Here's A Quiz On Financial Events In 2010
T
hough calmer than some, 2010 was
once again tumultuous year in
financial circles. The aftereffects of
the recession continued to be felt. Concerns
over government debt in Europe boiled over
in civil unrest. Back home, investors
remained on edge as news of swindles and
other abuses came to light. A “flash crash”
resulted in a five-minute meltdown for
stocks, while the market continued to be
volatile throughout the year.
Meanwhile, legislation enacted in
2010 included significant financial reforms,
and Congress also finally approved health
care legislation and extended several
key tax provisions. The Securities and
Exchange Commission (SEC) also imposed
regulatory changes.
Were you paying attention? Here’s a
brief quiz to test your knowledge.
1) During 2010, the Dow Jones Industrial
Average posted an overall:
a) Increase of less than 5%.
b) Increase of more than 10%.
c) Decrease of less than 5%.
d) Decrease of more than 10%.
2) The Federal Reserve recently
announced plans to:
Simplify Financial Life
(Continued from page 1)
leading to better, more tax-efficient
investment decisions and a coordinated
strategy focused on achieving your
long-term financial goals.
Automate. If you contribute to a
401(k) or other retirement plan, your
money goes in automatically. Now
consider doing the same at home—
directing automatic monthly payments
from your checking account to
your IRA, a 529 plan, and a taxable
investment account. You can also
have dividend and interest income
automatically reinvested. Meanwhile,
online banking and bill-paying could
help you get a handle on day-to-day
finances. Being able to monitor your
accounts on the Web and schedule
a) Purchase $300 billion of mortgagebacked securities.
b) Purchase $600 billion of long-term
Treasury securities.
c) Bail out several major
financial firms.
d) Stimulate small business spending
with tax incentives.
3) The “flash crash” of May 6 was
triggered by:
a) A precipitous decline in the value of
the dollar.
b) A single computer-generated sale by
a mutual fund.
c) A malfunction of the electronic
securities trading system for all firms.
d) Multiple securities sales by panicked
investors.
4) The Dodd-Frank Act of 2010 resulted
in all of the following except:
a) Creation of a Consumer Financial
Protection Agency.
b) Creation of a council to assess
financial threats to the economy.
c) Consolidation of oversight of many
types of debt.
d) Reduced commissions for securities
sales by broker-dealers.
5) Under new regulations for registered
investment advisers (RIAs):
a) Oversight of more than 4,000 RIAs
shifted from the SEC to state authorities.
b) The SEC assumed complete
responsibility for all compliance measures.
c) Financial firms must offer an
“Investment Bill of Rights.”
d) Daily reports on investment
activities must be filed with the SEC.
6) Under new disclosure rules, the SEC
now requires RIAs to:
a) Offer virtual “guarantees” against
financial abuses.
b) Reveal personal tax information to
the general public.
c) Ensure all client brochures are
written in “plain English.”
d) Update clients daily on their
investment activities.
7) The 2010 Tax Relief Act:
a) Eliminated basis reporting rules
for securities.
b) Created new tax credits for investors.
c) Extended an exemption for
IRA distributions.
d) Preserved tax-favored treatment of
long-term capital gains.
Answers: 1-b; 2-b; 3-b; 4-d; 5-a; 6-c; 7-d
payments for your mortgage, car
payments, and other bills reduces
paperwork and saves time and
postage. Just don’t schedule automatic
payment of your credit-card bill;
it’s important to check your statement
for fraudulent activity.
Delegate. The turbulent markets
of the past few years have made it
very clear that it takes more than luck
and hunches to make steady progress
toward financial goals. Many
investors, who during the Internet
boom briefly thought they could direct
their own accounts by pouring money
into a handful of high-growth stocks,
have turned to us for professional
advice. By building a portfolio that
fits your objectives, risk tolerance,
and timetable, we will help you stay
organized and execute a coordinated
financial plan—which greatly
simplifies your financial life. But in
order for it to work right, it’s wise to
delegate. Don’t procrastinate about
making investment decisions, or
trying to manage complex financial
issues on your own. Pick up the phone
and call us. Add an accountant for tax
matters and an attorney who can
execute your estate planning.
Relieving yourself of the time and
stress of trying to handle such issues
on your own ensures you’ll get issues
addressed timely and in a manner to
your liking.
