Unbridled Optimism!

I must confess I am an unbridled optimist. I have always been the glass runneth over type, as opposed to a half full or half empty—kind of person. At social events, I will not shy away from the “doom and gloomers.” I usually confront them with a positive comment. The conversation goes something like this: “I can’t wait till so and so is out of office because they are ruining the country.”

My response is, “the only way to ruin a country is for its citizens to abandon it.” William James said, “Pessimism leads to weakness, optimism to power.” Dietrich Bonhoeffer felt that “The essence of optimism is that it takes no account of the present, but it is a source of inspiration, of vitality and hope where others have resigned; it enables a man to hold his head high, to claim the future for himself and not to abandon it to his enemy.”

Here is more good news to confront the “naysayers.” The IRS has just released the “Fall 2013 Statistics of Income Bulletin.” And the news is good—go figure. For tax year 2011, taxpayers filed 145.4 million individual income tax returns. This is an increase of 1.7 percent from tax year 2010. Even better, the adjusted gross income reported on these returns is up 3.5 percent from the previous year. And the icing on the cake is taxable income for 2011 rose 4.4 percent. And knowing the taxpayers predilection for understating income and overstating expenses, I would say the news is even better.

So, has the U.S. government rescued it citizens? I would say, “No.” It’s the citizens of the United States that not only rescued themselves but saved the planet during 2007 – 2009. More particularly, it was the U.S. small business owner, who regardless of economic circumstance—famine, war, or recession—is able to make a living for themselves and their families.

If you are looking for optimism to begin the New Year, then look no further than your neighbor and all those who embrace the “can do” attitude of America. And the next time bad news is heralded at an event, share some good news. Automobile sales are up. Housing sales are up. We have a surplus of oil and we are about to export natural gas. Just being an American is cause for optimism.

Think Before You Take That First Step!

I recently received the following question from an attorney and wanted to share it with you because it could help you as you work with and support your clients and friends who have the same situation. “‘My father asked me, ‘Now that I have turned 65, I plan to draw on your mother’s Social Security benefit and continue working. How do I go about doing this?’ My parents are both 65, are highly compensated ($300,000 plus), and plan to continue working into the foreseeable future. Is this a good idea?”

After I fell out of my chair, I asked the attorney where his father got this idea. He said an insurance agent trying to sell him Medicare Advantage suggested this as being a good strategy. Good is a very subjective word. Also, not knowing all of the facts and circumstances is problematic. However, more likely than not, this is not a good idea. Claiming a Social Security retirement benefit sooner than it is needed can be a costly mistake. The mistakes in this scenario are found by looking at the Social Security rules, the income tax rules; as well as, general principles for retirement planning. [Read more…]

Home for the Holidays

The holidays provide a time to reconnect with family members. So this is an appropriate time to discuss the family of financial planners. For decades, this financial planning family, as covered by the financial press, has included Chartered Financial Consultants® and CERTIFIED FINANCIAL PLANNERSTM. One family member absent from the published festivities has returned—the CPA Personal Financial Specialist (CPA/PFS).

In this season I am reminded of the critical role of CPAs in the financial planning process because of another cyclical event: the recruiting of CPAs by financial services firms. About every ten years financial services firms go on a binge to recruit CPAs to both refer business (and share in compensation) or to recruit the CPA into Financial Planning, asset management and product sales. The economy has recovered and the season as begun anew. Some recent headlines that have come across my desk are: “10-Step Plan to Meet More CPAs” and “What CPAs Want.” The articles opine that financial services firms through “strategic arrangements” with CPAs hope to provide financial services and products to the CPA’s clients. [Read more…]

Tis the Season . . .

December 31, 2013 is fast approaching and the deadline for making charitable gifts and receiving an income tax deduction is fast upon us. I often wonder who is giving and how much is being given. One source for such statistics is the National Philanthropic Trust.

Some of the numbers are encouraging, especially in light of the Recession of 2007 – 2009. The percentage of U.S. households which give to charity is 88%.  Charitable giving is up 3.9% which exceeds the consumer price index. Of total giving, the largest source is from individuals (73%), followed by foundations (14%), bequests (8%), and corporations (5%) [Yes, there are rounding errors—not my issue]. [Read more…]

Avoiding Coal in Your Stocking!

