Last week I saw an article on MSN.com and then an article in Saturday's WSJ both on the topic of people getting professional advice on their 401(k) accounts.  A little background, in the past, companies were not allowed by law to offer advice to their employees about their retirement accounts.  Luckily, someone with a little common sense passed a law that removed what were really minor hurdles so this can happen.

Why is this important? Well, since most of our houses has lost all their value, the retirement account now will probably be (or should be, even in a good real estate market) the most valuable asset a person owns at retirement.  Study after study (by non-financial firms such as Msn.com and WSJ) have shown that investors do better when they have professional advice. However I'm not sure why this is such a difficult concept for people to understand.  Tiger Woods (Bad morals aside) was the best golfer on the planet for years.  Guess what-he had help.  He got advice.  How you ask?  Well, he had a swing coach (several actually) and he also had a caddie (and former best friend) to help him every step of the way. 

According to those 2 articles I referenced, the gist was something like 75% of companies are now offering advice to their employees.  The stagering thing is of those 75%, only 25% of the employees have signed up to get advice.  It's no wonder so many people are not preparred or will fall short of their possibilities.  The other crazy thing is when the market starts getting volitle, people load up on their own companies stock.  Precisely when people need to be diversified, many do the exact opposite.

Please get help, it may be the best investment you ever make.

This article was written by Mike Petras, a friend of mine from South Bend.  Mike is an executive recruiter, author, and career advisor.  Here is a link that gives more info about him and his book: http://www.job-interview-wisdom.com/job-search.html


Never in my life have I felt more insecure and uncertain about the future.

I’ve never seen a more polarized, frustrated, angry America.

About the only thing we seem to all agree on is…

We need strong leadership to guide us out of this mess of an economy.

But what would that leader look like?

I’ve been around extraordinary leaders only a few times in my life. Each one of them had three character traits that truly set them apart:

• Abounding self-confidence without being overbearing
• A genuine love for people
• Quiet generosity beyond compare

Early in my career, I was blessed to work with just such a leader…

John Crean

I sensed something special about him from the very first time we met.

It happened on a Monday.

After my usual 30 minute commute to Fleetwood Motor Homes through the rolling hills of Northumberland County Pennsylvania, I arrived at the plant and settled into my office to begin my day. At the time, I was their eastern regional sales director.

I hadn’t even hung up my jacket when the plant general manager walked into my office and said:

“Mike, I’d like you to meet John Crean.”

I turned around and there standing before me was John Crean, CEO and Founder of Fleetwood Enterprises. He was wearing faded blue jeans, a pair of cowboy boots…and a large western-style belt buckle I can’t even begin to describe.

John founded Fleetwood in 1951—the year I was born—and at the time of our impromptu meeting, Fleetwood was a $1 billion Fortune 500 corporation (later to reach $3 billion).

John never attended college, avoided public speaking, hated to fly, and was a man of few words. Not your typical Fortune 500 CEO.

But I love the man.

Have, in fact, for 35 years.

My brief meeting with John Crean lasted no more than 10 minutes, but I learned some astounding life lessons that linger with me to this day.

Here are some excerpts from our conversation:

John:   Mike, if you have any questions for me, fire away.

Mike:   I’ve always been curious as to why you built so many small plants across America (50). Wouldn’t it be more efficient and profitable to have six or seven large regional plants?

John:   Probably…but then that wouldn’t be very good for my employees.

Mike:   Why is that?

John:   I like to keep things simple. Don’t you think people are happier and work better together if they know everyone? Plus small plants are easier to manager and can weather downturns better. I hate to layoff anyone.

Mike:   Yeah, sure, but…

John:   Another reason I decided to have lots of small plants is to attract and keep the best leaders in our industry.

Mike:   What do small plants have to do with that?

John:   I never planned on growing Fleetwood into a billion dollar company. I’m not that smart. Everything I have, I owe to my extraordinary employees…and I treat them like co-owners. If I don’t grow, I won’t be able to promote my people. I don’t want the best leaders in the industry going to one of my competitors.

Mike:   [speechless]

John:   And another thing…I always pay cash for my plants.

Mike:   You pay cash?

 John:   Yes…you see…I don’t believe in debt. It almost ruined me once and I vowed never to borrow money again. (At this time Fleetwood was debt free with 50 plants in North America and $100 million in the bank. All “the experts” told him he was nuts to do this because our competitors would grow much faster than us. Just the opposite happened.)

Mike:   So…let me get this straight…your expansion goals are not motivated by profits or bowing down to Wall Street?

