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Financial Planning Newsletter• Jan 28th 2009 


Financial Planning Newsletter
January 2010

Welcome to 2010, they seem to be going by quicker, don't they?

It seems like each year goes by quicker and quicker, and here we are already at the end of January. After the hunker down mentality of 2008 and 2009 it looks as if there are some signs of life out there. That's not to say that 2010 will be easier, but what most are learning is that it is time to move on. The shell shock of the collapse of the realestate market and the financial system have sunk in and now we are having to readjust to the "new normal". I know it's a tired phrase, but the reality is that we are all adjusting and reprioritizing.

And that includes yours truly. After a year that had me chewing finger nails and eating rolaids like they were candy, I have taken a look at the business and decided that it is time to ramp it up. So this year there will be many positive changes at The Advisory Firm. And to go along with that I am on a mission to encourage folks to get serious about their financial planning. Believe me I have heard all the excuses: "when the market comes back", "when I get that raise", "when the kids are older". The markets may come back, but what if we have another decade like the one that just passed? Don't look back in 10 years and say I should have planned for that!

Tax cuts going, going, gone?

2010 is quite the year for unusual tax events. If you happen to die this year and you have a large estate, the way the law is currently written your estate avoids the dreaded "estate tax". This is big considering the estate tax can eat up 1/2 your estate.

As I also mentioned recently in a newsletter this year anyone of any income can do a Roth IRA "conversion". This is simply converting a traditional IRA over to a Roth. You pay the taxes in 2011 (or spread them equally over 2011 and 2012) and then forever and ever all the growth in the IRA is tax free.

Unfortunately, the low capital gains taxes disappear after this year as well. So let's assume that you have held a company stock for many years and have a low cost basis in it. If you sell this year you will be taxed at a cap gains rate of 15% ( if in the 25%, 28%, 33% or 35% income tax brackets) Next year that rate will jump back to 20% and there is talk that it could creep higher.

Ditto for stock dividends. Since 2003 EGTRRA tax rule they have been taxed at 15%. That is supposed to sunset in 2010 as well. So look for those to be adjusted upwards as well beginning in 2011.


Investment climate in 2010?

As I write this we are in a bit of a correction mode for the markets. We all new it would happen sooner or later. What I am noticing that is much different from the 2008/2009 crash is that asset allocation is working again. While the market may be retreating a bit, not all asset classes are selling off. This is how normal markets are supposed to function. While some are optimistically calling for a V shape recovery, the more probable outcome is a muddle along economy for several years much like the 70's. Now is the time to make sure your investments are allocated to handle either scenario.


If you have any questions on this months topics or want to discuss your Financial Planning feel free to email or phone me.

James A. Daniel,

This newsletter if for informational purposes only. The information contained within should not be considered as financial advice nor soliciation for financial services. Consult with your financial professional if you have any questions.

The Advisory Firm, LLC is a fee-only financial planning company and registered investment advisor.

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