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April and May Edition Issue 2 ...Volume 2

Playing it Safe

A Balancing Act

By Raymond J. Ohlson, CLU,

Where Will The Market Go From Here? Although financial markets do tend to comeback to the middle ground eventually – bubbles at some point will burst and a bear market will turn around and become a bull – it doesn’t always happen By Dr. Jack Marrion Continue Page 3

Safety Pins An Un-Happy Birthday to Them! Here’s a birthday few of us look forward to celebrating: federal income taxes turn 100 years old in 2013. Hmm? How should we celebrate? Maybe by spoiling their party just a bit Continue Page 5 By Steve Dinnen

Safe Retirement Social Security and Retirement Risk The average Social Security Retirement benefit for 2011 was $14,100. To give you an idea of how significant this is… you would need $470,000 in an investment, paying you 3%, to give you the same kind of income. By Dr. Frederick Saide, PhD

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Personal Finance 2013 Will Hit Higher-Income Taxpayers Hard - Be Prepared


mericans who are either in a pre- or current retirement position face many financial considerations; however, the rules of the retirement game have changed – dramatically! “Elder youngsters” as I call them – people between 55 and 70 – need to reexamine their personal financial situations. This reexamination includes, but is not limited to, their insurance portfolios. At some point, they must make the decision to play it safe and take some of their money off the table.

Now that Congress has passed the American Taxpayer Relief Act of 2012 (ATRA) and avoided the so-called “fiscal cliff,” higher-income taxpayers need to brace for higher taxes. Continue Page 10 By Thompson Myers and Associates, PC

Safe for Life Life Long Lessons Someone once said, “When you stop learning, you stop living!” That may seem a bit dramatic, but a truer statement has seldom been made. By Norm Wilkens

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Safety Pins ... A Balancing Act Continued By “off the table,” I’m speaking about their atrisk money. Because many of us are no longer looking ahead to many more years of productive work, this shortened timeline makes it imperative that we transfer a percentage of our nest egg to safe money places. Past economic crises, hurricanes, high oil prices, tensions with North Korea, Chapter 11 filings, the “War on Terror,” and other major events can play havoc with our at-risk money. So, it’s not surprising that many people want to quit worrying and play it safe. But, it is often a balancing act, and that’s where we, as consumers, have to analyze our individual situations, ideally with the help and guidance from a professional advisor. Let’s look at some facts and factors that have brought many of us to our current situation. Social Security, for example, was never intended to take care of all nor even most of our retirement needs. The tax for Social Security was approximately $ 50 per year from 1935 to 1955. Why? Because most people only received benefits for an average of six months, if they actually lived to 65! Second, since more than 60,000 people will live past 100 next year, we all should take a closer look at payout products, such as an immediate annuity. Many people, for instance, need to turn their 401k dollars into immediate income products. They may also do the same with indexed annuities that have guaranteed lifetime withdrawal benefits. Here’s another vitally important area of consideration: Our nursing home or home health care needs may also increase. Did you know, for example, that a female spouse is really more at risk, and that more women go into nursing homes or need home health care? Why? Women live longer. Furthermore, men usually can’t take care of women, though most women will do everything possible to keep their husbands at home. So make sure that you either have a long-term care product, annuities with nursing home riders, liquidity features, and life policies Back to Table of Contents

that allow you to accelerate the benefits whether it’s home health care or a nursing home. Next, we all need to review our insurance portfolios. Do we have adequate life insurance? And what if we used a portion of the penalty-fee withdrawal in the annuity to fund a life policy? Remember, too, that the majority of our lifetime medical expenses will occur in the last six months of our lives! Therefore, we need to reexamine everything. You need to talk to your financial professional and have him or her go over these facts with you. When you’re talking to your advisor, make sure you explain and emphasize how long it took you to accumulate your nest egg and how long you think it will last if you’re in a nursing home. You’d be amazed at how many “elder youngsters” don’t sit down and look at these kinds of possibilities. Many of them have never understood what a balancing act they may have to perform to guarantee a long and happy retirement. So, please, use this springtime as an opportunity to discuss, analyze, and look in detail at your current financial situation. This may just be the perfect time to start playing it safe.