John:   That’s right. I figured if I took care of my people, the sales and profits would follow. I make more money than I deserve…and I believe in sharing the wealth. (I was humbled to find out after John died in 2007, that for many years he gave away 50% of his annual earnings to numerous charitable causes. When he was young and struggling to get Fleetwood off the ground, John said he could only afford to give away 10% of his annual income until he got on his feet. And as soon as he did–get this–he increased his charitable contributions to 20%, then 30%, and finally 50%. This commitment continued until the end of his life.)

John:   Any other questions for me, Mike? I’m late for an important meeting.

Mike:   Are you meeting with the rest of the management team?

John:   HELL NO. I’ve already spent 10 minutes with each of them. That’s plenty. Now I’m going to spend the rest of the day with the people who pay all of our salaries.

Mike:   The stockholders?

John:   No…the hourly folks down on the floor. I love those people!

My conversation with John Crean took place over 25 years ago. Some folks may read this and say the world is different now, or things don’t work that way anymore, or this is too simplistic.

I disagree. Does love ever become outdated?

John left all of us a beautiful legacy of leadership:

Love people more than profits…avoid debt like the plague…and success will find you.

Imagine how many jobs would be created, and how many problems would simply go away if the world had more leaders like John Crean.

• The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $16,500 to $17,000.
• The catch-up contribution limit for those aged 50 and over remains unchanged at $5,500.
• The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $58,000 and $68,000, up from $56,000 and $66,000 in 2011.  For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000.  For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $173,000 and $183,000, up from $169,000 and $179,000.
• The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to $183,000 for married couples filing jointly, up from $169,000 to $179,000 in 2011.  For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000.  For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.
• The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is $57,500 for married couples filing jointly, up from $56,500 in 2011; $43,125 for heads of household, up from $42,375; and $28,750 for married individuals filing separately and for singles, up from $28,250.

I came across a recent article from Kipplinger's that reviewed good and bad states in which to retire.  The article reviewed many factors such as state, local, sales, property, inheritance, and other taxes.  They also took into account whether or not (or how much) Social Security, pension and other income is taxed.  Hope you like cold weather because the top 6 are cold weather states. Keep in mind, this article only reviewed taxation, not cost of living, life-style, culture and other factors.

The top 10 in order:
1. Alaska
2. Wyoming
3. Michigan
4. Pennsylvania
5. Colorado
6. Delaware
7. Hawaii
8. Georgia
9. South Carolina
10. Alabama

The worst 10 in order (and surprisingly only 1 warm state):
1. California
2. Rhode Island
3. New Jersey
4. Vermont
5. Iowa
6. Nebraska
7. Wisconsin
8. Oregon
9. Indiana
10. North Dakota
8.

By most measures, a $250,000 household income is substantial. It is six times the national average, and just 2.9% of couples earn that much or more. "For the average person in this country, a $250,000 household income is an unattainably high annual sum -- they'll never see it," says Roberton Williams, an analyst at the Tax Policy Center, a nonpartisan think tank in Washington, D.C.

But just how flush is a family of four with a $250,000 income? Are they really "rich"? To find the answer, The Fiscal Times asked BDO USA, a national tax accounting firm, to compute the total state, local and federal tax burden of a hypothetical two-career couple with two kids, earning $250,000. To factor in varying state and local taxes, as well as drastically different costs of living, BDO placed the couple in eight different locales around the country with top-notch public schools, using national data on spending.

The analysis assumes that this hypothetical couple -- let's call them Mr. and Mrs. Jones -- both have professional positions at their companies. They take advantage of all tax benefits available to them, such as pretax contributions to 401k plans and flexible spending accounts for medical care, child care and transportation. They have no credit card debt, but Mr. Jones racked up $40,208 in student loan debt in undergraduate and graduate school, and Mrs. Jones borrowed $22,650 to get her undergraduate degree (both amounts are equal to the national averages for their levels of education). They also have a car loan on one of two cars, and a mortgage for 80% of the value of a typical home in their communities for a family of four, which includes one toddler and one school-age child.

The bottom line: It's not exactly Easy Street for our $250,000-a-year family, especially when they live in high-tax areas on either coast. Even with an additional $3,000 in investment income, they end up in the red -- after taxes, saving for retirement and their children's education, and a middle-of-the-road cost of living -- in seven out of the eight communities in the analysis. The worst: Huntington, N.Y., and Glendale, Calif., followed by Washington, D.C., Bethesda, Md., Alexandria, Va., Naperville, Ill., and Pinecrest, Fla. In Plano, Texas, the couple's balance sheet would end up positive, but only by $4,963.

