers will be forced to make changes eventually – as have occurred in the past – to create long-term stability.  These changes will most likely impact younger generations and may consist of increasing the Social Security defined full retirement age, reducing benefits for high income wage earners, increasing the taxability of benefits (currently up to 85% of benefits are subject to federal income tax), raising the amount of income subject to the payroll tax ($110,100 currently), increasing the payroll tax, etc.

The full 242 page report can be found here:  www.socialsecurity.gov/OACT/TR/2012/. 

April 2012 Market and Planning Update


ACTING IN AN UNCERTAIN WORLD
Everyone has likely heard plenty about the inevitable tax and spending changes coming at the end of this year. Change will occur whether it is by default (in the event Congress and the President do nothing) or whether it is by our leaders’ own actions prior to midnight on 12/31/2012. When evaluating certain wealth planning strategies that have to do with income tax, estate tax, levels of projected growth and the like, a world rife with uncertainty can be challenging for the key financial decision maker in the average American household. READ MORE


MARKET COMMENTS & OBSERVATIONS
We saw most stock market indexes take a breather during April although many are still considerably higher for 2012. Out of the five financial market indices represented below, only the two bond indexes posted positive gains this past month. Stock prices have appreciated significantly this year thanks to continued easy money policies by central banks, healthy corporate balance sheets, better earnings, and a gradually improving economic picture. READ MORE

Wednesday, April 25, 2012

The Fiscal Cliff

It is looming!!!  In his recent congressional testimony, Fed Chairman Bernanke stated, “Under current law, on January 1, 2013, there’s going to be a massive fiscal cliff of large spending cuts and tax increases.”  This is the date when the Bush-era tax cuts, the temporary payroll tax cut and extended unemployment benefits are all due to expire.  To make matters worse - since the Congressional Super-Committee failed to reach consensus last year on reducing government spending we will also see $1.2 trillion of automatic spending cuts begin on the same date.  Combining tax increases with spending cuts could push our economy back into recession.  It is anticipated that economic output would be reduced by 3.5% next year if all these things come to pass.  

We remain hopeful that a more thoughtful approach is taken regarding spending and tax cuts by Congress and the President prior to meeting the fiscal cliff Chairman Bernanke speaks of.  However, the risk of policy errors and continued political dysfunction, particularly in an election year, remains very high.  We will continue to monitor these issues closely as the year progresses.        

Wednesday, April 11, 2012

Is Your Credit Card Information Safe?

An Indianapolis television station recently reported on the potential risks of RFIDs (Radio Frequency Identification) on credit and debit cards.  Cards containing this electronic chip are designed to be a faster method of payment by allowing the cardholder to simply wave the card in front of a scanner instead of the “old fashioned” swipe method. 

In the investigation (which can be viewed at http://www.youtube.com/embed/lLAFhTjsQHw), we see on camera how easy it can be to obtain someone’s credit card information – without even touching the cardholder or the card – and then create a clone card to use for purchases.  Even more alarming is the fact that the individual mimicking thievery in this report purchased the equipment online for less than $100. 

The youtube video above describes how to determine whether your card contains a RFID chip.  As technology advances in our society, additional risks will become apparent.

Thursday, April 5, 2012

What Does Warren Buffett Think about GOLD?


Through various media outlets today, we are bombarded by offers to sell us gold.  In his recent 2011 shareholder letter, Warren Buffett explained in great detail his thoughts on investing, the definition of risk and the role of various types of investments in a portfolio.  We thought his comments on unproductive assets, like gold, were very insightful, so we would like to share his thoughts with our readers.  Buffet focuses on the Tulip mania during the 17th century and the last two major US financial bubbles to take a serious jab at the precious metal. 

In Buffett’s words:
“The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future.  Tulips, of all things, briefly became a favorite of such buyers in the 17th century.  This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further.  Owners are not inspired by what the asset itself can produce – it will remain lifeless forever – but rather by the belief that others will desire it even more avidly in the future.”

“What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct.  Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while.  Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices.  In these bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market, and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling.  But bubbles blown large enough inevitably pop.  And then the old proverb is confirmed once again:  ‘What the wise man does in the beginning, the fool does in the end’.”