About the Author:

Raymond J. Ohlson CLU, CRC, CEO & President of The Ohlson Group, Inc. and SMP International, LLC

Mr. Ohlson entered the insurance business while completing his Bachelor of Science Degree at Ball State University. He quickly qualified for the Million Dollar Round Table (MDRT) of which he is a Life Member. He also received his Chartered Life Underwriter (CLU) designation from the American College in Bryn Mawr, Pennsylvania. Mr. Ohlson, a former life insurance company president, currently sits on college and hospital boards and is a published author. Raymond J. Ohlson can be reached at:

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Playing it Safe

Where Will The Market Go From Here? By Dr. Jack Marrion

The stock market has been on an interesting path over the last several months leading everyone to ask – where does it go from here? I don’t know, sorry. However, the reality is no one else does either and you’ll get better results flipping a coin than listing to these pundits’ predictions. Most forecasts of future stock market performance are based on either the idea that some metric or formula can predict where the market is heading or on the idea of reversion to the mean whereby stocks will inevitably return to their long-term returns of 8% to 10% (6%-7% after adjusting for inflation). The metrics crowd says they can predict the future based on... Back to Table of Contents

the percentage of new stock highs versus stock lows...comparing the current price earnings ratio with the historic P/E ratio...and dozens of other algorithms. However, a tidy paper produced by the people at Vanguard pretty much kills the metrics idea. They found that commonly used metrics and models had zero predictability over 1 year terms. Zero! For example, dividend yields and profit margins had lower correlations with stock market returns than comparing stock market movements with butter production in Bangladesh. Put simply, throwing darts will get you far more accurate results than listening to any of the talking heads on television. ( Page 3 )

Playing it Safe ... Where Will The Market Go From Here? Continued and we just finished a decade that averaged roughly a 0% return, shouldn’t the next 10 years be up? Maybe, maybe not. After the ‘80s stock markets averaged a 17% return for the decade the general prediction was that market returns in the ‘90s would be modest; however, the actual return was 18%. A few analysts did predict a lousy market for the first decade of the 21st century, which was correct, but does that mean that the next decade will be up and offset the previous down decade, or will the next decade be down because since 1981-2000 was so good that 2001-2020 just has to be bad? The other reality is although financial markets do tend to comeback to the middle ground eventually – bubbles at some point will burst and a bear market will turn around and become a bull – it doesn’t always happen. As an example, the interest rate on bonds has been generally declining for the last 200 years; it is unlikely that bond yields will return to their 1853 level anytime soon. The other problem as shown above is if even there is a reversion to the mean how long will it take? The Japanese stock market hasn’t been over 30,000 since 1990 and the last time a British pound was worth $5 the Model T was still in production. This uncertainty is why there is Safe Money Places®. The only financial tools discussed on Safe Money Places are those where principal

is protected from market risk of loss. Yes, the yield on your certificate of deposit, fixed annuity or I Bond will fluctuate, but assuming you don’t choose to cash it in early you know your money will be there. Unfortunately, this certainty and safety makes Safe Money Places very boring to pundits and reporters so we don’t do a lot of interviews, but in times such as these we think boring is a good place to be. About the Author: Dr. Jack Marrion Dr. Marrion’s research on senior decision making and the financial world have been featured in hundreds of publications including: Business Week, Kiplinger, Smart Money, and The Wall Street Journal. He is the author of six books and a frequent media guest. Email:

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Safety Pins


ere’s a birthday few of us look forward to celebrating: federal income taxes turn 100 years old in 2013. Hmm? How should we celebrate? Maybe by spoiling their party just a bit by depriving that “inside-the-beltway mob” of a little bit of your cash that they’ll just waste anyway! Here are some safe - and perfectly legal - ways to reduce your annual tax bill. You can implement these tips now, for your 2013 taxes, or in some cases, you can even qualify for this year’s tax savings if you haven’t yet filed for 2012.

