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How to survive fiscal cliff

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Anonymous

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Financial planners: How to survive fiscal cliff
By Blake Ellis @CNNMoney December 23, 2012: 10:26 AM ET


NEW YORK (CNNMoney)

As Congress struggles to avert the fiscal cliff and its tax increases, financial planners are being peppered with questions from confused, worried or angry clients.

Their advice: Prepare for the worst but don't panic.

"We're doing a lot of hand holding," said Lynn Ballou, Certified Financial Planner and managing partner at Ballou Plum Wealth Advisors. "Clients were really hopeful that Congress would set aside its differences and come to a decision, so most people don't actually know what it's going to mean to them if they go over the fiscal cliff. They're concerned but they're also just mad."

Here are a few questions advisers have been fielding from their clients.

1. What's going to happen to my money if we go over the fiscal cliff?

If the fiscal cliff isn't avoided, tax rates on income, estates, gifts, capital gains and dividends will increase, and a number of tax breaks will expire.

The average household will face a total tax increase of $3,500, according to the Tax Policy Center.

Income tax rates would revert to higher levels if the Bush tax cuts expire. Gift and estate tax rates are slated to soar to 55% for anything worth $1 million or more next year -- up from the current 35% tax and exemption of $5.12 million.


Ballou said it's a smart idea for certain clients to convert retirement accounts to a Roth IRA. And for clients who were planning to give big gifts next year, it could be beneficial to do it this year to avoid a big tax hit.

In addition to the rate increases, key tax breaks for families -- like the American Opportunity Credit and the Earned Income Tax Credit -- are set to revert to lower levels at the beginning of the year. The payroll tax cut is also slated to expire, which would leave 160 million workers with smaller paychecks.



2. Should I get out of the stock market?

Ross Levin, president of Accredited Investors in Minneapolis, said that many of his clients are especially concerned that going over the fiscal cliff could spark a stock market sell-off.

For those particularly worried about investment losses, Levin has been shifting their stock and bond holdings. While a typical portfolio has 70% stocks and 30% bonds, he said in some cases he will scale back the stock investment to as little as 55%.

But he says it's a bad idea to do any drastic repositioning. "As an investor, you need to be comfortable with uncertainty -- it is that uncertainty that allows you to have returns," he said.

For clients who were already planning on selling a stock next year, however, Levin said he may advise them to do it this year instead, in order to take advantage of the lower capital gains tax rate.

Otherwise, planners are telling clients not to panic.

"Some people want to take drastic actions like go to all cash," said Paul Jarvis, a CFP and portfolio manager at Bell State Bank & Trust in Fargo, North Dakota. "Investors are worried that if the fiscal cliff negotiations fail, they'll have a significant loss."

Along with making modest portfolio adjustments, Jarvis advises people to put aside enough money to last one to three years. And stash this money in an FDIC-insured savings account -- not under a mattress, Levin recommends.

Ballou said she doesn't have any clients who want to get out of the stock market completely, but she said that many have thought about selling their dividend-paying stocks because they're worried about dividend taxes increasing.

"We have to tell clients, 'Your portfolio is designed to get you where you need to go in life irrespective of tax law, so there's no rush to go out and start selling things because you think you're paying lower tax rates now."

3. Am I on track to survive a fiscal cliff?

Making it through the fiscal cliff unscathed will likely involve readjusting your spending and saving habits, advisers say.

"Many clients are saying their biggest concern is whether they're going to run out of money," said Jarvis. He recommends setting up an emergency fund, making sure investments are diversified and maximizing tax-deferred accounts like 401(k)s and IRAs.


Ballou, who has received more calls than usual in recent weeks, said many clients are particularly worried about affording income tax hikes. To help them budget accordingly, she sits down with them and looks over last year's tax returns to show them just how much taxes would increase if Congress doesn't act.

"We're looking at people's budgets to make sure they have room for an extra tax bite," she said.

Even if Congress reaches a deal and their taxes don't end up rising, this is still a good way for people to make sure they're living within their means and their finances can sustain an emergency or future tax code changes.

"It's a good reminder of what we should be doing anyway," she said.


Along with making modest portfolio adjustments, Jarvis advises people to put aside enough money to last one to three years. And stash this money in an FDIC-insured savings account -- not under a mattress, Levin recommends.

I just wonder how many common folks they think have enough cash laying around to last them 3 years :???: :roll:
 

Whitewing

Well-known member
And for clients who were planning to give big gifts next year, it could be beneficial to do it this year to avoid a big tax hit.

Isn't doing something like this un-American?
 

MoGal

Well-known member
Well, our local tv news has talked about this "fiscal cliff" every day for the past two weeks..... what they have talked about more than anything is..

Medicare benefits have to be cut (my thoughts on this if they cut Medicare anymore, it won't be worth the $105 month they deduct for it)

Social security COLA's have to be reduced (come on people, a 1.7% increase for next year is not keeping up with cost of food increase this past year much less anything else.... tie in congress's COLA's to SSA would be a good starting place)

Milk is going to $7.00 gallon (Walmart has it at $4.17 now and I've already said to hubby when it gets to $5.00 gallon he better like powdered milk or find me a jersey cow, luckily Aldi's is at $3.17 gallon so he has a little time...... but I'm not paying $5 gallon for milk)
 

TexasBred

Well-known member
Whitewing said:
And for clients who were planning to give big gifts next year, it could be beneficial to do it this year to avoid a big tax hit.