Monday, April 2, 2012

March 2012 Market and Planning Update


TAX TIME TRAUMA
During the time period we all affectionately call “tax time” there are many important decisions related to one’s finances. Some of these decisions must still be made for the previous year (like whether to contribute to an IRA and what type) yet so many more deal with the year ahead. It is critical that all options be evaluated and that no stone go unturned. READ MORE


MARKET COMMENTS & OBSERVATIONS
We saw many market indexes take a breather during March from their robust gains of the past several months. Out of the five financial market indices represented below, the S&P 500 index was the only one to post a positive gain this past month. It is noteworthy that the S&P 500’s gain of 12.6% for the first quarter of 2012 is its best first quarter return since 1998. Stock prices have appreciated significantly in a relatively short period of time thanks to continued easy money policies by central banks, healthy corporate balance sheets and better earnings, and a gradually improving economic picture. Only time will tell if the recent rally in stock prices has run its course. READ MORE

Tuesday, March 27, 2012

Putting Money in Context

Seth Godin is a best-selling author that writes a blog we follow religiously.  His blog post today spoke to a money challenge that everyone deals with- how do you put money decisions in an appropriate context so as to make the best possible decision? 
Through relationship-based wealth planning we work with our clients to illustrate to them the tradeoffs when it comes to big money decisions.  Not whether to upgrade that stereo in your new car but when to retire, how to grow and exit your business, how to spend your assets, what goals are realistic, etc. 
We hope you enjoy Seth’s post as much as we did: http://tinyurl.com/cvyerf6

Wednesday, March 21, 2012

Indiana Inheritance Tax Bill Signed

Yesterday Governor Mitch Daniels signed the bill into law that will completely eliminate the Indiana inheritance tax after 2021.  Until then, the tax will gradually phase out by applying an increasing credit against any liability.

A higher $250,000 exemption (formerly $100,000) is now available for each Class A beneficiary retroactive to January 1, 2012.  Class A beneficiaries typically consist of lineal ancestors and lineal descendants such as a child, grandchild, parent, etc.  The new law additionally defines a child’s (or stepchild’s) spouse as a Class A beneficiary to receive this increased exemption.  This is a substantial benefit since a daughter-in-law or son-in-law previously only received a Class B beneficiary exemption of $500 and was then subject to more progressive tax rates.

As an example, an individual with two married children can potentially bequeath a $1 million estate free of Indiana inheritance tax ($250,000 to each child and $250,000 to each child’s spouse).  Previously, this same estate would have paid approximately $51,000 in Indiana inheritance tax.

This is a significant development in the wealth and estate planning arena, and our wealth planning team continues to monitor details of such activities to evaluate the impact on our clients’ personal wealth plans.

Thursday, March 15, 2012

Indiana Lawmakers Pursuing A Repeal of the State’s Inheritance Tax

The Indiana Senate and House of Representatives recently voted to repeal, in its entirety, the Indiana inheritance tax (AKA state death tax) by the year 2022.  If signed by Governor Mitch Daniels, the legislation will also gradually reduce this tax over the next 10 years, leading to a complete repeal.

Previously, the first $100,000 left at death to each Class A beneficiary (children, grandchildren, parents, etc.) was received free of this tax.  If an individual with a $1 Million estate had 4 children receiving an equal portion of the estate, only $600,000 would be subject to the Indiana inheritance tax ($1 Million minus the $100,000 exemption for each of the 4 children).  If the bill becomes law, this exemption will increase to $250,000 per Class A beneficiary starting this year.  Thus, the $1 Million estate described above would be free of Indiana inheritance tax.
This is a significant development in the wealth and estate planning arena, and our wealth planning team continues to monitor details of such activities to evaluate the impact on our clients’ personal wealth plans.

Friday, March 9, 2012

Three Years Since Market Lows – What Was Key Driver of Returns?

March 9, 2012 provides us with an opportunity for reflection back to exactly three years ago.  On March 9, 2009, the S&P 500 index had declined to a low of 677 as a result of the 2008-09 financial crises.  At that point in time, the financial system was extremely fragile and many were concerned that we were heading into a depression.   Upon hitting this low, the S&P 500 index had declined 57% from its peak of 1,565 which was reached on Oct. 9, 2007.  Now for the good news - since that low, the S&P 500 has recovered substantially and earned a total return of 112%.  Over the same time period the Barclays Aggregate Bond Index has achieved a total return of about 23% and the typical money market fund has returned about 0.2%. 