Bunch medical deductions. Luckily, most of us don’t seem to have enough medical expenses to exceed the adjusted gross income tax floor (7.5 percent for 2012, rising to 10 percent this year). But if you face elective procedures, such as cosmetic surgery or braces, you have an opportunity to bunch them together into one tax year.

Take advantage of catch-up provisions for retirement savings and investment plans

Once you pass a certain age, you can typically Back to Table of Contents

contribute more money to these tax-favored plans, such as 401(k)s, 403(b)s, and IRAs. For instance, in 2013, a worker 50 years old or older can kick in an additional $ 5,500 to the standard $ 17,500 deduction allowed for a 401(k) plan.

Donate appreciated stock Wall Street has seen a smart recovery these past few years. If you want to cash out your position in a winning stock, you’ll have to pay a capital gains tax. If you’re in a giving mood, however, you could simply donate the stock to your favorite charity. The beauty of this is two-fold: You avoid that capital gains tax, and you get to take the deduction for the price of the stock at disposition time, not at acquisition time. Oh, and you get to look like a hero to the recipient.

Fund a retirement plan You can put as much as 20 percent of your net self-employment income, or a maximum of $ 51,000, into a SEP-IRA. And you can do this as late as October 15th , as long as you filed for an extension on your original return. Similar tax dampening funding rules apply to the Simple IRA ( Page 5 )

Safety Pins ... An Unhappy Birthday to Them! Continued and Solo 401(k). Pay your teenager to work for you Obviously, you have to own your own business. If so, and your child is under 18, you avoid employment taxes. This is a win-win, as it reduces your taxable income while putting some tax-advantaged money into the hands of someone who’s going to be asking for it in any event! And along the way, it will give “junior” an insight as to what mom or dad does for a living, plus possibly training your potential successor! In a move that shows it may be getting a bit soft in its old age, the IRS itself actually offers tips on reducing the tax bite. Though the IRS cleverly waits until after nearly half of Americans already have filed their taxes, their tips, (visit its website at:, offer guidance on taking advantage of tax credits—yes, credits, not deductions. These are aimed mostly at lower income earners. For instance, the IRS notes the “Savers Credit,” which provides a credit of up to $ 2,000 beyond the deduction of the income you might have earned from contributing to a qualified IRA or 401(k).

So, maybe, just maybe, we should be saying “Happy100th Birthday IRS!” Their tips are some birthday presents we can all celebrate! About the Author: Steve Dinnen Steve is a freelance writer specializing in financial and travel news. He received his Bachelors Degree from Drake University and his Master of Journalism from Oklahoma University. Mr. Dinnen served as Sr. Business Reporter for the Des Moines Register, Business News Editor for the Indianapolis Star and served as Editor (freelance) for the Christian Science Monitor of its weekly personal finance column. Steve can be reached at : Email:

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Safe Retirement Social Security and Retirement Risk Planning strategies for this most reliable asset By Dr. Frederick Saide, PhD

What asset insures against all three retirement risks? 1. Inflation 2. Market volatility 3. Longevity (running out of money) It’s an asset that we all own… its Social Security. It’s adjusted annually for inflation. It is impervious to market and investment ups and downs. And it will pay out as long as you live (of course there are arguments about this, but for baby boomers, it will pay during their retirement). Will it pay for their children’s retirement? Well, that’s a whole different story. This asset that you own is significant. The average Social Security Retirement benefit for 2011 was $14,100. To give you an idea of how significant this is… you would need $470,000 in an investment, paying you 3%, to give you the same kind of income. In fact, according to the Social Security Administration , Social Security Back to Table of Contents

makes up 64.8% of the total income, on average, for households with someone aged 65 or older. But what do you actually know about Social Security? What do you need in order to apply? When should you apply? Is there a better way to do it than just applying when you become eligible? If you are wondering these things, you are not alone. In a recent Boston College study, 73% of the population is unaware of exactly how Social Security works and the best way to draw it. There are actually more than 300 ways a married couple can arrange to take their retirement Social Security benefits, according to Alicia Munnell, director of the Center for Retirement Research at Boston College. That’s a lot of choices! There are many factors that will determine the best way for you to draw your Social Security; ( Page 8 )

Safe Retirement ... Social Security and Retirement Risk Continued whether you were married or not, your income history, how long you are going to work, how much you have saved in your personal retirement accounts… are just a few to name. It can get a bit complicated, but it doesn’t have to be. You could just go down to the Social Security Office on your 62nd birthday and fill out the paperwork to have your benefits begin. There are some financial advisors that recommend just that.