Evaluate. Simplifying your
financial life isn’t a once and done
process. After you’ve taken steps
to get things in order, you’ll still
need to revisit your financial plan at
least annually ●
©2011 API
S p rin g 2 0 11
Five Ways To Simplify
Your Financial Life Now
I
s there anything more stressful than
trying to stay on top of your
finances? Tax laws change almost
every year, spawning new strategies for
retirement, college, and estate planning.
Accounts proliferate. Meanwhile, as
the economy and investment markets
move through inevitable cycles, interest
rates, inflation, and stock and bond
prices are constantly in flux.
Beyond the challenge of simply
keeping up, there are those nagging
questions that keep you awake at night.
What if you’re doing something
wrong? Are you missing opportunities,
paying unnecessary taxes, failing to
look far enough ahead?
Yet as complicated as your
financial life may be now, a few
straightforward strategies can go far to
simplify things. You’ve already taken
the most important step, choosing to
work with us as your financial
professional who can take over many
of your short- and long-term concerns.
So, if we have not sat down recently to
discuss your plan, what follows are
suggestions for getting the most out of
the relationship, reducing your stress,
and increasing the odds that you’ll
achieve your financial goals.
Assess. Let's start by writing down
all of your sources of income and your
liabilities—your mortgage, other debts,
alimony or child support, tuition
payments. How much do you have in
retirement plans, taxable accounts, and
other savings? If you own a business,
do you know what it’s worth? Then
think about where you are in the arc of
your financial life. Still early in your
career, with decades of steady income
growth to come? Or has your earning
power peaked? And what major
expenses are coming up—a baby,
college, a wedding, a grand tour of
Europe? Though it may remind you
just how complex your finances are,
gathering this information and writing
it down on a single sheet of paper is
the first step in establishing a comprehensive financial plan—a plan that
will simplify everything.
Consolidate. It’s not uncommon
for a family to have investments
scattered in a dozen accounts or more.
There may be a 401(k) from each of
several jobs, custodial accounts opened
for the kids with a few different fund
companies, plus variable annuities, 529
college savings plans, and taxable
investment accounts. This means
you’re probably paying more than your
fair share of fees. And it’s a big job
gathering 1099s at tax time. Moreover,
it’s typical that people in this situation
make mistakes with beneficiary
designations on accounts, which could
wind up costing your loved ones
dearly. Even worse are the challenges
to creating a coherent asset allocation
when you own scores of mutual funds
and other investments, especially if
you have picked from limited menus
often available in company retirement
plans. Monitoring investment
performance across different accounts
is also more difficult. The solution:
consider rolling over those 401(k)s
into a single IRA, and consolidate
your other accounts as much as
possible. In addition to likely savings
on account fees, you’ll get a much
better picture of what you have,
(Continued on page 4)
Harbor View
W
elcome to the first issue of
the Harbor View, Lifetime
Wealth Planning and
Management’s quarterly newsletter.
In these newsletters, we hope to
provide you with timely information
and advice to enrich your lives. We
hope you find the articles useful and
maybe even entertaining! In this
inaugural issue, we are focusing on
strategies and ideas that you can
implement now to help you focus on
your finances. The suggestions in our
lead in article, “Five Ways to
Simplify your Financial Life Now,”
may seem obvious, but the planning
ideas in this article to “assess” and
“write it down” are timeless pieces of
advice that we all should heed. This
holds true for the article "Creating
Your Own Financial Independence
Plan" which also contains relevant,
actionable items for planning your
financial future. The “Twenty Top
Tax Breaks in the New Tax Act”
gives readers tips that they may want
to discuss with their accountant. And,
in a departure from financial advice,
we have also included an article on
daily walking and how it can
decelerate the aging process
...interesting information that we can
all use! Lastly, some of you may
want to test your “financial current
events” knowledge with our quiz on
page 4. See if you can score 100%!
—Carolyn and Diana
A Walk Every Day Can Keep Aging At Bay
I
t’s much easier to talk the talk
about staying young than it is
to walk the walk. Starting in
our 20s and 30s, we commence a long,
seemingly inevitable physical
deterioration. Our maximum
heart rate declines, and with it
the amount of oxygen-bearing blood
the heart can pump. Muscle is
gradually replaced with fat and
weight edges upward. And decade
by decade, as oxygen intake drops,
it becomes a little harder just to
get around. Eventually, in our 70s,
80s, or 90s, most of us lose our
“functional independence,” the
ability to live on our own. We move
to assisted-living or nursing homes
because, literally, our living needs
to be assisted.
