The Death of the Stretch is Back On Congress’ Agenda

Posted on by in Current Events, Estate Tax, Government Programs, Inherited IRAs, Market News, Retirement Planning, Stretch IRA, Tax Law and tagged , , , , , .

The Death of the Stretch is Back On Congress’ Agenda

This just in.

Stretch IRA James Lange Pittsburgh PennsylvaniaThe House is scheduled to vote on Thursday, May 23, 2019, on the SECURE ACT. Then, it will be in the Senate’s court to vote on RESA. Then the House and Senate will need to reconcile the differences between the bills. Experts, including us, think a compromise will be found and that the “stretch IRA” as we know it, will be gone, dealing a severe blow to IRA and retirement plan owners who were hoping their heirs would be able to continue deferring the distributions on their inherited IRAs and retirement plans for decades.

Here is the story so far.

In mid-April, Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and ranking member Ron Wyden, D-Ore., reintroduced their Retirement Enhancement and Savings Act (RESA).

Under this bill, which we’ve been talking about since 2016, the account balance in a defined contribution plan or IRA must be distributed and included in income by the beneficiary five years after the employee’s or IRA owner’s death. Surviving spouses, beneficiaries who are disabled or chronically ill individuals, individuals who are not more than 10 years younger than the employee (or IRA owner), or the child of the employee (or IRA owner) who has not reached the age of maturity are excluded from this rule. Plus, an exception to the five-year distribution deadline is provided for each beneficiary to the extent that the balance of the account they receive from the deceased employee or IRA owner does not exceed $400,000.

Also in April, the House Ways and Means Committee passed a bill known as the Secure Act (Setting Every Community Up for Retirement Enhancement Act of 2019). What was remarkable about the Secure Act is that it was fast-tracked and approved with lightning speed, with the intention “To amend the Internal Revenue Code of 1986 to encourage retirement saving, and for other purposes.” And while it does include some incentives for people to participate in retirement plans, it also proposes the “death of the stretch IRA.” The House version of the bill differs from RESA in that it proposes a 10-year time limit on holding an inherited IRA or inherited Roth IRA or other defined contribution plan before all of the funds in the account must be distributed.  According to the summary provided by the House Committee on Ways and Means:

Section 401. Modifications to Required Minimum Distribution Rules: The legislation modifies the required minimum distribution rules with respect to defined contribution plan and IRA balances upon the death of the account owner. Under the legislation, distributions to individuals other than the surviving spouse of the employee (or IRA owner), disabled or chronically ill individuals, individuals who are not more than 10 years younger than the employee (or IRA owner), or child of the employee (or IRA owner) who has not reached the age of majority are generally required to be distributed by the end of the tenth calendar year following the year of the employee or IRA owner’s death.

We have been anticipating the death of the stretch IRA for years and wrote two books about its consequences.  We were pretty convinced it was going to be eliminated in the last round of tax law changes, and frankly, we were surprised when the limit on non-spouse heirs stretching distributions from inherited IRAs over their lifetimes was not included. But, it’s back, and once again the devil is in the details which will have to be hashed out between the two houses. In the next post, I will offer some insight into the consequences and preliminary recommendations.

If you have an IRA and/or other retirement plan and were hoping to leave it to your heirs with a favorable tax treatment and want to be kept up to date with this information, please contact our offices at 412-521-2732.

Tax Cuts and Jobs Act of 2017: Ten Huge Take-Aways

Posted on by in Current Events, Economy, Home Buyer, Income Tax, Market News, Tax Law and tagged , , , , .

Ten Huge Take-Aways from the Tax Cuts and Jobs Act by Jim Lange

 

Ten Huge Take-Aways from the Tax Cuts and Jobs Act of 2017

by James Lange, CPA/Attorney

The first thing to consider about the proposed Tax Cuts and Jobs Act is that it is just a proposed tax bill.  It is possible it will face stiff resistance in the Senate and possibly get no votes from the Republicans.  Jeff Flake, John McCain, Bob Corker, and Lisa Murkowski might be on that list of Republican “no” votes. So, like health care it is possible, and even likely, that nothing will happen this year and maybe not in the foreseeable future.

Depending on your personal circumstances, the Tax Cuts and Jobs Act of 2017 could be good or bad for your family.  Critical factors like how many children you have, whether you live in a high-tax state and itemize your deductions or take the standard deduction, whether you own a home or are looking to buy one could sway you from benefiting from these changes or suffering from them.