As we continue to try & sort out the tax bill passed in December, here is one little thing that although it won't impact many people, for those impacted, be ready to pony up.  In the past, any estate/death taxes paid to your state, you received a credit for any taxes owed to the Feds.  Not any more.  As part of the compromise between the GOP & White House, that credit now becomes a deduction.

The IRS said the delay was necessary because it needed more time to program its systems to accommodate tax breaks included in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.

State's lawmakers pass 66 percent income tax increase

Illinois lawmakers have approved a politically risky 66 percent income tax increase in an effort to solve a historic budget crisis.
The bill now goes to Democratic Gov. Pat Quinn, who supports the plan.

It would temporarily set the personal tax rate at 5 percent, up from 3 percent now. Corporate taxes would climb, too.

Quinn's office says the tax increase would generate about $6.8 billion annually, helping close a budget hole that could hit $15 billion this year.

In sheer percentage terms, the increase could be the biggest on the long list of those passed as states grapple with nationwide economic woes.

The Illinois Senate approved the measure 30-29 early Wednesday. The House had approved it late Tuesday.

 What's that mean for me?  Here's a short rundown of the bill:

• Extending the EGTRRA 2001 income tax rates for two years. Associated changes in itemized deduction and personal exemption rules are also continued for the same period. The total cost of this was estimated at $186 billion.
• Extending the EGGTRA 2001 and JGTRRA 2003 dividends and capital gains rates for two years. The total cost of this was estimated at $53 billion.
• Patching the Alternative Minimum Tax to ensure an additional 21 million households will not face a tax increase. This was done by increasing the exemption amount and making other targeted changes. The cost of this measure was estimated at $136 billion.
  • The above three measures are intended to provide relief to more than 100 million middle-class families and prevent an annual tax increase of over $2,000 for the typical family.
• A 13-month extension of federal unemployment benefits. The cost of this measure was estimated at $56 billion.
• A temporary, one-year reduction in the FICA payroll tax. The normal employee rate of 6.2 percent is reduced to 4.2 percent. The rate for self-employed individuals is reduced from 12.4 percent to 10.4 percent. The cost of this measure was estimated at $111 billion.
• Extension of the Child Tax Credit refundability threshold established by EGTRRA, ARRA, and other measures. According to the White House, this would benefit 10.5 million lower-income families with 18 million children.
• Extension of ARRA's treatment of the Earned Income Tax Credit for two years. According to the White House, this would benefit 6.5 million working parents with 15 million children.
• Extension of ARRA's American opportunity tax credit for two years, including extension of income limits applied thereto. According to the White House, this would benefit more than 8 million students and their families.
  • The above three provisions, as well as some others of its ilk, are intended to provide about $40 billion in tax relief for the hardest-hit families and students.
• An extension of the Small Business Jobs and Credit Act of 2010's "bonus depreciation" allowance through the end of 2011, and an increase in that amount from that act's 50 percent to a full 100 percent. For the year of 2012, it returns to 50 percent. The White House hopes the 100 percent expensing change will result in $50 billion in new investments, thus fueling job creation.
• An extension of Section 179 depreciation deduction maximum amounts and phase-out thresholds through 2012.
  • Together, the above two business incentive measures were estimated to have a cost of $21 billion.
• Various business tax credits for alternative fuels, such as the Volumetric Ethanol Excise Tax Credit, were also extended. Others extended were credits for biodiesel and renewable diesel, refined coal, manufacture of energy-efficient homes, and properties featuring refueling for alternate vehicles. Also finding an extension was the popular domestic Nonbusiness Energy Property Tax Credit, but with some limitations.
• Estate tax adjustment. EGTRRA had gradually reduced estate tax rates until there was none in 2010. After sunsetting, the Clinton-era rate of 55 percent with a $1 million exclusion was due to return for 2011. The compromise package sets for two years a rate of 35 percent with an exclusion amount of $5 million. The cost of this provision was estimated at $68 billion.
• An extension of the 45G short line tax credit, also known as the Railroad Track Maintenance Tax Credit, through January 1, 2012. This credit had been in place since December 31, 2004 and allowed small railroad companies to deduct up to 50% of investments made in track repair and other qualifying infrastructure investments.

In the late 90's, there were less than a dozen taxes that needed to be renewed/adjusted every year or two.

Today there are over 140.

Many economists and financial professionals (myself included) feel this level of uncertainty, complicates financial planning (personal and corporate), discourages investment and hiring.

For many individuals and companies, this will lead to an increase in overseas investment, hiring, and expansion.  This is money much needed to maintain and strengthen our economic recovery. 

Cross your fingers, call your Congressman, and be sure you meet with your financial advisor, CPA, attorney if needed, to you don't end up on the wrong end of the uncertainty.