But what if there were a simple
way to turn back the clock? In a recent
article in the British Journal of
Sports Medicine, Roy Shephard,
a physician at the University of
Toronto, reports that for people
64 and older, a vigorous, hourlong walk five days a week cuts a
dozen years from their biological
age. In a review of other published
work on the subject, Shephard found
that such an exercise program could
also extend a person’s functional
independence, which tends to be lost
when maximal oxygen intake falls
below 18 milliliters per kilogram per
minute in men and 15 ml/kg/min
in women.
Without this kind of exercise
program, about 10 years of physical
aging normally corresponds with a
loss of about five ml/kg/min. But
Shephard found that beginning a
program of vigorous aerobic exercise
could restore about 25% of maximal
oxygen intake within three months,
raising that essential level by
an average of six ml/kg/min and
decreasing biological age by 12
years.
Shephard also found that regular
exercise provides other benefits,
helping prevent conditions that
may hasten aging including obesity,
high blood pressure, diabetes, heart
disease, osteoporosis, and even some
kinds of cancer. And the improved
muscle tone that comes with brisk
walking, swimming, or other aerobic
activities may help older people
avoid falls.
Another study, from Texas,
further highlights what exercise can
do. In 1966, five healthy 20-yearolds were kept in bed around the clock
for three weeks—and suffered many
of the ills normally associated with
aging. They gained weight, their
heart rates and blood pressure rose,
and their hearts lost pumping
capacity. Then, an eight-week
exercise program more than reversed
the effects of inactivity. In a followup with the men 30 years later, actual
aging had imitated the effects of the
forced bed rest. But here, too, an
endurance exercise regimen undid
most of the damage, restoring all
of their lost aerobic capacity.
The moral? Exercise always
helps, and it’s never too late to start
pushing back the hands of time. ●
Creating A Comfortable Financial Independence Plan
E
veryone needs a financial
blueprint for life after work.
Operating without one is a
little like closing your eyes as you
barrel down the freeway. It’s
essential to know where you’re
going and how you expect to get
there. But a financial independence
plan will help you achieve your
goals only if you incorporate it into
your financial life, and that won’t
happen unless the plan feels
comfortable. And that comes from
understanding its component parts
and how they’re connected.
Consider these elements:
Cash flow analysis. Your plan
needs to project where your money
will come from and where it will
go during the rest of your life (and
your spouse’s life, too, if you’re
married). What will come in during
retirement, from Social Security, a
company pension, annuities, and
from drawing down your savings?
And how will that match the needs
of the lifestyle you want? Several
unpredictable variables complicate
these calculations. Inflation affects
how far your money goes, and
investment returns, based in turn
on economic and market cycles and
your choices, determine how much
you have to spend. Taxes will also
play a role.
Investment choices. Three
factors affect what should be in
your investment portfolio. Your
goals: What kind of return do you
need, both while you’re working
and during retirement, to support
your lifestyle? Your risk tolerance:
How much volatility in portfolio
returns are you willing to accept to
meet your goals? Taking greater
risks may provide higher potential
long-term returns, but not if you
panic and sell when the market
takes a turn for the worse. And
your time horizon: How long do
you have to save for retirement,
Twenty Top Tax Breaks In New Tax Act
T
he 2010 Tax Relief Act includes
dozens of tax breaks for individuals
and businesses. Here are 20 of the
top provisions.
1. No increase in income tax rates.
Rates in the top two income brackets had
been scheduled to rise from 35% to 39%
and from 33% to 36%. The new law also
preserves relief from the “marriage penalty”
for joint filers.
2. Status quo for capital gains and
dividends. The maximum tax rate for longterm capital gains was supposed to jump to
20% (10% for low-income individuals), and
dividends would have been taxed as
ordinary income. Now, the existing 15% rate
for long-term gains and dividends remains
for most taxpayers through 2012.
3. Lower payroll taxes. For 2011 only,
the law authorizes a two percentage point
drop—to 4.2%—in employees’ share of the
Social Security tax, due on the first
$106,800 of wages. You get the same break
if you’re self-employed.
4. Alternative minimum tax (AMT)
relief. The new law slightly increases the
exempt amounts on 2010 and 2011 returns
for avoiding exposure to the AMT and its
bigger tax bite. The amounts had been
scheduled to revert to low, pre-2001 levels.