In fact, there are so many variables to consider that it is difficult to make a blanket statement that the proposal will offer you tax relief.  Corporate America is a clear winner. Reducing the corporate tax rate from 35 to 20 percent, Speaker Paul Ryan argues, will create more jobs and drive up wages.  But critics, even Republican critics, say it is not a given that companies will pass their savings on to workers vs. shareholders through higher dividends.

However, the bill as it stands now is far from becoming law.  Ultimately, the Senate will introduce more changes and what we will end up with and whether it will pass are still great unknowns.  But, going forward it will still be helpful to understand some of the main provisions the bill advances so you can begin to assess the impact on you and your family.

Champions and underdogs in the Tax Cuts & Jobs Act of 2017:

  1. This doesn’t appear to be an overall tax-cut for the middle class, as promised. What we see in this bill is a tax cut for some, and a tax hike for others.  As usual, it all depends on how much you make, how you earn your living, where you live, the mortgage on your home, your property taxes, student loans, etc.  The Tax Policy Center commented that the bill wasn’t really tax reform but rather it was more of a complicated tax cut.  We have compared differences for different hypothetical clients and the results were less dramatic than we thought.  In one case, the elimination of the alternative minimum tax was helpful, but the dis-allowance of state and local income taxes netted out to a tax increase for one client.
  2. The bill reduces the number of tax brackets from seven to four. Currently the brackets are 10-15-20-28-33-35-39.6%.  Under the new provisions there will be a zero bracket (in the form of an enhanced standard deduction according to the bill), and from there the brackets will be 12-25-35-36.9%.  Here is how they break down:
2017 Single Filer2017 Married Filing Jointly2017 Head of Household
$0- $9,325 – 10%$0-18,650 – 10%$0- $13,350 – 10%
$9,326- $37,950 – 15%$18,651- $75,900 – 15%$13,351- $50,800 – 15%
$37,951- $91,900 – 25%$75,901- $153,100 – 25%$50,801- $131,200 – 25%
$91,901- $191,650 – 28%$153,101- $233,350 – 28%$131,201- $212,500 – 28%
$191,651- $416,700 – 33%$233,351- $416,700 – 33%$212,501- $416,700 – 33%
$416,701-$418,400 – 35%$416,701- $470,700 – 35%$416,701- $444,550 – 35%
$418,401 + – 39.6%$470,701+ – 39.6%$444,551 + – 39.6%

 

Proposed Single Filer Proposed Married Filing JointlyProposed Head of Household
$0-$44,999 – 12%$0-$89,999 – 12%$0-$67,499 – 12%
$45,000-$199,999 – 25%$90,000-$259,999 – 25%$67,500-$229,999 – 25%
$200,000-$499,999 – 35%$260,000-$999,999 – 35%$230,000-$499,999 – 35%
$500,000+ – 39.6%$1,000,000+ – 39.6%$500,000+ – 39.6%

Additionally, the bill would eliminate the alternative minimum tax (AMT), a second tax calculation for people earning about $130,000 which reduces the impact of many tax breaks.