Take the Money And Run? “Take your money and run,” they say. Are you willing to run away from $100,000 or more? When it comes to making this important decision, and remember you only get one chance to make this decision… putting your head in the sand and just pulling the switch, can cause you to lose a lot of money. It’s estimated that Americans leave $10 Billion in Social Security benefits on the table by not using any of the available strategies. The average Social Security Retirement benefit for 2011 was $14,100. To give you an idea of how significant this is... you would need $470,000 in

an investment, paying you 3%, to give you the same kind of income Many couples can see $10,000 (or more) a year increase above their normal Social Security retirement check by doing a bit of planning. Or, they can leave that money on the table. So, who will help you with these strategies to get the highest payout from Social Security? In a recent poll, 77% of people think that the folks at the local Social Security Office can dole out this advice. They cannot. They are smart, hardworking people, but they are not trained for this. The Social Security Administration prohibits them from giving strategic advice because it does not want the liability of making financial recommendations. All your local office is going to help you with, is filling out the appropriate forms to file for your benefit and give you the different monthly benefit amounts at different election ages. In order to see up to a 67% increase (above your normal Social Security benefit) you need to know the strategies. There are 5 basic strategies. These strategies can be used in up to 300 different combinations. It sounds complicated, but

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Safe Retirement ... Social Security and Retirement Risk Continued it’s really not due to the many resources that are available to you, which I’ll cover at the end of this article. 5 Social Security Enhancement Strategies 1 Double Trouble Prevention—Up to 85% of your Social Security benefits may be taxed. With a little planning, this can many times be reduced to 0%. 2 Finish the Race—This strategy uses the Social Security credits you earn during your working years to ensure you use them to qualify for the highest benefit. 3 Cart before the Horse—Planning that is done in conjunction with your other retirement accounts that may allow you to retire years earlier. 4 The Switch—The many switch strategies available to you by understanding the SSA codes and rules. 5 Strategic Withdrawal—The strategic use of a combination of the above strategies to guarantee you the highest possible Social Security benefit. As we talked about earlier, this can mean $10,000 a year (or more) in additional benefits.

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If you want to cash in on the extra money, above and beyond your normal retirement benefit… you’re going to have to come up with a plan that utilizes the available strategies to your best benefit. But don’t worry; it’s not as difficult as you think. There are lots of resources available to help you make the best decision for your particular set of circumstances. There have been dozens of magazine articles that outline your choices. There are software packages that help you calculate all of the 300 possibilities. And there are financial professionals who specialize in helping people with getting the highest possible benefit from Social Security. Now, that you know what’s possible, what’s you next step? Invest a few hours with one of the resources above, to get a lifetime of income you would not otherwise have received.

About the Author: Dr. Frederick Saide, PhD Dr. Saide is Founder and President of Foundation Insurance Services, LLC. Connect with him by e-mail

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Personal Finance 2013 Will Hit Higher-Income Taxpayers Hard ­— Be Prepared -By Thompson Meyers and Associates, PC Now that Congress has passed the American Taxpayer Relief Act of 2012 (ATRA) and avoided the so-called “fiscal cliff,” higher-income taxpayers need to brace for higher taxes. There are numerous provisions in the ATRA that don’t provide the higher-income taxpayer any relief, and when these are combined with the provisions of the 2010 Affordable Health Care Act, higher-income taxpayers will feel a significant increase in taxes for which they need to prepare. Virtually all of the increases are based on a taxpayer’s filing status and income, and even individuals who don’t perceive themselves as higher-income taxpayers may be surprised if they have a substantial gain from the sale of stocks, sale of a home or rental, sale of a business, the exercise of stock options, and just about any other event that would inflate income for the year or generate investment income.