5. No phaseouts for itemized
deductions and personal exemptions.
Before 2010, itemized deductions and
personal exemptions were phased out for
high-income taxpayers. But those limits
were repealed for 2010, and the new tax act
extends that relief through 2012.
6. A bigger break for owning
qualified small business stock (QSBS).
The maximum 50% exclusion for
investments in QSBS had been temporarily
increased to 75%. Now, under the new tax
act, there’s a 100% exclusion for QSBS
acquired before January 1, 2012.
7. An enhanced education credit.
The American Opportunity Tax Credit
(AOTC), which expanded the Hope credit
for college expenses, was scheduled to
expire after 2010. Now, the maximum
$2,500 AOTC is extended through 2012,
though it’s still phased out for high-income
taxpayers.
8. A bigger deduction for college
savings. The maximum $2,000 deduction
for contributions to Coverdell Education
Savings Accounts, slated to drop to $500
after 2010, is extended through 2012.
9. A partial reprieve for Section 179
deductions. The maximum Section 179
deduction, which rose from $250,000 to
$500,000 for qualified business property
placed in service in 2010 and 2011, was
then scheduled to drop to $25,000. The new
law allows a maximum $125,000 deduction
for 2012.
10. A bonus for bonus depreciation.
The tax act retroactively reinstates this
business perk, which had expired after 2009.
A 100% bonus depreciation deduction is
generally available for qualified property
what is your tax bracket, and how
many years do you need your
savings to last?
Contingency plans. Job losses,
expensive illnesses, or the
unexpected death of you or your
spouse could put your plan off
track. There could also be
unforeseen expenses involving your
children or parents, and the need
for nursing home care during
retirement could quickly drain your
savings. Having a cash cushion
along with life, disability, and longterm care insurance can prepare you
to handle potential setbacks. Not
planning for lifestyle changes is a
major mistake and will put your
financial future in jeopardy.
Estate planning. This is crucial
even if estate taxes aren’t likely to
be an issue. You need a will,
periodically updated, and a letter of
instruction that tells heirs where to
find information about financial
accounts, life insurance, safe
deposit boxes, and the like. It’s also
important to designate beneficiaries
for 401(k)s, IRAs, and other
financial accounts that reflect your
wishes and take into account
potential tax liability.
It can be complicated to weave
together all of these elements. But
we have the tools, expertise, and
experience to help you create a
financial plan that feels
comfortable. ●
placed in service in 2011, and there’s a
50% deduction for 2012.
11. Revived credit for going green.
The credit for home energy-saving devices,
scheduled to expire after 2010, is extended
through 2011, but the credit is limited to
10% of the cost of improvements (it had
been 30%) and a maximum of $500.
12. Offspring benefit. The child tax
credit of $1,000 per child was going to
lapse after 2010; now it will be in force
through 2012.
13. Help with adoption costs. The
new law extends the credit for adoption
expenses—now a maximum of $12,170,
down from $13,170 in 2010—through
2012.
14. Money for hiring. The Work
Opportunity Tax Credit, available to
businesses for employing workers from
“target” groups, now won’t expire as
planned on August 31, 2011, but will stay
in force through 2012.
15. Reward for taking the bus. The
maximum monthly $230 tax-free benefit
for transit passes, scheduled to decrease to
$120 after 2010, is extended through 2011.
16. A renewed deduction for
corporate largesse. Enhanced deductions
for companies’ contributions of food
inventory, books and computer equipment,
which expired after 2009, are retroactively
extended through 2011.
17. Option to deduct sales tax. The
chance to write off sales tax, rather than
state and local income taxes, ended after
2009 but now is back for 2010 and 2011.
18. Deduction for IRA transfers to
charity. The ability to direct an annual
maximum of required IRA distributions to
charitable organizations, which had
expired after 2009, is retroactively
extended through 2011.
19. Generous estate tax rules.
Following the temporary repeal of the tax
for 2010, it’s reinstated but with a $5
million exemption and a top tax rate of
only 35% and the reunification of estate
and gift taxes through 2012. And heirs will
again benefit from a step-up in basis on
inherited assets.
