01.03.11
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What the New Tax Bill Means for You 
The new tax bill will save every American from a number of tax hikes that would have begun January 1 and will add more than a year of benefits for those who are long-term unemployed.

But there are plenty of other tax perks in the bill, most of which extend breaks already in place. Here's a rundown:

Marginal Tax Rates - Federal income-tax rates, which were lowered under the Bush tax plans of 2001 and 2003 and scheduled to end December 31, will remain in place through 2012.

Unemployment Benefits - Long-term unemployment benefits get extended for 13 months.

Estate Tax - Among Obama's concessions to Republicans is a 35% tax levied on an inheritance of $5 million or more.

Social Security Tax Holiday - The so-called payroll tax holiday stays put too, meaning employees who pay 6.2% in Social Security taxes out of each paycheck will pay just 4.2% for the next year on wages up to $106,800.
 
Making Work Pay - The "Making Work Pay," which was part of the 2009 Recovery Act, is set to expire December 31 and will not be renewed.
Alternative Minimum Tax -The alternative minimum tax patch continues into 2011 and the exemptions increase slightly, according to Bankrate.com. For married joint filers, the 2011 threshold is at $74,450; it's $48,450 for single or head of household taxpayers and $37,225 for married taxpayers filing separate returns.
 
Tax Breaks for Families - The $1,000 per child tax credit stays through 2012 rather than reverting to $500 per child. The credits begin to phase out for singles with adjusted gross income of $75,000 and $110,000 for married couples.  The tax credit of up to $3,000 for dependent care for children under 13 sticks too. If the kids are now in college, the $2,500 "American Opportunity Credit" for the first four years is available for anyone with a salary of $90,000 or less.
 
Marriage Penalty Relief - Marriage still gets a reprieve. The Bush tax law aimed at fixing the so-called marriage penalty is extended to 2012.
 
Other Breaks - A number of additional energy- and business-related tax credits were also extended or expanded, including popular credits for homeowners who make energy-efficient home improvements or buy energy-efficient new homes.

See full story, located at SmartMoney.
Investment Insight
1st Quarter 2011
IN THIS ISSUE
What the New Tax Bill Means for You
Court Strikes at Health Law
Making Sense of Minimum Distribution Rules
No Rest for Retirees

   
ABOUT HORAN
 
HORAN offers a range of investment products and a comprehensive suite of services to enhance your financial security.
 
Our team of experts provides guidance, insight, and investment monitoring with complete objectivity.

By focusing on your needs first, success will follow.

Retirement planning is increasingly complex. A host of investment options, combined with fluctuating interest, inflation rates and other variables, make it difficult to determine how much you will need, where you should invest, and who to turn to for assistance. The complex tax and legislative environment surrounding retirement planning compounds the confusion.

We guide our individual and corporate clients through the confusion surrounding retirement planning.

For more information on the topics in this issue, contact a HORAN advisor at 513.745.0707 or visit our website www.horanassoc.com.

    

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Court Strikes at Health Law 
A federal court ruled Monday, December 13 that a key part of the health- care overhaul violates the Constitution, dealing the first legal setback to the Obama administration's signature legislative accomplishment.  
 
U.S. District Judge Henry E. Hudson said the law's requirement that most Americans carry insurance or pay a penalty "exceeds the constitutional boundaries of congressional power."  The 42-page ruling does not mean states or the federal government must stop implementing the law. But it is expected to give ammunition to a broad Republican assault against the overhaul, which includes efforts in Congress to chip away at it.
 
The lawsuit, brought by Virginia Republican Attorney General Ken Cuccinelli, is the first court ruling against the law since President Barack Obama signed it in March. More than 20 federal lawsuits have been filed against the overhaul, and judges in two of those cases ruled in favor of the Obama administration. The battle is expected to end up at the Supreme Court, though probably not until the 2011-12 term at the earliest.
 
The health overhaul is designed to expand insurance to 32 million Americans. Without the requirement to carry insurance, the Obama administration predicts, the law would leave an additional 16 million Americans uninsured.
 
States and companies in the health industry say they are forging ahead with implementing the law, and Monday's decision is unlikely to change those plans. Spokesman Matthew Wiggin of insurer Aetna Inc. said that pending the legal appeals, "we intend to remain compliant" with the health care law.