So here are the things to watch for in 2013: Back to Table of Contents

Personal Exemption Phase-out For tax years beginning after 2012, ATRA reinstated the Personal Exemption Phaseout (PEP), which had been suspended in 2010 through 2012. It is interesting to note that the reinstated phase-out thresholds are higher than in

previous years, thus requiring significantly higher income before the phase-out begins to take effect. The otherwise allowable exemption amounts are reduced by 2% for each $2,500, or part of $2,500 ($1,250 for married filing separately), that the taxpayer’s ( Page 11 )

Personal Finance ... 2013 Will Hit Higher-Income Taxpayers Hard Cont. AGI exceeds the amount shown in the table below for the taxpayer’s filing status.

contributing member of the agreement who is not hit by the phase-out to claim the dependent’s exemption.

The following deductions are not subject to the phase-out: • Medical and dental expenses • Investment interest expense • Casualty and theft losses from personal use property • Casualty and theft losses from income-producing property • Gambling losses

Example: Ralph and Louise have an AGI of $412,500 for 2013 and two children for a total of four exemptions totaling $15,600 (4 x $3,900). The threshold for a married couple is $300,000; thus, their income exceeds the threshold by $112,500. Dividing $112,500 by $2,500 equals 45. So 90% (45 x 2%) of their $15,600 exemption allowance is phased out, leaving them with a reduced exemption deduction of $1,560 ((100-90) x $15,600). Assuming Ralph and Louise are in the 33% federal tax bracket, the phase-out costs them an additional $4,633 ($15,600 x 90% x 33%).

Planning Tips Taxpayers subject to the phase-out should consider relinquishing the exemption of a dependent child to the other parent, in cases where the parents are divorced or separated. Where a taxpayer is party to a multiple support agreement, the taxpayer may want to allow another Back to Table of Contents

Itemized Deduction Phase-out The itemized deduction phaseout referred to as the “Pease” limitation, which, like the personal exemption phase-out, had been suspended for 2010 through 2012, is reinstated for 2013 and later years. The AGI threshold amounts are the same as the exemption thresholds shown in the table above. Like the exemption phaseout thresholds, the reinstated itemized deduction phase-out thresholds are higher than they were in earlier years, thus requiring significantly higher income before the phaseout begins to take effect. For taxpayers subject to the “Pease” limitation, the total amount of their itemized deductions is reduced by 3% of the amount by which the taxpayer’s adjusted gross income (AGI) exceeds the threshold amount, with the reduction not to exceed 80% of the otherwise allowable itemized deductions. Not all itemized deductions are subject to phase-out.

Thus, a taxpayer who is subject to the full phase-out still gets to deduct 20% of the deductions subject to the phase-out and 100% of the deductions listed above. Example: Ralph and Louise from the previous example, who had an AGI of $412,500 for 2013, exceed the threshold for a married couple by $112,500. Thus, they must reduce their itemized deductions subject to the phase-out by $3,375 (3% of $112,500) but not exceeding 80% of the deductions subject to the phase-out. For 2013, Ralph and Louise had the following itemized deductions: • Home Mortgage Interest: $10,000 (Subject to Phase-out) • Taxes: $8,000 (Subject to Phase-Out)

• Charitable contriibutions: $6,000 (Subject to Phaseout) • Casualty Loss: $12,000 (Not Subject to Phase-out)

The phase-out is the lesser of ( Page 12 )

Personal Finance ... 2013 Will Hit Higher-Income Taxpayers Hard Cont. $3,375 or 80% of $24,000. Thus Ralph and Louise’s itemized deductions for 2013 will be $32,625 ($24,000 - $3,375 + $12,000). Assuming Ralph and Louise are in the 33% federal tax bracket, the phase-out will cost them an additional $1,114 ($3,375 x 33%) Planning Tip – Conventional thinking is to maximize deductions. However, where taxpayers are not normally subject to phase-out and have a high-income year because of unusual income, it may be appropriate, where possible, to defer paying deductible expenses to the year following the high-income year, or perhaps pay and deduct the expenses in the preceding year.