20. A break on generation-skipping
tax (GST). The new law coordinates the
GST with the estate tax rules through 2012,
with the same maximum exemption of
$5 million. ●
A Walk Every Day Can Keep Aging At Bay
I
t’s much easier to talk the talk
about staying young than it is
to walk the walk. Starting in
our 20s and 30s, we commence a long,
seemingly inevitable physical
deterioration. Our maximum
heart rate declines, and with it
the amount of oxygen-bearing blood
the heart can pump. Muscle is
gradually replaced with fat and
weight edges upward. And decade
by decade, as oxygen intake drops,
it becomes a little harder just to
get around. Eventually, in our 70s,
80s, or 90s, most of us lose our
“functional independence,” the
ability to live on our own. We move
to assisted-living or nursing homes
because, literally, our living needs
to be assisted.
But what if there were a simple
way to turn back the clock? In a recent
article in the British Journal of
Sports Medicine, Roy Shephard,
a physician at the University of
Toronto, reports that for people
64 and older, a vigorous, hourlong walk five days a week cuts a
dozen years from their biological
age. In a review of other published
work on the subject, Shephard found
that such an exercise program could
also extend a person’s functional
independence, which tends to be lost
when maximal oxygen intake falls
below 18 milliliters per kilogram per
minute in men and 15 ml/kg/min
in women.
Without this kind of exercise
program, about 10 years of physical
aging normally corresponds with a
loss of about five ml/kg/min. But
Shephard found that beginning a
program of vigorous aerobic exercise
could restore about 25% of maximal
oxygen intake within three months,
raising that essential level by
an average of six ml/kg/min and
decreasing biological age by 12
years.
Shephard also found that regular
exercise provides other benefits,
helping prevent conditions that
may hasten aging including obesity,
high blood pressure, diabetes, heart
disease, osteoporosis, and even some
kinds of cancer. And the improved
muscle tone that comes with brisk
walking, swimming, or other aerobic
activities may help older people
avoid falls.
Another study, from Texas,
further highlights what exercise can
do. In 1966, five healthy 20-yearolds were kept in bed around the clock
for three weeks—and suffered many
of the ills normally associated with
aging. They gained weight, their
heart rates and blood pressure rose,
and their hearts lost pumping
capacity. Then, an eight-week
exercise program more than reversed
the effects of inactivity. In a followup with the men 30 years later, actual
aging had imitated the effects of the
forced bed rest. But here, too, an
endurance exercise regimen undid
most of the damage, restoring all
of their lost aerobic capacity.
The moral? Exercise always
helps, and it’s never too late to start
pushing back the hands of time. ●
Creating A Comfortable Financial Independence Plan
E
veryone needs a financial
blueprint for life after work.
Operating without one is a
little like closing your eyes as you
barrel down the freeway. It’s
essential to know where you’re
going and how you expect to get
there. But a financial independence
plan will help you achieve your
goals only if you incorporate it into
your financial life, and that won’t
happen unless the plan feels
comfortable. And that comes from
understanding its component parts
and how they’re connected.
Consider these elements:
Cash flow analysis. Your plan
needs to project where your money
will come from and where it will
go during the rest of your life (and
your spouse’s life, too, if you’re
married). What will come in during
retirement, from Social Security, a
company pension, annuities, and
from drawing down your savings?
And how will that match the needs
of the lifestyle you want? Several
unpredictable variables complicate
these calculations. Inflation affects
how far your money goes, and
investment returns, based in turn
on economic and market cycles and
your choices, determine how much
you have to spend. Taxes will also
play a role.
Investment choices. Three
factors affect what should be in
your investment portfolio. Your
goals: What kind of return do you
need, both while you’re working
and during retirement, to support
your lifestyle? Your risk tolerance:
How much volatility in portfolio
returns are you willing to accept to
meet your goals? Taking greater
risks may provide higher potential
long-term returns, but not if you
panic and sell when the market
takes a turn for the worse. And
your time horizon: How long do
you have to save for retirement,
Twenty Top Tax Breaks In New Tax Act
T
he 2010 Tax Relief Act includes
dozens of tax breaks for individuals
and businesses. Here are 20 of the
top provisions.
1. No increase in income tax rates.
Rates in the top two income brackets had
been scheduled to rise from 35% to 39%
and from 33% to 36%. The new law also
preserves relief from the “marriage penalty”
for joint filers.
