As an economist, I am also aware there are forces out there that are far more likely to influence the outcome than whether we are red or blue. They are going to influence the outcome regardless of the party or political direction held by the White House at any given time. As we are being overwhelmed by political clutter these days, I think it might be helpful to understand one of these forces, which is ably described in the post below.

By Matthew Yglesias
Posted Tuesday, Feb. 14, 2012

A very neat Aaron Carroll chart shows that, on average, conservative states feature more “dependency” on federal programs than do liberal ones. You can slice this kind of data in a variety of ways, but you always end up with the same aggregate pattern. It happens to be the case that the richest parts of the United States (think the San Francisco Bay area or Connecticut) favor Democrats and also that conservative areas of the country are overrepresented in the Senate. Transfers, on average, flow away from high-income and underrepresented areas and toward low-income and overrepresented areas. I think the overall pattern is best described as a coincidence and not a pattern of large-scale hypocrisy but there are two important points to make about it.

One is that high-income people living in low-income states are generally very conservative in their political ideology but probably benefit more from federal income support programs more than they realize. If you own fast food franchises in the Nashville area, for example, you’re going to form a self-perception as a self-reliant businessman but the existence of Medicaid and the Earned Income Tax Credit are helping to ensure that your customers have adequate income to sometimes eat at your Taco Bell.

These chains of dependency snake even longer. If you sell luxury cars in Florida, many of your customers are probably medical professionals who are earning high incomes because other people have Medicare benefits. The aggregate geographic transfer patterns, in other words, do make a real difference to the economic life of the nation. The existence of transfer payments props up the entire local economies of low-income, low-productivity parts of the country.

The other point is that the fact that we don’t think of the issues in this way is important to making the overall country work. Voters, whether they’re liberal or conservative, don’t think about Boston subsidizing Louisiana. They think about high-income people (a disproportionately large number of whom happen to live in the Boston area) subsidizing low-income people (a disproportionately large number of whom happen to live in Louisiana) and debate the issues on broad ideological grounds.

Absent that commitment to broad ideological thinking we’d be in roughly the situation that the European Union is currently in, with Boston-area people happy to participate in a joint economic undertaking with Louisiana to some extent but horrified by the notion that their hard work should subsidize Bayou indolence. You would then have the question of to what extent can people simply leave the low-wage, low-productivity places and move to the more prosperous ones. In the European case you’d find that the logistics of language make it hard for a middle class Greek person to get a good job in Finland, while in the United States severe zoning makes net migration to the highest-income cities impossible.

Apart from the legal and accounting merits of the ideas described, which are very accurate and appropriate, there is a total lack of awareness of the millions of dollars that each and every college and university across the nation uses to get the students they want enrolled.

College is big business in this country. If you are in charge of an admissions office, your challenge is to encourage the best and the brightest to enroll at your college, and for the parent of that child to pay all they can. If you want colleges to compete and pay for your student to enroll, you have to know how the system works.

If the following article is too long, click HERE for a short presentation to better understand how you can get your hands on “free money” to help pay for college.

Volume 7, Issue 2

According to the College Board, the average cost of attending an in-state four-year public college in 2011-2012 is more than $19,000 per year; for a four-year private college it is nearly $40,000 per year. Over the last decade, published tuition and fees for in-state students at public four-year colleges and universities increased at an average rate of 5.6% per year beyond the rate of general inflation.

As a result, saving for college is the most significant savings goal of many families facing future college costs for their children, especially considering the recent wide-spread depletion of portfolio and home values starting in 2008. Advisors who understand the various education savings tools will bring significant value not only to their clients, but also to the advisory team.

In this issue of The Wealth Counselor, we will examine several of these educational savings tools as well as the impact they can have on financial aid.

Uniform Gifts to Minors Accounts (UGMA)
Uniform Transfers to Minors Accounts (UTMA)
The simplest form of education savings vehicles, and therefore quite common, is an account created under the Uniform Gift to Minors Act (UGMA) or its successor, the Uniform Transfer to Minors Act (UTMA) in the child’s state. While easy and inexpensive to establish, there are considerable disadvantages to these including:

* The beneficiary has the absolute right to the account upon reaching the age of majority (18 or 21, as defined by state law) and can spend this money however he or she pleases. In other words, it cannot be limited to educational expenses. For a beneficiary receiving needs-based government benefits, the required outright distribution may cause the loss of these benefits until the UGMA/UTMA funds are gone. For an immature beneficiary, the distribution and subsequent spending can cause other problems.

* Neither the custodian nor the donor can change the beneficiary after the account has been established. Until the beneficiary reaches the age of majority, the custodian has a fiduciary duty to spend the income or principal for the benefit of the minor.

* If the custodian uses income derived from UGMA/UTMA property to discharge or satisfy, in whole or in part, a parent’s or guardian’s legal obligation to support or maintain the minor, the income is taxable to the parent or guardian. And at least one state considers the payment of educational expenses to be a parent’s legal support obligation and that UGMA/UTMA funds used to pay the child’s educational expenses would be taxable as income to the parent.

* The “kiddie tax” may also come into play. If the child is under age 18 (under 24 if a dependent, full-time student) all of the child’s unearned income above $1,900 (for tax year 2011), including UGMA or UTMA income, is taxed at the parent’s income rate, whether or not the parent is the custodian of the account. For children 18 years and older (24 and older if a dependent, full-time student), the child’s unearned income is generally taxed at the child’s income tax rate.