Ordinary Income Tax Rate Increase Beginning in 2013, the ATRA retained the graduated tax marginal rates that are adjusted annually for inflation, and added a new top rate of 39.6%

(previously the top rate was 35%). Thus, higher-income taxpayers who fall within this new bracket will be subject to an additional 4.6% tax on their income above the threshold for this new bracket. The thresholds are:

rate for long-term capital gains and qualified dividends to 20% (up from 15%) for taxpayers with incomes exceeding the following for 2013 (inflation adjusted for future years):

• $450,000 for joint filers and surviving spouses;

• $425,000 for heads of household;

• $425,000 for heads of household; • $400,000 for single filers; and • $225,000 for married filing separately. Example: Jack and Sally who are filing jointly have an ordinary taxable income of $600,000. Their income above $450,000 will be subject to the 39.6% tax rate. Thus, they will see a tax increase of $6,900 (($600,000 $450,000) x 4.6%) as a result of the new tax bracket.

Capital Gains and Dividends Beginning in 2013, ATRA permanently increased the top

• $450,000 for joint filers and surviving spouses;

• $400,000 for single filers; and • $225,000 for married filing separately. This results in an increase of 5% (20% – 15%) in capital gains rates for higher-income taxpayers. Example: Howard, a single individual, retired this year and sold his rental, which he had owned for a long time, for a profit of $700,000. Even though his income is generally in a lower-income tax bracket, the profit from the sale itself pushed his income above the $400,000 threshold for single

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Personal Finance ... 2013 Will Hit Higher-Income Taxpayers Hard Cont. taxpayers, and to the extent his income exceeds the $400,000 threshold, he will be subject to the increased capital gains rate. Had Howard’s other taxable income been $50,000, then he would have had a total income of $750,000, of which $350,000 exceeds the 20% long-term CG rate threshold. As a result, Howard pays the 20% rate on $350,000. That is an increase of $17,500 ($350,000 x 5%) over what he would have paid in 2012.

must combine their incomes subject to HI tax when computing this additional tax. Thus, for wages the HI tax rate will be 1.45% up to the income threshold and 2.35% (1.45 + 0.9) on amounts in excess of the income threshold. The hospital insurance portion of the self-employed tax rate will be 2.9% up to the income threshold and 3.8% (2.9 +

0.9) on amounts in excess of the threshold. The income thresholds where this increase begins are $250,000 for married taxpayers filing jointly, $125,000 for married taxpayers filing separately, and $200,000 for all other taxpayers. Employers are required to withhold the additional tax once wages exceed $200,000, but only on income from that

Caution – Generally, sales that are subject to long-term capital gains rates are also investment income subject to the 3.8% unearned income Medicare contribution tax that is part of the Affordable Care Act discussed later in this article. Planning Tip – If Howard had utilized an installment sale, he could have spread the gain over multiple years and possibly avoided the higher CG rate. He might have also utilized a tax-deferred exchange to defer the gain into other real estate property.

Increased Hospital Insurance Tax As part of the Affordable Health Care Act, beginning in 2013, the Hospital Insurance (HI) tax rate (currently at 1.45%) will be increased by 0.9% on individual taxpayer earnings (wages and self-employment income) in excess of compensation thresholds for the taxpayer’s filing status. Married taxpayers Back to Table of Contents

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Personal Finance ... 2013 Will Hit Higher-Income Taxpayers Hard Cont. employer. Employers cannot adjust the HI withholding based upon the employee having additional employment or a spouse who also works. Thus, there will be situations where the taxpayers will be underwithheld for the year. Example – Jack and Jill are both employed. Jack’s wages are $175,000, and Jill’s wages are $150,000. Since neither employee’s wages exceed $200,000, their employers do not withhold the additional 0.9% for HI tax on either Jack’s or Jill’s wages. When they file their joint 1040 return, they will need to include $675 (($175,000 + $150,000  $250,000) x 0.009) HI tax as part of their total tax. Jack and Jill may need to adjust their income tax withholding or make estimated tax payments to account for the extra HI tax and to avoid any underpayment penalty.