2. Status quo for capital gains and
dividends. The maximum tax rate for longterm capital gains was supposed to jump to
20% (10% for low-income individuals), and
dividends would have been taxed as
ordinary income. Now, the existing 15% rate
for long-term gains and dividends remains
for most taxpayers through 2012.
3. Lower payroll taxes. For 2011 only,
the law authorizes a two percentage point
drop—to 4.2%—in employees’ share of the
Social Security tax, due on the first
$106,800 of wages. You get the same break
if you’re self-employed.
4. Alternative minimum tax (AMT)
relief. The new law slightly increases the
exempt amounts on 2010 and 2011 returns
for avoiding exposure to the AMT and its
bigger tax bite. The amounts had been
scheduled to revert to low, pre-2001 levels.
5. No phaseouts for itemized
deductions and personal exemptions.
Before 2010, itemized deductions and
personal exemptions were phased out for
high-income taxpayers. But those limits
were repealed for 2010, and the new tax act
extends that relief through 2012.
6. A bigger break for owning
qualified small business stock (QSBS).
The maximum 50% exclusion for
investments in QSBS had been temporarily
increased to 75%. Now, under the new tax
act, there’s a 100% exclusion for QSBS
acquired before January 1, 2012.
7. An enhanced education credit.
The American Opportunity Tax Credit
(AOTC), which expanded the Hope credit
for college expenses, was scheduled to
expire after 2010. Now, the maximum
$2,500 AOTC is extended through 2012,
though it’s still phased out for high-income
taxpayers.
8. A bigger deduction for college
savings. The maximum $2,000 deduction
for contributions to Coverdell Education
Savings Accounts, slated to drop to $500
after 2010, is extended through 2012.
9. A partial reprieve for Section 179
deductions. The maximum Section 179
deduction, which rose from $250,000 to
$500,000 for qualified business property
placed in service in 2010 and 2011, was
then scheduled to drop to $25,000. The new
law allows a maximum $125,000 deduction
for 2012.
10. A bonus for bonus depreciation.
The tax act retroactively reinstates this
business perk, which had expired after 2009.
A 100% bonus depreciation deduction is
generally available for qualified property
what is your tax bracket, and how
many years do you need your
savings to last?
Contingency plans. Job losses,
expensive illnesses, or the
unexpected death of you or your
spouse could put your plan off
track. There could also be
unforeseen expenses involving your
children or parents, and the need
for nursing home care during
retirement could quickly drain your
savings. Having a cash cushion
along with life, disability, and longterm care insurance can prepare you
to handle potential setbacks. Not
planning for lifestyle changes is a
major mistake and will put your
financial future in jeopardy.
Estate planning. This is crucial
even if estate taxes aren’t likely to
be an issue. You need a will,
periodically updated, and a letter of
instruction that tells heirs where to
find information about financial
accounts, life insurance, safe
deposit boxes, and the like. It’s also
important to designate beneficiaries
for 401(k)s, IRAs, and other
financial accounts that reflect your
wishes and take into account
potential tax liability.
It can be complicated to weave
together all of these elements. But
we have the tools, expertise, and
experience to help you create a
financial plan that feels
comfortable. ●
placed in service in 2011, and there’s a
50% deduction for 2012.
11. Revived credit for going green.
The credit for home energy-saving devices,
scheduled to expire after 2010, is extended
through 2011, but the credit is limited to
10% of the cost of improvements (it had
been 30%) and a maximum of $500.
12. Offspring benefit. The child tax
credit of $1,000 per child was going to
lapse after 2010; now it will be in force
through 2012.
13. Help with adoption costs. The
new law extends the credit for adoption
expenses—now a maximum of $12,170,
down from $13,170 in 2010—through
2012.
14. Money for hiring. The Work
Opportunity Tax Credit, available to
businesses for employing workers from
“target” groups, now won’t expire as
planned on August 31, 2011, but will stay
in force through 2012.
15. Reward for taking the bus. The
maximum monthly $230 tax-free benefit
for transit passes, scheduled to decrease to
$120 after 2010, is extended through 2011.
16. A renewed deduction for
corporate largesse. Enhanced deductions
for companies’ contributions of food
inventory, books and computer equipment,
which expired after 2009, are retroactively
extended through 2011.
17. Option to deduct sales tax. The
chance to write off sales tax, rather than
state and local income taxes, ended after
2009 but now is back for 2010 and 2011.