Tuesday, March 6, 2012

February 2012 Market and Planning Update


THE WEIGHT OF WEALTH
We often hear from our clients and prospective clients that some of the toughest decisions they face have to do with responsibility surrounding their financial wealth. While it would be easy for someone unfamiliar with wealth to assume that it brings nothing but good things, this really isn’t the case in reality. READ MORE


MARKET COMMENTS & OBSERVATIONS
Stock markets around the world are off to an impressive start in 2012. Emerging Market Equities, which declined the most during 2011, have led the rebound with a gain of 17.8%. U.S. stocks, as measured by the S&P 500 Index, are up 9% for the first two months of 2012. Most bond categories, which provided the strongest returns in 2011, are showing much more modest returns so far this year. READ MORE

Tuesday, February 28, 2012

Charitable Giving Tool

To help with charitable giving decisions, the IRS recently launched a new online search tool called Exempt Organizations Select Check.  Among other things, this tool allows taxpayers to see if an organization is eligible to receive tax-deductible charitable contributions.  Users can search by various criteria including city, state, organization name, employer identification number (EIN) or deductibility status.  We would encourage you to visit this site prior to making gifts to your favorite charities. 

You may access the site from this link:  http://www.irs.gov/charities/article/0,,id=249767,00.html

It’s important to note that some entities eligible to receive tax deductible contributions are not part of this list.  For example, many churches which are included in group exemption letters may not be found.  Contributions to subordinate units of such organizations are often tax deductible under the central organization’s group exemption letter.  More information can be found in IRS Publication 4573.

Thursday, February 23, 2012

Bait and Switch?

For years, American’s have saved for retirement through employer-sponsored retirement plans (i.e. 401ks) and personal retirement vehicles (i.e. IRAs).  The income tax incentives provided are primarily what make these plans so attractive for savers, and until recently there has been little doubt that these benefits will remain.

Thursday, February 16, 2012

December 2011 Market and Planning Update

PLANNING COMMENTARY

Our end of year practice always includes a revisit of key assumptions used in client wealth planning.  We would like to provide a very brief summary of the assumption changes we are implementing for 2012.  Note that these long-term assumptions are being used over a typical clients planning time horizon and are illustrations of what we anticipate prospectively versus simply a measure of what has happened in the past.  READ MORE


INVESTMENT COMMENTARY
We entered 2011 with much hope and promise since the economy was showing signs of continued improvement.  However, extreme volatility took over last year due to Japan’s Tsunami, Libya and other middle-east unrest, a spike in oil prices, Europe’s debt crisis resurfaced, fears of another recession lingered, Congress continued its dysfunctional ways and then the U.S. credit rating was downgraded.  Through all this unrest, our economy showed tremendous resilience.  Investors are pleading for a smoother and much calmer market for 2012.  Unfortunately, we’re not likely to have that.  Uncertainty continues so we’d expect more volatility in the markets.  READ MORE 

January 2012 Market and Planning Update


YOUR FINANCIAL LIFE – IN PERSPECTIVE

For years, continued medical advancements and heightened awareness of personal health have led to increases in longevity.  Looking at this phenomenon over the past 100 years puts this in more perspective:

  • A typical baby born in 1900 was expected to live to age 45; today, life expectancy at birth is roughly 82!
  • The average 65 year old retiree is expected to live to age 86. 
  • There is a 25% chance at least one member of a 65 year old couple will reach age 97!

MARKET COMMENTS AND OBSERVATIONS

How quickly the markets can change.  We always preach that “time in the market” is more important than “timing the market.”  Due to a resilient U.S. economy and some progress towards stabilizing Europe’s debt crisis, we’ve seen upward progress in the equity markets for January and now over the past 3 months.  As we write these comments the S&P 500 index is up 4.5% for the month and we’re on track for one of the better January’s on record.   You may remember that we increased our exposure to stocks during the month of August and that tactical adjustment has been rewarding to portfolios.  The emerging stock markets have also shown a strong January (up 9.8%), and they have erased almost one-half of their 2011 losses.


Are you financially literate?