Unearned Income Medicare Contribution Tax As part of the Affordable Health Care Act, a new tax takes effect beginning in 2013. The official name of this tax is the “Unearned Income Medicare Contribution Tax,” and even though the name implies it is a contribution, don’t get the idea you deduct it as a charitable contribution. It is, in actuality, a surtax levied on the net investment income of higherincome taxpayers. The surtax is 3.8% on the lesser of your net investment Back to Table of Contents

• Home sale gain in excess income or the excess of your of the allowable home gain modified adjusted gross income exclusion, (MAGI) over a threshold based on your filing status. MAGI is • A child’s investment income your regular AGI increased by in excess of the excludable income excluded for working out threshold if, when eligible, of the country; net investment the parent elects to include income is your investment his or her child’s investment income reduced by investment income on the parent’s Learn how your expenses. return, money is protected The filing status threshold • Trade or business income amounts are: from loss in safe that is a Sec. 469 passive activity with respect to the • $250,000 for married money places. You taxpayer, and taxpayers filing jointly and will find information surviving spouses. • about: Trade or business income • $125,000 for married with respect to trading taxpayers filing separately. financial instruments or • The FDIC commodities. • $200,000 for single and head of household filers. • NCUA Planning Tips: For surtax • Guaranty purposes, gross income doesn’t Example - A single taxpayer include Associations interest on tax-exempt has net investment income bonds. Thus, one can avoid the of $100,000 and MAGI of net investment income surtax by $220,000. The taxpayer would in tax-exempt pay a Medicare contribution tax investing You can find out bonds. A taxpayer can also utilize the only on the $20,000 amount by how your installment salemoney provisionsisto which his MAGI exceeds his spread gains from capital assets threshold amount of $200,000, protected if the bank because that is less than his net such as rentals and business or your fails. over insurer a number of years investment income of $100,000. assets to keep the investment income Thus, the taxpayer’s Medicare under the tax threshold. contribution tax would be $760 Visit our website at ($20,000 × 3.8%). Investment expenses include: Investment income includes: • and Investment interest expense, click the “How • Interest, dividends, annuities • Safe Investment advisory Tab. and (but not distributions from Are They?” brokerage fees, IRAs or qualified retirement plans), and royalties, • Expenses related to rental and royalty income, and • Rents (other than derived from a trade or business), • State and local income taxes properly allocable to items • Capital gains (other than included in Net Investment derived from a trade or Income. business),

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Personal Finance ... 2013 Will Hit Higher-Income Taxpayers Hard Cont. • Home sale gain in excess of the allowable home gain exclusion, • A child’s investment income in excess of the excludable threshold if, when eligible, the parent elects to include his or her child’s investment income on the parent’s return, • Trade or business income that is a Sec. 469 passive activity with respect to the taxpayer, and Trade or business income with respect to trading financial instruments or commodities. Planning Tips: For surtax purposes, gross income doesn’t include interest on tax-exempt bonds. Thus, one can avoid the net investment income surtax by investing in tax-exempt bonds. A taxpayer can also utilize the installment sale provisions to spread gains from capital assets such as rentals and business assets over a number of years to keep the investment income under the tax threshold. Investment expenses include: • Investment interest expense, • Investment advisory and brokerage fees, • Expenses related to rental and royalty income, and • State and local income taxes properly allocable to items included in Net Investment Income.

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Do you think you will never get hit with this tax because your income is way under the threshold amounts? Don’t be so sure. When you sell your home, the gain is a capital gain, and to the extent that the gain is not excludable using the home gain exclusion, it will add to your income and possibly push you above the taxation thresholds. And, since capital gains are investment income, you might be in for a surprise. The same holds true for gains from selling stock and a second home. So when planning to sell a capital asset, be sure to consider the impact of this new surtax. The surtax also applies to undistributed net investment income of trusts and estates, and there are special rules applying to the sale of partnership and Sub-S Corporation interests. If you are subject to these new and increased taxes on higherincome taxpayers, it may be appropriate to review your situation so that you can avoid any unpleasant tax surprises at the end of 2013 and to adjust your withholding and estimated taxes if necessary to prevent underpayment penalties. Please give this office a call for assistance.

