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Everybody welcome back -- -- were hanging on to the cliff right now the fiscal cliff because on one line.
Thirteen everything's gonna change but we don't know -- so let's kind of try to figure it out with Michael -- -- joining us from.
I was really no way Illinois and north of Chicago right near the president of the financial planning for firm yourself -- -- -- -- Thank you welcome to you -- thank you.
There's a life can do it's nice here so enjoy a -- your time here.
OK so how you -- -- our portfolios for this oncoming uncertainty.
Upcoming and -- will.
Lower and the biggest thing that that we've been talking to our clients about.
In this all relates really to the fiscal clear from the fact that the bush.
Tax cuts made Spider-Man -- may or may not but you don't we just feel like it's important to.
Make sure we're ready and prepared and assume the worst so to speak so what are the big things that we are advising people to do this year certainly own clients in the is to consider doing a Roth conversion.
This year instead of waiting until next year if it's the right thing to do.
So explain what Iraq conventional Roth conversion is where you take a traditional -- -- a which means a diary that you have not paid tax on yet can pay the taxes when you take money out yeah sixteen however old -- -- -- usually 59 and half as we -- can do without the 10% penalty OK and you convert that.
To a wall fiery which basically means -- tax you pay the taxes upfront.
Converted to a Roth once it's in the Roth it grows tax free and later comes out checks for.
So why wouldn't more people -- just in Iraq and -- -- -- -- well the reason why is partly it has to do with tax bracket in -- age.
If if a person's in a high tax bracket your culture your retirement in May not be as appropriate to I have -- Okay such a great idea people should certainly more.
That also on made a lot of people on the dividend paying world stocks such as utilities you -- -- and what's the tax rate now on that dividend.
And what do we think it's -- be -- to -- sort of a big one for us because right now the top tax bracket.
On -- vivid in paying investment is 15%.
And -- that means that even a person and highest bracket which is 35%.
The most they're giving up his 15% of every.
Dollar -- -- -- starting next year.
The top bracket is going to go from 15% to 43 point four you're talking.
Almost tripling the -- -- for the top tax credit tax bracket those going to be all the brackets are going to go it's gonna clobber everybody but.
If you're just thinking now just to keep the math simple.
-- The -- the highest it's letting go is 43 it was 43 point four socially as 101000 dollars of -- -- -- income and this year the most are gonna loses 1500.
Dollars next year the -- can lose is 4340.
But either but basically it's gonna laugh taxed as ordinary income next year dictators parents it's taxed like a capital gain.
So even if you're not in the highest bracket.
That that actually is really gonna go -- up -- What is listen -- sell all your stocks that pay out dividends will.
What we're suggesting written and again it's a case by case basis -- because experts -- for our higher income.
People but again not necessarily they do they have to be in the highest bracket they can be likened them.
25% bracket which isn't that high -- we're suggesting they look at reallocate eating this year because they can also sell the stocks cheaper this year.
Because the capital gains taxes cheaper this year that it will be next year -- reallocate where reallocate to for example sun in tax free municipal bonds.
We're suggesting putting more stocks in the hiring at Celtic and I don't need the income because then they're sheltering the dividends from taxation.
A cat also very -- stocks because growth stocks don't pay out is and I vividly and did make some examples of popular -- hello -- well of course that you always can say apple yeah I think you're going to stand up -- can grow beyond 702 -- exactly.
-- Philadelphia Atlanta and cognizant is another one that we hundreds of rules -- sold you know but those.
And you know you can't have growth stocks and share little piece of the sale little pieces off to -- income from.
Is that if a person does need.
Income on their stocks.
Now what is should this differentiate based on age like what age group are you most concerned about now as we go into the election year.
Well we specialize in pre retirement retirement planning so typical profile of our claim is 62 years.
Of -- so.
But frankly what it comes to some of these issues like converting a Rothman.
Or even in terms of -- -- -- income they tend to be issues that do affect.
People closer to retirement -- in retirement.
I understood and 102 answer is -- -- hey this is and I think it's important and people now.
This is also the last year to sell highly appreciated investments tax -- exactly explain Alan class because the long term capital gain tax rate this year is lower than is going to be next year.
You're zero -- 80 if you're in the ten or 15% bracket right -- long term capital gains tax rate is zero.
-- can sell the stock extreme.
But even in the higher brackets its 15% this year after 20% next year for the capital.
So everything -- so upgrade.
DSL -- -- -- -- -- Chad thank you for reading and I'm concerned my taxes going up period.
Should we be concerns that are taxes are going up in general period or I we -- say that it's not really that certain right now.
It's not certain but I think we need to prepare for the worst.
I'll be there are those that believe.
Even -- both the president and brought them Mitt Romney do not want to just pull back to the -- pre bush.
That we might get some gridlock where it it could happen anyway so we believe it's important to prepare for the worst weather the worst happens are now.
My -- -- thank you so much president of yourself financial.
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