See full story, located at The Wall Street Journal.  (registration may be required.

Making Sense of Minimum Distribution Rules

If you are approaching retirement, you will eventually need to make serious decisions about when to begin taking withdrawals from your retirement accounts (known as distributions), how to receive the money, and how to calculate the taxes you will owe.  Fortunately, the rules governing required minimum distributions (RMDs) have been simplified in recent years.

 

The Basics - Many people begin withdrawing funds from their IRA and 401(k) soon after they retire. Before age 70, when and how much you withdraw is your decision.  After that, failure to withdraw the so-called RMD amount each year may result in substantial tax penalties to the tune of 50 percent of the amount that you failed to withdraw.

 

For IRAs, you must begin taking RMDs no later than April 1 following the year in which you turn 70. The same generally holds true for 401(k)s and other qualified retirement plans.  However, RMDs from a 401(k) can be delayed until retirement if you continue to be employed by the plan sponsor beyond age 70 and you do not own more than 5 percent of the company for which you work.  If you have a Roth IRA, you are not required to take distributions at any age.  In addition, the minimum distribution rules do not apply to annuities funded with after-tax dollars.

 

What if You Have Multiple Accounts? - Your RMD for a particular tax year is based on the total of each type of retirement account. So to simplify, total all of your IRAs separate and apart from your qualified plans like 401(k)s and 403(b)s (they get calculated based on each separate plan). For your IRAs you are not required to take RMDs from each account in an amount that is proportional to each IRA account value.  Simply put, you can decide which accounts you want to take money from, as long as you remove enough in total to cover your RMD for that year.

 

Next steps. - If you have questions, contact your financial advisor to help you determine your RMD amount as well as help you develop an investment strategy that makes sense for you.

 

See full story, located at U.S.News.

No Rest for Retirees 
Retirees may need to lower their savings withdrawal rates to adjust to new global realities, research suggests. The bottom line: Save more, or spend less.

The economic news has been bleak for retirees and near-retirees over the past decade: Two recessions and two bear markets. The Standard & Poor's 500 index sporting an average annual return of 0.81 percent over those 10 years. A one-third decline in home values since the market peaked in 2006. Near-zero yields on safe savings.
 
Spend Neither Too Much Nor Too Little - Here is the classic dilemma:  Everyone wants to maintain the highest possible standard of living throughout their lives, including old age.  Live too high on the hog off accumulated savings early in retirement, spending with abandon, and you might have a lot of fun, but the risk is you will be forced to make drastic cuts in lifestyle later on.  Spend too little, hoarding savings, and the danger is you will die with plenty of money and a long list of regrets.  How much to withdraw is one of the biggest decisions anyone will ever make.
 
When the Future Is not Like the Past - The standard solution: the four percent rule.  Problem is, what if the four percent past is not prologue?  What if the simulations and experience behind the withdrawal rule-of-thumb largely reflects an unusually generous period of U.S. equity returns and the damage from the last decade lingers?
 
You May Have to Save More Than You Thought - That is potentially the understatement of the decade.  The implication is dramatic for an aging baby boom generation.  The leading edge of the generation born between 1946 and 1964 is eligible for Medicare in 2011.  The ranks of those 65 and over are projected to increase from some 13 percent of the population in 2000 to 20 percent in 2030.  If these future retirees feel the pressure to switch to a lower withdrawal rate to steer clear of the risk of running out of money, they will have to save a lot more money to preserve their lifestyle.  More likely, they'll end up embracing a combination of moves: Cut back on spending, work longer to keep earning an income, and save more.
 
Adjust as You Go - To be sure, the four percent-plus-inflation mantra is a guideline, a rule of thumb.  Actually figuring out a safe withdrawal rate is immensely complicated.  Coming up with a reasonably safe number involves making guesstimates of life expectancy, deciding the importance of leaving a financial legacy to the kids, the willingness to put money into stocks and other risky assets, and a judgment about reactions to market implosions and business cycle downturns.  What's more, while the financial services industry often stokes fear, the reality is that most people are remarkably creative at controlling their spending and coming up with ways to make money on the side.  The safe withdrawal rate is not a static number. It is dynamic, and it can be adjusted over the years.

See full story, located at Bloomberg Business Week.
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