  1. The bill doubles the current standard deduction, giving $12,000 to single filers, $24,000 for married filing jointly, and $18,000 for heads of household.
  1. But before you get too excited about a larger deduction, they’ve decided to repeal the personal exemption—currently $4,050 per person—and the deductions for state and local taxes. So, it isn’t as much of a break as you think it is.
  1. They are taking away one of our favorite, and edgiest strategies. No more recharacterization of Roth IRAs. If you’ve heard me talk about Roth IRAs, you’ve probably heard me mention recharacterization.  The ability to recharacterize, basically undo the Roth conversion, adds enormous flexibility in our Roth IRA conversion planning.  This will mean that the days of do-it-yourself Roth IRA conversion calculations will be highly risky.  Having a professional you can trust, who knows the system in and out, and who has the experience to get it right will become incredibly important.
  1. Taxpayers with a net worth of $10 million or more (and their children) have a reason to cheer as the plan almost doubles the current federal estate tax exemption from $5,490,000 to $10,000,000 per individual, with spouses exempt from any limits. The Joint Committee on Taxation has commented that this provision, while being a boon for business owners and wealthier Americans will reduce the federal revenue by around $172 billion over 2018-2027.  Oh, yeah…and after 2023, the estate tax will be repealed all together.  Compensating for that loss of revenue is a huge stumbling block for the proposed tax reform.  Though hard to confirm, rumor has it that originally they were going to eliminate the estate tax entirely but put this provision in to secure the support of Alaska.
  1. While the bill does simplify many areas, it also complicates many areas. It is not a major tax simplification.  I do not fear that our CPA firm will lose business because clients will find it so easy to complete their tax returns.
  1. While corporations and businesses will see a reduced corporate tax rate—from 35% to 20% – it will come with a price¾a much more involved and complicated filing process. New anti-abuse rules, complicated multi-national corporation rules, new tax treatments on interest, and changes in international income rules will make navigating your business tax return much more difficult.  Shareholders of pass through entities, like Subchapter S corporations will get a big break, but the complications for claiming that break are considerable.
  1. The Act is silent on the Death of the Stretch IRA. We still aren’t sure if and when this will happen.  It is very possible that they are holding it in reserve to for future negotiations pertaining to reducing the deficit.  The tax cuts in this bill will massively reduce federal revenue.  We’re talking in the trillions of dollars here.  To get any version of this to pass, it is very likely that the GOP will have to come up with ways to offset some of the deficit.  Killing the ability to stretch IRAs and retirement plans for generations is one way to do that.
  1. Even the Republican’s admit that this bill will increase the deficit by $1.5 trillion dollars over the next ten years, and that is a huge issue. Critics on both sides see increasing the deficit as unacceptable.  Further, the Tax Policy Center and other tax policy commentators on both sides of the aisle think that this estimate is too low or too high, and many do not believe that this bill will provide the economic growth or tax-relief promised to the middle class.

If you want to read an excellent 82-page summary of the bill, check out The Fiscal Times online:

http://www.thefiscaltimes.com/2017/11/02/Read-House-GOPs-Tax-Bill-or-Summary-Key-Points

If you are looking for more of a brief overview summary, these are excellent resources:

https://taxfoundation.org/details-tax-cuts-jobs-act/

http://www.taxpolicycenter.org/taxvox/house-gop-tax-bill-mostly-business-tax-cut-will-create-new-winners-and-losers

As I mentioned above, this bill is simply the first iteration of what the final bill might look like, and it isn’t clear that anything in it is going to become law.  But it bears some scrutiny since some of the main points are likely to provoke debates.  We will continue to watch as the process evolves.  We might even have to interrupt our series on Lange’s Cascading Beneficiary Plan once again!  If that happens, I hope you will bear with us.  But unless there is major news, we will see you next week as we continue exploring the advantages of the LCBP

Disclaimer: Please note that the Tax Cuts and Jobs Act of 2017 removed the ability for taxpayers to do any “recharacterizations” of Roth IRA conversions after 12/31/2017. The material below was created and published prior the passage of the Tax Cuts and Jobs Act of 2017. 

Special Alert About the Equifax Data Breach

Posted on by in Current Events, Data Breach, Economy, Financial Scandals, Identity Theft, Market News, QTIP Trusts and tagged , , .

The Equifax Data Breach:
All You Need To Know

The Equifax Data Breach – What Should You Do

The recent data breach at Equifax has sparked a lot of discussion about how vulnerable the personal information of all Americans may be to theft.  Is there anything you can do to protect yourself in our computer-driven society?  While the Equifax hack was by far the largest in history, it’s not the first and will not be the last.  In 2017 alone, Verizon, Blue Cross Blue Shield/Anthem, Dun and Bradstreet, Chipotle, Washington State University, and even the IRS have discovered that they’ve been hacked – exposing the personal information of millions of Americans to thieves.  The breach at Equifax was so far-reaching that several corporate officers have retired, and many on Capitol Hill are calling for a complete investigation.  With over 143 million Americans at risk of being involved in this massive breach, you could very easily be affected.

What You Can Do If Your Information Has Been Compromised

So what can you do to protect yourself?  You probably know that Equifax has set up a website where you can check to see if your number has been exposed.  If your information was exposed in the breach, you can get free credit monitoring for one year.   In my opinion, that’s like closing the barn door after the horse has gotten out.  They’re happy to let you know that someone has opened up a fraudulent account in your name, but it’s still up to you to clean up the mess if they do!  And what happens when your year of free credit monitoring is over?  If you don’t pay for credit monitoring every year for the rest of your life, you may never know if someone is using your identity at some point down the road.

What Does Freezing Your Credit Report Do?