About Thompson Myers & Associates, PC Accounting Firm Thompson Myers & Associates’ accounting and payroll staff have been delivering professional services to small businesses in Central Indiana for over 20 years. Having worked with hundreds of small business clients, we have significant expertise with a wide variety of service businesses in Indiana. We have especially strong experience and expertise in working with businesses in the healthcare (medical, dental, etc.) and foodservice (restaurants, caterers, etc.) industries. We recognize the value of a personal hands-on approach to doing business and earning clients for life. Thompson Myers & Associates is committed to carrying out our services with integrity, excellence, and respect for others. Our dedication and client support are beyond compare—focused on putting your best financial interests at the forefront. Phone Number: (317) 571-8080 Email: Website: https://www.

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Life Long Lessons - By Norm Wilkens Someone once said, “When you stop learning, you stop living!” That may seem a bit dramatic, but a truer statement has seldom been made. Learning should be an essential part of our daily lives. No matter your interests, reading; travelling; public speaking; cooking classes or doing crossword puzzles, all add to the pleasure of daily life’s lessons. The end result is we are happier for accomplishments achieved – large or small. And, happiness Back to Table of Contents

leads to a more balanced and healthier life. A number of my friends have recently determined to pick up college studies that they had missed when they were younger. Some wanted to complete degrees that were started and never completed. Others had interests they felt would be enhanced by taking specific courses that were designed to complement their life’s activities. In both instances, the individuals believed the lessons made their lives more enjoyable and worthwhile.

It hasn’t been too many years ago, that people looked toward the age of sixty-five as being close to life’s end. In truth, that was usually the norm rather than the exception. The actuary tables of that day strongly indicated life expectancy for men was to cease in the midsixties. Consequently, a lot of males gave up at that age and stopped looking toward the future. Times have certainly changed. Today, life expectancy has moved toward the early eighties for men and even longer for woman. Obviously, that is due in no small part to the increases in the efficiencies ( Page 17 )

Safe For Life ... Life Long Lessons Continued of health care and preventive medicine. On the other hand, men and women today are seeking more knowledge and ways of improving their lifestyles. The results can be seen in an older population that is not satisfied with retirement, but want to continue in the work force as well as remain active in a variety self indulgences. Try getting a tee-time on your local golf course on the weekend if you think I’m wrong. There was a recent television news program featuring a man who was 104 in age and just completed his sixth 26-mile marathon in just over eight hours. And, a woman who had her right leg amputated at birth, but plays and teaches golf to those handicapped. By the way, she turned pro in 2003 and played on the Futures Tour for three years. She will tell you that she never gave up and never stopped learning. Recently, I have had the opportunity of witnessing first hand a large number of men and women of varying age applying their skills to second

and even third job offerings. For the most part, they had one thing in common, they were in their sixties and seventies. Most were college educated and had worked and retired from a variety of professions, but did not want to stop the daily activity of getting out of bed and working – even if it was on a limited basis. According to the management of these firms, these older individuals were their best workers on staff, and their experience level made them valuable assets to their new companies. It was not unusual to find upper management asking these older clerks and cashiers questions about company policies and performance.

About the Author: Norm Wilkens A nationally recognized speaker and writer, Norman Wilkens has traveled to forty-seven of the fifty states speaking on topics of marketing, advertising and public relations. His most noteworthy subjects include: Healthcare Marketing; Multi-generational travel and Baby Boomers - their contribution to society and economics. He is presently serving as Midwestern Contributor to California’s AAA WESTWAYS Magazine. Among Wilkens’ current activities are the Butler University Alumni Board of Directors; Butler’s Central Indiana Alumni Chapter Board; Chairman of the Board of Visitors for the new Communication College of Butler; Board of Directors of Ruth Lilly Educational Foundation; Salvation Army of Indiana Advisory Board and as an Elder at Second Presbyterian Church of Indiana.

Yes, it is a different world and one where learning lessons Email: never ceases. Who knows, but we could be looking at a time in the very near future when people nearing the century mark will advise us younger “seniors” how to stock a shelf or sell a product.

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Safe Money News Spring Issue  

This issue focuses on tips and advice for 2012 and 2013 Taxes.