U.S. Fiscal Uncertainty and Your Portfolio
by Charles Rotblut, CFA
The fiscal cliff loomed as we sent this issue to the printer three weeks before the November election. Unless Congress and the president reach an agreement, tax cuts enacted under the George W. Bush administration will expire and automatic budget cuts will go into effect on January 1, 2013. As I said in my Editor’s Note, we are delaying publication of our 2012 tax guide until the January 2013 issue in hopes that we will have more clarity about 2013 tax rates.
Congress is expected to reconvene on November 13. It is possible that both parties will agree on a plan or at least be close to agreeing on a plan by the time you read this. It is also possible that no agreement will have been reached and fiscal uncertainty will still loom. Either way, there are portfolio actions you can and should not take heading into the new year.
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Use the tax status of your accounts to your advantage
If you have an individual retirement account IRA or a Roth IRA, use them for your less tax-efficient investments and strategies. Capital gains, dividends and corporate bond interest payments are not taxable events when they occur in an IRA or a Roth IRA. (You will pay taxes on amounts withdrawn from a traditional IRA, however.)
Use your taxable brokerage accounts for your most tax-efficient investments, such as index funds and municipal bonds.
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Discussion
It is a disgrace that our elected officials put more time and energy into keeping their jobs and getting reelected than it making common sense corrections to our tax codes.
Investors at all levels are insecure about their unknown future.
We have worked and saved all of our lives and now that retirement is close at hand, government inaction will diminish our efforts.
posted 4 months ago by Fred from Pennsylvania
I discovered that tax exempt Income is included when Social Security figures your gross income. I would like to know where this authority came from.
posted 4 months ago by Joseph Turney from Kansas
When a political office became a profession We all lost out!
posted 4 months ago by Max Higgason from Iowa
You have not commented on the direction of stock prices, based on your best guess about the outcome of Fiscal Cliff. For instance I have about $25,000/- to invest. Should I wait for the outcome or should I go ahead and invest now? It is not important that your guess should prove correct. Any informed guess is better than drifting.
Ashok Choksi
posted 4 months ago by Ashok Choksi from California
How do I go about selecting an estate attorney in NYC? I will change my permanent home on January 1,2013.
Neither my Bank, Attorney, Accountant or Vanguard, can help me with a list of recommended attorneys.
Do you have an article dedicated to the topic? Do you recommend to go to the listed estate attorneys in the NY State Government list of professionals?
Thank you,
Sincerelly
E.Cubillo (Life member)
(Ben-Erik, from NY)
If your policy does not allow you to change my name for privacy in your reply, please do not answer me.
posted 4 months ago by E Cubillo from New York
We do not recommend attorneys or advisers. You may want to check with bar association for the state you live in or are moving to.
Last year, we published an article with questions to ask a financial professional (including lawyers) you are considering hiring. You find it at:
http://www.aaii.com/journal/article/how-to-check-out-a-financial-advisor
-Charles
posted 4 months ago by Charles Rotblut from Illinois
I think the only solution to our self indulgent congress is "Term Limits"
posted 4 months ago by H Mc allister from Arkansas
what are your thoughts about inflation, rising interest rates and their role in the deficit?
posted 4 months ago by Alfred Falcone from New York
what are your thoughts about inflation, rising interest rates and their role in the deficit?
posted 4 months ago by Alfred Falcone from New York
The federal budget has increased 7+% per year for 4 years. The sequester would barely dent one year's escalation and provide a ray of hope that would be stimulating to the economy in my opinion. Any simple agreement on taxes would put the issue to bed near term. I would pay more in tax if it was earmarked for debt reduction instead of spending increase.
posted 4 months ago by Arthur Gilbert from North Carolina
I AM PRAYING FOR A COMPROMISE BETWEEN OUR FEARLESS LEADERS !!!!!!!
posted 4 months ago by Ralph Hellender from Florida
I just signed up. I've been investing/trading for over 10 years and I am yet to find a newsletter to be happy with. What I am looking for is buy/seel recommandation where I will not lose more than 20% on that recommandation, specially when there is already a gain of 20% or more on the same position. As a new subscriber I can not buy whole Portfolio I would like to see some of the best present recommandations to start investing with you. I do not beleave in in long term investing.
Thank you,
SAM CA
posted 4 months ago by Sime Sunjara from California
Hi Sam,
Trading too frequently can harm your long-term performance. I would suggest reading this article by Mark Hulbert, which looks at the impact transactions have on investment newsletter performance.
http://www.aaii.com/journal/article/think-twice-even-thrice-before-trading
-Charles
posted 4 months ago by Charles Rotblut from Illinois
I certainly agree on term limits for congress and also having a review of their benefits including their salaries and I think it is ridiculous that they make these decisions for themselves. I would like to see the number of federal employees reduced by 50% and much of what they do returned to the state and local level.
posted 3 months ago by Lorene Farmer from Missouri
Our elected Washington folks have no skin in the game...
Their "retirement" income is assured
They have a separate health care plan
Most are already wealthy
All they worry about is being re-elected
posted 3 months ago by William Crutcher from Texas