Some experts are recommending that you place a freeze on your credit files.  A freeze prevents lenders from even accessing your credit report.  The advantage to freezing your file is that, if they do not know your credit history, lenders will not offer credit to a thief who is trying to use your identity.   What are the disadvantages of freezing your credit files?  First, it’s not an easy process.  There are three major credit reporting bureaus, and you will have to place three separate freezes.  You can do so by using these links:

Equifax freeze

Transunion freeze

Experian freeze

If you are a Pennsylvania resident, the law permits the credit bureau to charge you $10 to freeze your file.  Equifax has agreed to waive their fee, but only after public pressure.

Unfortunately, the data breach at Equifax has caused all three credit reporting agencies to be overwhelmed with requests to freeze accounts.  Many consumers are complaining that they can’t even get into the websites or if they do get in, that the site crashes after they fill out the application form.  If you have not already frozen your account, you may have a better chance of getting through if you try before 7:00 a.m., or after 11:00 p.m.  Another disadvantage of freezing your credit files is that if you need to apply for credit yourself – for a car loan, a home equity loan or even a medical credit card – you must first remove the freeze from your files.  You will need a PIN number to remove the freeze and, if you lose your PIN number, you will be facing a time-consuming and difficult process to get another one.

The Equifax Data Breach and Your Tax Return

Opening phony credit accounts in your name, unfortunately, could be just the tip of the iceberg.  The Internal Revenue Service (IRS), which has issued more than $20 billion in fraudulent tax refunds over the past few years, could be plundered unless there is intervention by Congress.  By law, the IRS must process your tax return within a specified period – generally 45 days – or they have to pay you interest on your refund.  To meet those guidelines, they’ve adopted a “pay first, ask questions later” philosophy.  In our practice, it’s not uncommon to see a client get a tax refund check and then an audit notice a year later! The IRS’s system requires little more than a name, date of birth and Social Security number to process tax returns – information which was exposed in the Equifax data breach – and they accept returns as soon as January 1st.   On the other hand, employers aren’t required to submit updated employment information to the IRS until March.  By that time, about half of all of the refund checks have already been issued!

Protecting Yourself After the Equifax Hack

So what can you do to protect yourself?  If you don’t want to freeze your credit files, then you should be checking your credit reports regularly for fraudulent activity.  Most of the major credit card companies allow you to request that you be notified if a charge is processed on your account that exceeds a certain dollar amount.  You should consider placing an alert for an amount that exceeds your normal spending threshold.   If you are traditionally a procrastinator when it comes to filing your tax return, don’t wait – get it filed as soon as possible.  Even if you owe, you don’t have to pay the IRS until April 15th.  If you have any credit card debt, get it paid off.  Financial institutions that fall victim to fraudsters because of the Equifax data breach will have to pass the cost of their losses on to their customers – and you don’t want to be one of the unlucky ones footing the bill.

Last but not least – whatever you do to protect yourself, make sure that you do the same for those who might not, including children and elderly parents!

Stay safe out there!

Jim

 

The Aftermath of Brexit

Posted on by in Investing, Market News, The Lange Money Hour and tagged , , , , .

The Aftermath of Brexit

Pros and Cons: What Options Do Individual Investors Have?

The Aftermath of Brexit Pay Taxes Later Blog

What should you do about your own retirement plan in the aftermath of Brexit? Find out why now could be a great time to do a Roth conversion!

On June 23, 2016, a majority of British citizens voted to leave the 28-member European Union – an action referred to as the “Brexit”. The following day, Americans awoke to learn that global stock markets had not reacted well to the news. Our major domestic indices followed suit, with the Dow Jones Industrial Average declining more than 600 points in one day. Trillions of dollars in wealth were estimated to have been wiped out overnight, and more is likely to follow as the world adjusts to the news.

Prior to the historic Brexit vote, I watched with interest as the pollsters interviewed people on the streets and then confidently predicted that Britons would vote to stay in the union. The British pound made gains, and even the lethargic US stock markets seemed cheered at the news. Life, it seemed, would be good as long as the union remained intact. Investors throughout the world thought that the good citizens of Great Britain would never upset the apple cart, and placed their bets accordingly. And guess what? They bet wrong!

Time will tell, but I suspect that much of this market chaos is happening because the investors who relied on the pollsters got caught with their pants down. Plans were made and fund managers structured their portfolios assuming that the citizens of Great Britain would vote to stay – and they didn’t. Now these investors find themselves having to scramble to put their Plan B – assuming they even have one – in place. What does their mistake mean for you?