18. Deduction for IRA transfers to
charity. The ability to direct an annual
maximum of required IRA distributions to
charitable organizations, which had
expired after 2009, is retroactively
extended through 2011.
19. Generous estate tax rules.
Following the temporary repeal of the tax
for 2010, it’s reinstated but with a $5
million exemption and a top tax rate of
only 35% and the reunification of estate
and gift taxes through 2012. And heirs will
again benefit from a step-up in basis on
inherited assets.
20. A break on generation-skipping
tax (GST). The new law coordinates the
GST with the estate tax rules through 2012,
with the same maximum exemption of
$5 million. ●
Here's A Quiz On Financial Events In 2010
T
hough calmer than some, 2010 was
once again tumultuous year in
financial circles. The aftereffects of
the recession continued to be felt. Concerns
over government debt in Europe boiled over
in civil unrest. Back home, investors
remained on edge as news of swindles and
other abuses came to light. A “flash crash”
resulted in a five-minute meltdown for
stocks, while the market continued to be
volatile throughout the year.
Meanwhile, legislation enacted in
2010 included significant financial reforms,
and Congress also finally approved health
care legislation and extended several
key tax provisions. The Securities and
Exchange Commission (SEC) also imposed
regulatory changes.
Were you paying attention? Here’s a
brief quiz to test your knowledge.
1) During 2010, the Dow Jones Industrial
Average posted an overall:
a) Increase of less than 5%.
b) Increase of more than 10%.
c) Decrease of less than 5%.
d) Decrease of more than 10%.
2) The Federal Reserve recently
announced plans to:
Simplify Financial Life
(Continued from page 1)
leading to better, more tax-efficient
investment decisions and a coordinated
strategy focused on achieving your
long-term financial goals.
Automate. If you contribute to a
401(k) or other retirement plan, your
money goes in automatically. Now
consider doing the same at home—
directing automatic monthly payments
from your checking account to
your IRA, a 529 plan, and a taxable
investment account. You can also
have dividend and interest income
automatically reinvested. Meanwhile,
online banking and bill-paying could
help you get a handle on day-to-day
finances. Being able to monitor your
accounts on the Web and schedule
a) Purchase $300 billion of mortgagebacked securities.
b) Purchase $600 billion of long-term
Treasury securities.
c) Bail out several major
financial firms.
d) Stimulate small business spending
with tax incentives.
3) The “flash crash” of May 6 was
triggered by:
a) A precipitous decline in the value of
the dollar.
b) A single computer-generated sale by
a mutual fund.
c) A malfunction of the electronic
securities trading system for all firms.
d) Multiple securities sales by panicked
investors.
4) The Dodd-Frank Act of 2010 resulted
in all of the following except:
a) Creation of a Consumer Financial
Protection Agency.
b) Creation of a council to assess
financial threats to the economy.
c) Consolidation of oversight of many
types of debt.
d) Reduced commissions for securities
sales by broker-dealers.
5) Under new regulations for registered
investment advisers (RIAs):
a) Oversight of more than 4,000 RIAs
shifted from the SEC to state authorities.
b) The SEC assumed complete
responsibility for all compliance measures.
c) Financial firms must offer an
“Investment Bill of Rights.”
d) Daily reports on investment
activities must be filed with the SEC.
6) Under new disclosure rules, the SEC
now requires RIAs to:
a) Offer virtual “guarantees” against
financial abuses.
b) Reveal personal tax information to
the general public.
c) Ensure all client brochures are
written in “plain English.”
d) Update clients daily on their
investment activities.
7) The 2010 Tax Relief Act:
a) Eliminated basis reporting rules
for securities.
b) Created new tax credits for investors.
c) Extended an exemption for
IRA distributions.
d) Preserved tax-favored treatment of
long-term capital gains.
Answers: 1-b; 2-b; 3-b; 4-d; 5-a; 6-c; 7-d
payments for your mortgage, car
payments, and other bills reduces
paperwork and saves time and
postage. Just don’t schedule automatic
payment of your credit-card bill;
it’s important to check your statement
for fraudulent activity.
Delegate. The turbulent markets
of the past few years have made it
very clear that it takes more than luck
and hunches to make steady progress
toward financial goals. Many
investors, who during the Internet
boom briefly thought they could direct
their own accounts by pouring money
into a handful of high-growth stocks,
have turned to us for professional
advice. By building a portfolio that
fits your objectives, risk tolerance,
and timetable, we will help you stay
organized and execute a coordinated
financial plan—which greatly
simplifies your financial life. But in
order for it to work right, it’s wise to
delegate. Don’t procrastinate about
making investment decisions, or
trying to manage complex financial
issues on your own. Pick up the phone
and call us. Add an accountant for tax
matters and an attorney who can
execute your estate planning.