According to recent research, financial literacy declines with age, on average.  The research was published through a working paper by Annamaria Lusardi, an economist at Dartmouth College. 
When asked to perform a simple compound interest calculation, a group of 51-56 year-olds were puzzled.  Less than one in five could arrive at the correct answer.  (question and answer can be found at the bottom)

Saturday, February 11, 2012

A Taxing Matter

Our federal tax code is too confusing, too complicated and quite frankly unfair to many Americans.  We believe our tax code is in desperate need of an overhaul.  Think about the following: 

  • Next week President Obama will introduce a FYE 2013 budget calling for higher taxes on those who earn over $250,000, including a repeal of the “Bush tax cuts.”  If the U.S. Tax Code is used to penalize success then we will see much less success achieved.  Taxes should be collected to fund our country, not as a political platform of “class warfare.”  We need a flatter, and less complicated system of individual income taxation as recommended by the Presidents own Simpson Bowles Deficit Commission.
  • 23% of all personal tax returns that were filed in 1979 paid no federal income tax.  Thirty years later (in 2009) 42% of all personal returns that were filed paid no federal income tax. 
  • There have been approximately 4,428 changes to our tax code over the past ten years.  That is an average of more than one per day.  During 2010, there were 579 changes to the code. 
  • The wealthiest 1% of our population earns 19% of the income but pays 37% of the income tax.  The top 10% of income earners pay 68% of the income tax tab.  Meanwhile, the bottom 50% - those below the median income level - now earn 13% of the income but pay just 3% of the taxes.
Talk, talk and more talk……we hear many politicians speak of the need for change.  When will someone take the lead on real tax reform designed to drive growth and opportunity for all and start to make it happen? 

Source:  Internal Revenue Service

Wednesday, February 1, 2012

What Neighbors Do You Want?

According to the Tax Foundation’s most recent study, “2012 State Business Tax Climate Index,” Indiana ranks 11th in the country for tax system attractiveness.  The study is intended to help business leaders, policymakers and taxpayers understand how hard their state is working to attract profitable businesses and successful individual taxpayers.  The least attractive state may surprise you…

Tuesday, January 24, 2012

Policy Uncertainty Index

The Policy Uncertainty Index, developed by a team of professors from Stanford and the University of Chicago, illustrates how uncertainty about the direction of future government policy can weigh on our economy.  The index takes into consideration:
  1. The frequency of news stories on the issue of government policy uncertainty
  2. Expiring federal tax provisions (there happen to be 41 in 2012) 
  3. Disagreement among forecasters over inflation and federal government purchases
The professors estimate that the significant increase in policy uncertainty over the past five years (which has increased overall economic uncertainty) has cost our economy 2.5 million jobs. 

We would agree that a strong implication of their research is that clarity on future tax and spending policies may lead to acceleration in economic growth.  Today, many businesses are unwilling to invest for growth or hire new employees because of the uncertainty of future tax rates.  Another key issue that continues to burden us is our federal deficit and growing debt level. 

The United States and the rest of the developed world need to focus on policies that will support economic growth.  As U.S. citizens we should demand candidates for 2012 election (presidential, congressional, and gubernatorial) put forth their vision for restoring growth and be judged accordingly

Thursday, January 19, 2012

Worst Retirement Destinations

There are dozens of lists available for the “best retirement spots,” but where can you find information about the retirement destinations you should avoid like the plague?  TopRetirements.com has released results of their most recent study of the worst states to retire to and the conclusions may be surprising. 
The study, based mainly on objective data such as tax rates, weather and cost of living, ranked ten states as the worst in the union to retire to.  Seven of these worst ten states earned the same honor last year!  Here is the first half of their list and a short explanation of why each state earned it's spot:
1.     Connecticut: high taxes and cost of living
2.     Illinois: state is in severe fiscal trouble
3.     Rhode Island: high property taxes
4.     Vermont: high property and income taxes
5.     Massachusetts: high taxes, although social security income is exempt
What is less surprising about the list is that most of the top ten worst states for retirees are positioned in the northeast, partly because of the unfavorable climate and generally high property taxes, two key factors in the study.
To find more information on this topic and use a tool that allows you to customize the ranking specific to your tastes, visit http://tinyurl.com/7qlcj4b.
 

Tuesday, January 10, 2012

Volatility in the Dow Index

Since the Dow Jones Industrial Average (DJIA) is an index many pay attention to, we’d like to share some interesting facts.  These speak to the amount of volatility we’ve experienced in the stock market over the past several years.     

Ø  The DJIA crossed from below the 12,000 level to close above it 14 times in 2011.  The 12,000 level was first crossed on October 19, 2006 and then the index went below 12,000 on June 20, 2008.  It would not reach 12,000 again until February 1, 2011.

Ø  The 11,000 level was first reached on May 3, 1999.  The index fell below 11,000 on September 26, 2008 and did not to reach 11,000 again until April 12, 2010.  We started 2011 above the 11,000 level but crossed it from below that level to close above 11,000 five times during the year.   

Please note all numbers are reported on a closing basis.