If you’re clients of ours, you know that we have always advocated using a balanced approach to money management. And we never advocate making changes to your portfolio based solely on what the market is doing. However, for many of you, now would be a great time for you to take that trip to London that you’ve always wanted to do. The US dollar strengthened on the news of the Brexit, and will stretch much further now than it would have a week ago. Or, consider establishing Roth IRAs or college tuition accounts for your grandchildren. If they have ten or more years to wait out a market recovery, you can fund those accounts with equities purchased at prices much lower than they were last week at this time.

What should you do about your own retirement plan in the aftermath of Brexit? If you hold any global funds in your IRA, now could be a great time to do a Roth conversion. By converting when the market value of the fund is low, you pay less in federal income tax than you would when the fund value is high. And if the market continues to drop even further, you can always recharacterize your conversion. I’ll be talking about some of these points on my next radio show on 1410 KQV. You can call in and ask questions during the live broadcast on Wednesday, July 6th, from 7:00 – 800 p.m., or catch the rebroadcast on Sunday, July 10th at 9:00 a.m. You can also read more about Roth conversions by clicking this link on my website: https://www.paytaxeslater.com/roth_ira/

Please call our office soon if you have been thinking about doing a Roth conversion, and we will run the numbers to see if it makes sense for you. And if you do go to London, send me a postcard!

Jim

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John C. Bogle – A Financial Industry Giant Addresses Congress

Posted on by in Index Investing, Market News, Retirement Planning, Roth 401(k), Roth IRA, Roth IRA Conversions, Social Security, Tax Law, The Lange Money Hour, Traditional IRA and tagged , , , , , , , , .

John Bogle, The Lange Money Hour, James Lange, Pittsburgh, PA Wednesday, October 1, 2014Join us this Wednesday, October 1 at 7:05 p.m. on KQV 1410 AM for The Lange Money Hour, Where Smart Money Talks.

Program also streams live at www.kqv.com

Encore presentations air on KQV EVERY SUNDAY at 9:00 a.m.

The three legs of America’s retirement system are shaky, neither structurally efficient nor fiscally stable. That’s what the U.S. Senate Finance Committee heard on September 16, during testimony by a man Fortune Magazine labeled one of four giants of American Finance: John C. Bogle, founder and now retired CEO of the Vanguard Group, the world’s largest mutual fund company, with more than 3 trillion dollars under management.

To hear why Mr. Bogle believes the situation is so precarious, tune in tomorrow evening at 7:05, as The Lange Money Hour welcomes him back to the show.

Over the course of his 63-year career, Mr. Bogle has changed the face of investing. A pioneer in the concept of index mutual funds, collective portfolios of stocks that mimic the movement of a defined market sector rather than a selection of individual companies, he is credited with creating the first index fund available to individual investors, the Vanguard 500.

Mr. Bogle has written a dozen books, including his 1994 bestseller Bogle on Mutual Funds to most recently The Clash of the Cultures: Investment vs. Speculation. At 85, he remains an active industry observer, appearing regularly on national financial media outlets. He recently described the personal mission he has set for himself in his retirement – “to speak out for truth and integrity and character in the world of finance, striving to build a better world for investors—honest-to-God, down-to-earth human beings who deserve a fair shake.”

You can watch his 6-minute Congressional testimony here:

http://johncbogle.com/wordpress/2014/09/17/testimony-before-the-senate-finance-committee-september-16-2014/

We’re honored to have Mr. Bogle back as a guest on The Lange Money Hour. Please plan to join us Wednesday, Oct. 1, 2014 at 7:05 on KQV 1410 for an interesting and informative hour. The program will also stream live at www.kqv.com.

If you can’t tune in October 1, 2104, KQV will rebroadcast the show at 9:00 a.m. this Sunday. You can also access the audio archive of past programs including written transcripts on the Lange Financial Group website, www.paytaxeslater.com. Click on RADIO.

Finally, mark your calendar for Wednesday, October 15th at 7:05 p.m., when Pittsburgh City Controller Michael Lamb will join us for the next new edition of The Lange Money Hour.

 

Numbers to Know: COLA for 2014

Posted on by in Economy, Market News, Social Security.

The Social Security Administration has announced new cost-of-living adjustment, or COLA, numbers for 2014.  The cost-of-living adjustment is decided by comparing consumer prices in July, August, and September of each year to the prior year’s numbers.  Since 1975, Social Security increases have averaged around 4%—less than 2%, only six times.  This year we will see one of the smallest COLAs since the program was adopted, just 1.5%.