Home prices are up. In some locations there is a shortage of inventory. According to the National Association of Realtors the number of homes available for sale has reached a low not seen since 2003. Well, it looks as if the world did not come to an end in 2009, the housing/mortgage crisis was not prolonged, and things are looking very good for 2014.

With all of the good news consumers are feeling more confident about their employment and work security. As a result, some individuals may be tempted to tap into their new found home equity for purchases; perhaps a new automobile, a long delayed vacation, or debt consolidation. [Read more…]

It’s Almost “That” Time!

Well, it’s that time of year, and everyone is preparing their list of tax deductions in hopes that the jolly Internal Revenue Service will provide them with tax breaks. Between now and year-end I will be addressing year-end tax planning, and hopefully, filling everyone’s stockings with deductions.

A perennial question is the deductibility of legal fees. I have received a request from an attorney, whose primary practice is the sale of businesses.  He wrote:

“We have a client who has asked whether our legal expenses for Trust and Estate planning could be run through his company (he is the sole owner). I am curious as to the accounting basis for doing this deduction. I will obviously have the client double check any course of action with his CPA, but I’m curious as to your thoughts on this matter. Any help or advice you can offer would be very much appreciated.” [Read more…]

Quack, Quack! Discernment Needed!

I am a fan of humor, which is off-kilter, offbeat and unconventional. One of my favorite authors of this genre is Douglas Adams. In his book Dirk Gently’s Holistic Detective Agency, he provides the following reinterpretation of a familiar phrase: “If it looks like a duck, and quacks like a duck, we have at least to consider the possibility that we have a small aquatic bird of the family anatidae on our hands.”

In a previous posting I made mention of how critical it is for consumers to understand how financial planners are compensated. I stated that for the majority of the financial services industry “compensation falls into two broad categories: products and services provided and employment relationship. Both of these categories can have an impact on recommendations provided by the financial planner.”

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Essential Health Benefits: Pablum for the Masses

I am having entirely too much fun with the Affordable Care Act. The next item I would like to review is the list of Essential Health Benefits. I have entitled the posting “Pablum for the Masses.”

Pablum is an entendre on several levels: it means bland or insipid, which this Act most certainly is. It is a bland soft cereal for infants, and our government is certainly treating its citizens as infants by the passage of the act. Finally, it may mean simplistic writing, speech, or conceptualization, and the act is simplistic to the point of absurdity. [Read more…]

Life, Liberty, and the Pursuit of Affordable Health Care

Our Declaration of Independence contains the much quoted phrase, “We hold these truths to be sacred and undeniable; that all men are created equal and independent, that from that equal creation they derive rights inherent and inalienable, among which are the preservation of life, and liberty, and the pursuit of happiness.” This sentence was originally written by Thomas Jefferson in the first draft of the Declaration of Independence. “Life, Liberty and the pursuit of Happiness” survived the editing process and was ratified by Congress.

Try as I might, I am unable to find a constitutional right to affordable healthcare. Nowhere do I find an explicit right to health care. The Supreme Court has never interpreted the Constitution as guaranteeing a right to health care services from the government. And interestingly enough, the Supreme Court has held that the government has an obligation to provide medical care for prisoners. I leave you to draw your own conclusions. [Read more…]

Major Tom to Ground Control!

“Once again, please check to make sure your seat belt is securely fastened, your seat back and tray table are in the full upright and locked position, and all carry-on luggage is placed completely underneath the seat in front of you.” At some point, everyone who travels by air has heard this familiar refrain. There’s even a feeling of comfort in this familiar routine of flight. But what if the next time the Emergency Briefing Public Announcement said, “Once we reach our cruising altitude we will engage the auto pilot and return to the cabin and begin our cabin service.”

I’m fairly certain fear would break into our “comfort bubble.” Feelings of unbelief and incredulity probably would surface and maybe even some anger. We might think, I’m paying for a service: air transportation. For this service I expect flight attendants in the cabin to provide safety and a snack. I also expect the flight crew to pilot the aircraft! These feelings and responses are entirely appropriate and natural, and yet . . . .

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