Relieving yourself of the time and
stress of trying to handle such issues
on your own ensures you’ll get issues
addressed timely and in a manner to
your liking.
Evaluate. Simplifying your
financial life isn’t a once and done
process. After you’ve taken steps
to get things in order, you’ll still
need to revisit your financial plan at
least annually ●
©2011 API
S p rin g 2 0 11
Five Ways To Simplify
Your Financial Life Now
I
s there anything more stressful than
trying to stay on top of your
finances? Tax laws change almost
every year, spawning new strategies for
retirement, college, and estate planning.
Accounts proliferate. Meanwhile, as
the economy and investment markets
move through inevitable cycles, interest
rates, inflation, and stock and bond
prices are constantly in flux.
Beyond the challenge of simply
keeping up, there are those nagging
questions that keep you awake at night.
What if you’re doing something
wrong? Are you missing opportunities,
paying unnecessary taxes, failing to
look far enough ahead?
Yet as complicated as your
financial life may be now, a few
straightforward strategies can go far to
simplify things. You’ve already taken
the most important step, choosing to
work with us as your financial
professional who can take over many
of your short- and long-term concerns.
So, if we have not sat down recently to
discuss your plan, what follows are
suggestions for getting the most out of
the relationship, reducing your stress,
and increasing the odds that you’ll
achieve your financial goals.
Assess. Let's start by writing down
all of your sources of income and your
liabilities—your mortgage, other debts,
alimony or child support, tuition
payments. How much do you have in
retirement plans, taxable accounts, and
other savings? If you own a business,
do you know what it’s worth? Then
think about where you are in the arc of
your financial life. Still early in your
career, with decades of steady income
growth to come? Or has your earning
power peaked? And what major
expenses are coming up—a baby,
college, a wedding, a grand tour of
Europe? Though it may remind you
just how complex your finances are,
gathering this information and writing
it down on a single sheet of paper is
the first step in establishing a comprehensive financial plan—a plan that
will simplify everything.
Consolidate. It’s not uncommon
for a family to have investments
scattered in a dozen accounts or more.
There may be a 401(k) from each of
several jobs, custodial accounts opened
for the kids with a few different fund
companies, plus variable annuities, 529
college savings plans, and taxable
investment accounts. This means
you’re probably paying more than your
fair share of fees. And it’s a big job
gathering 1099s at tax time. Moreover,
it’s typical that people in this situation
make mistakes with beneficiary
designations on accounts, which could
wind up costing your loved ones
dearly. Even worse are the challenges
to creating a coherent asset allocation
when you own scores of mutual funds
and other investments, especially if
you have picked from limited menus
often available in company retirement
plans. Monitoring investment
performance across different accounts
is also more difficult. The solution:
consider rolling over those 401(k)s
into a single IRA, and consolidate
your other accounts as much as
possible. In addition to likely savings
on account fees, you’ll get a much
better picture of what you have,
(Continued on page 4)
Harbor View
W
elcome to the first issue of
the Harbor View, Lifetime
Wealth Planning and
Management’s quarterly newsletter.
In these newsletters, we hope to
provide you with timely information
and advice to enrich your lives. We
hope you find the articles useful and
maybe even entertaining! In this
inaugural issue, we are focusing on
strategies and ideas that you can
implement now to help you focus on
your finances. The suggestions in our
lead in article, “Five Ways to
Simplify your Financial Life Now,”
may seem obvious, but the planning
ideas in this article to “assess” and
“write it down” are timeless pieces of
advice that we all should heed. This
holds true for the article "Creating
Your Own Financial Independence
Plan" which also contains relevant,
actionable items for planning your
financial future. The “Twenty Top
Tax Breaks in the New Tax Act”
gives readers tips that they may want
to discuss with their accountant. And,
in a departure from financial advice,
we have also included an article on
daily walking and how it can
decelerate the aging process
...interesting information that we can
all use! Lastly, some of you may
want to test your “financial current
events” knowledge with our quiz on
page 4. See if you can score 100%!
—Carolyn and Diana