Isn't doing something like this un-American?

Oh hell yes it is. It's a loophole. :!: Romney wanted to lower the limits on these things but buckwheat just said "raise the tax rate". So folks will dumping billions into charity to lower their taxable income. Uncle Sam and Buckwheat lose again. So who makes up the difference?? The middle class.
 
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Anonymous

Guest
The Gallup daily tracking poll released Wednesday showed 54% of respondents support Obama's handling of the fiscal cliff negotiations, compared with 26% who approve of Boehner's performance.
 
A

Anonymous

Guest
52% Favor Reducing or Eliminating Tax Deductions for Wealthier Americans


Wednesday, December 26, 2012

Voters tend to think income tax deductions help wealthier Americans more than taxpayers in the middle class, and most favor reducing or eliminating those deductions for those who earn more than $250,000 a year. A new Rasmussen Reports national telephone survey finds that 44% of Likely U.S. Voters believe tax deductions help upper-income Americans the most. Thirty-nine percent (39%) think those deductions are more beneficial to middle-class taxpayers. Sixteen percent (16%) are not sure.
 

Mike

Well-known member
Oldtimer said:
52% Favor Reducing or Eliminating Tax Deductions for Wealthier Americans


Wednesday, December 26, 2012

Voters tend to think income tax deductions help wealthier Americans more than taxpayers in the middle class, and most favor reducing or eliminating those deductions for those who earn more than $250,000 a year. A new Rasmussen Reports national telephone survey finds that 44% of Likely U.S. Voters believe tax deductions help upper-income Americans the most. Thirty-nine percent (39%) think those deductions are more beneficial to middle-class taxpayers. Sixteen percent (16%) are not sure.

The overwhelming majority OF PROPERTY OWNERS in the U.S. in 1775 didn't want to secede from Britain either. Best for us we had wiser heads for representatives.
 

TexasBred

Well-known member
Oldtimer said:
The Gallup daily tracking poll released Wednesday showed 54% of respondents support Obama's handling of the fiscal cliff negotiations, compared with 26% who approve of Boehner's performance.

56% also wanted substantial spending cuts regardless of who took credit for them.
 

TexasBred

Well-known member
Oldtimer said:
52% Favor Reducing or Eliminating Tax Deductions for Wealthier Americans


Wednesday, December 26, 2012

Voters tend to think income tax deductions help wealthier Americans more than taxpayers in the middle class, and most favor reducing or eliminating those deductions for those who earn more than $250,000 a year. A new Rasmussen Reports national telephone survey finds that 44% of Likely U.S. Voters believe tax deductions help upper-income Americans the most. Thirty-nine percent (39%) think those deductions are more beneficial to middle-class taxpayers. Sixteen percent (16%) are not sure.

This is what Romney/Ryan proposed....cutting deductions. Boehner also wanted it and proposed it. Buckwheat said NO. Apparently Buckwheat doesn't give a ratz ass what the majority of the people want.
 

Traveler

Well-known member
Speaking of cliffs, I assume nothing has changed, since buying US Debt has lost much of it's appeal.

http://www.moneynews.com/Headline/fed-debt-Treasury/2012/03/28/id/434106
 

gmacbeef

Well-known member
Oldtimer said:
The Gallup daily tracking poll released Wednesday showed 54% of respondents support Obama's handling of the fiscal cliff negotiations, compared with 26% who approve of Boehner's performance.

That's because Oblamea has done NOTHING, REPEAT, NOTHING !!! & that's what those 54 % are doing, sitting on their ASSES waiting for their ,welfare,food stamps, SSI=disability, heating checks, rent checks,free phones,ETC, So when the see Oblamea doing NOTHING, or "saying tax the rich, so I can send you more" ,they can relate to him.
 

backhoeboogie

Well-known member
gmacbeef said:
Oldtimer said:
The Gallup daily tracking poll released Wednesday showed 54% of respondents support Obama's handling of the fiscal cliff negotiations, compared with 26% who approve of Boehner's performance.

That's because Oblamea has done NOTHING, REPEAT, NOTHING !!! & that's what those 54 % are doing, sitting on their ASSES waiting for their ,welfare,food stamps, SSI=disability, heating checks, rent checks,free phones,ETC, So when the see Oblamea doing NOTHING, or "saying tax the rich, so I can send you more" ,they can relate to him.

They have nothing to lose if taxes are tripled. Freeloaders only stand to gain.
 

Whitewing

Well-known member
Oldtimer said:
The Gallup daily tracking poll released Wednesday showed 54% of respondents support Obama's handling of the fiscal cliff negotiations, compared with 26% who approve of Boehner's performance.

You keep posting silly shiite like this as though it's supposed to mean something.

Hey numbnut, over 50% of the voting public put that disaster of a president in office for a second term so we already know that greater than 50% are already kneeling before his majesty (along with you). :roll:
 

TexasBred

Well-known member
Traveler said:
Speaking of cliffs, I assume nothing has changed, since buying US Debt has lost much of it's appeal.

http://www.moneynews.com/Headline/fed-debt-Treasury/2012/03/28/id/434106

Would you want to invest in something with almost zero return from a country who's credit rating had been down graded and facing the real possibility of another down grade, not to mention, absolutely no plan on how to pay it off. When these treasuries mature the US will have to issue new treasuries to raise the money to pay off those that mature. There may be no buyer for worthless securities.
 
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