Advocates for seniors say the 2013 Consumer Price Index measurements aren’t entirely fair.  While gasoline and electronics prices were down significantly in 2013, the cost of food increased slightly, and housing, medical, and utility costs rose dramatically.  Unfortunately, seniors generally spend more on healthcare goods and services, so they are facing dramatic increases in their spending.

‘‘This (cost-of-living adjustment) is not enough to keep up with inflation, as it affects seniors,’’ said Max Richtman, who heads the National Committee to Preserve Social Security and Medicare.  ‘‘There are some things that become cheaper, but they are not things that seniors buy.  Laptop computers have gone down dramatically, but how many people at age 70 are buying laptop computers?’’  Nearly 58 million Americans receive Social Security benefits of some kind. This 1.5% COLA will add an average of only $17 to the typical American’s monthly benefit.

Congratulations Eugene Fama of Dimensional Funds Advisors on Winning the 2013 Nobel Prize in Economics!

Posted on by in Index Investing, Market News, The Lange Money Hour.

Eugene Fama, whose ideas and research, along with Kenneth French helped to form Dimensional Funds Advisors (DFA) has been annouced as the 2013 winner of the Nobel Prize in Economics.

He won based on the concept that he came up with decades ago and has gone about proving ever since “Stock prices reflect all available information.” Meaning that overall, it’s impossible to beat the market on a consistent, long-term basis. Eugene Fama, along with Professor French have identified seven risk factors that explain the vast majority of stock market returns.

This Prize comes after 40 years of proof that his theories were correct. Tune in to the Lange Money Hour on 1410 AM KQV tonight at 7:05pm EST (streaming live on www.kqv.com) to hear what PJ DiNuzzo, our DFA money manager has to say about this well-deserved and historic award.

(taken from press release from DIA, Inc.)

Government Shutdown a Concern for Investors, but No Need to Panic

Posted on by in Economy, Index Investing, Market News.

A partial government shutdown began today, leaving plenty of federal employees out of work and unpaid. National Parks are closed, FAA safety inspectors are out of work, NASA is all but closed, even The Smithsonian Museums are shut down. Many Americans worry during this time how the shutdown will effect them, their taxes, and the economy as a whole. @MacroScope Reuters tweeted an interesting chart this morning on the performance of the S&P 500 prior to, during, and after the previous government shutdowns.

While we could be facing a bumpy time during the shutdown and immediately after, it looks alike in most cases the S&P 500 didn’t fair so badly in shutdown situations. The shutdown is going to be an aggrevation, but there is no need to start panicking about investments. Contact your advisor before making any hasty buying/selling decisions during this time. An over-reaction could end up costing you!

Positive Market News

Posted on by in Market News and tagged , , .

In the latest issue of The Lange Report, we finally had a chance to share some positive market news. In fact, the second quarter of the year turned out to be the first positive quarter in a year.

Continuing the upturn, the market also had a great July. The S&P 500 reached its low on March 9, 2009 closing at 676.53.  On August 3, 2009, it closed at 1002.63.  This is a return of 48.2% off the March 9th bottom.  The second quarter performance of the S&P 500 – an increase of 15.9% for the quarter – was its best quarterly performance in over 10 years.

Even though the market is still well off the highs that we experienced in 2008, the latest market news is certainly promising.  Many of our clients continue to ask what’s going to happen to the market in the next 3 to 6 months or even in the next year.  The truth is – we don’t know.  Nobody knows.

However, it is interesting to take a look at historical trends.  From 1926 (before the depression) to the second quarter of 2009, the S&P 500 Index has generated an average annual return of 9.6% (compared to government bonds which have averaged 5.5%).  Let’s say that you invested $1 in 1926.  If you had invested in government bonds, you would have roughly $100 today.  If you had invested in the S&P 500 Index, you would have roughly $2,000 today.

Of course, individual circumstances play a critical role in determining what asset allocation is appropriate for you.  At Lange Financial Group we continue to be believers in well diversified portfolios with some representation in most asset categories.

If you’d like to take a look at a more detailed analysis of the latest market figures as well as other economic indicators including international markets, emerging markets, interest rate changes and unemployment figures – it’s all available in the latest edition of The Lange Report.  For a copy, please contact the office at 1-800-387-1129 or sign up for our e-mails on the home page of this website.