* There is limited investment flexibility with these accounts; UGMA accounts are very restrictive in terms of the types of assets they may hold.

* While a transfer to a minor under UGMA or UTMA constitutes a completed gift for federal gift tax purposes at the time of the transfer, if the donor names himself or herself as custodian of the account and that person dies before the child reaches majority, the UGMA or UTMA account assets will be includible in the donor/custodian’s gross estate for estate tax purposes.

Planning Tip: Upon learning that your client is contemplating an UTMA gift or that your client is an UGMA/UTMA custodian, immediately discuss the potential problems with the client and alternatives for funding future expenditures for the child’s benefit.

What To Do With Existing UGMA/UTMA Accounts
On realizing that the now-teenager beneficiary will soon have an absolute right to the account assets, many parents and grandparents who have made significant gifts to an UGMA or UTMA will want to restrict somehow the beneficiary’s access to the account or eliminate the danger. There are at least three ways to accomplish this:

1. The custodian can spend the account funds for the benefit of the beneficiary (ideally other than in satisfaction of the guardian’s legal support obligation to avoid income tax on the gain) before the beneficiary reaches the age at which he can withdraw the funds. Meanwhile, donor funds that otherwise would have been spent for the benefit of the beneficiary can be used to fund an irrevocable Crummey trust for the benefit of the beneficiary (see below).

2. The custodian may be able to give the child an unqualified withdrawal right when the beneficiary attains the age of majority and, upon lapse of the demand right period, invest the funds (on behalf of the child) in an illiquid manner (e.g., in a Family Limited Partnership or Family Limited Liability Company) or (on behalf of the child) transfer the funds to a self-settled trust for the beneficiary that limits the beneficiary’s access. Giving the child an absolute right to withdraw principal should suffice for purposes of vesting. To be on the safe side, the custodian should get the child’s consent to the investment AFTER the child has attained age 18.

3. The custodian could liquidate the UGMA/UTMA account and invest the proceeds in a Qualified Tuition Program (QTP) under Section 529 or another investment. Some of these QTP savings plans grant the beneficiary unrestricted access to the funds upon attainment of the age of majority; however, if the child uses the funds for something other than qualified higher education expenses, they will be subject to tax on the income.

Planning Tip: Techniques 2 and 3 may expose the custodian to a claim from an unhappy beneficiary that the custodian has breached his fiduciary obligation. Be careful!

Planning Tip: If the child is significantly younger than age of majority, the custodian may be able to establish an irrevocable trust for the benefit of the beneficiary, provided the trust gives a demand right window upon the beneficiary’s attainment of age of majority. The existence of the demand right window must be communicated to the beneficiary, preferably immediately on the beneficiary reaching age 18. To protect the custodian, the communication should be in writing and a receipt obtained from the beneficiary.

Planning Tip: If the custodian invests in the name of someone other than the beneficiary (including the custodian’s name), the custodian will arguably have breached his fiduciary duty by usurping property that was the beneficiary’s. However, many parent-custodians are willing to take the risk of a lawsuit filed against them by their children. Counseling the custodian, in writing, is essential to protect the advisor.

Qualified Tuition Programs (529 Plans)
Under Section 529, states can set up two types of plans:

1. Prepaid tuition plans, through which the state guarantees tuition rates, will remain at current levels; and
2. Savings plans, which are essentially state-sponsored mutual funds.

Only cash contributions (checks, money orders, credit cards and similar methods) can be made to a QTP. Contributions are not tax-deductible, but earnings grow tax-free and distributions are tax-exempt if used for “qualified higher education expenses” (QHEEs), which include tuition, fees, books, supplies, equipment, and room and board expenses.

Planning Tip: State laws vary considerably regarding the deductibility of contributions, exemption of earnings, and taxation of non-qualified withdrawals and qualified withdrawals from a plan in another state. Some states, including Alaska and Colorado, provide creditor protection for their QTPs. You will want to be clear on your state’s laws in this area.

Contributions qualify for the annual gift tax and the annual generation-skipping transfer tax exclusions. One of the most attractive gift tax features of QTPs is the contributor’s ability to “front-load” up to five years of gift tax annual exclusions (currently $13,000 per year, or $65,000 total) into the QTP in the first year and allocate to that year and four succeeding years. This allows the QTP funds to begin to grow tax-free while the donor removes up to $65,000 from his or her estate. (Married couples with two children can remove $260,000 (2 x 2 x $65,000) from their estate instantly in one year if they make no other gifts to their children in the five year window.) However, if the donor dies before the fifth year following the transfer, the annual gift tax and GST tax exclusions for years following the year of death are brought back into the donor’s estate for estate and GST tax purposes.

Planning Tip: If the owner changes beneficiaries or effects a “rollover,” the account balance will not be subject to gift tax or GST tax if the new beneficiary is a member of the original beneficiary’s family and is assigned to the same generation (siblings and first cousins included). This can give the owner considerable power over an original beneficiary who is not inclined to pursue the higher education opportunity afforded him or her.

Planning Tip: A trust can be named as successor owner of the account, thereby ensuring that the assets are used in the intended manner, even if the original owner dies or becomes incapacitated.

Coverdell Education Savings Accounts (ESAs)
Education Savings Accounts, formerly Education IRAs, were of little significance until passage of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). EGTRRA made four major changes that made ESAs more attractive and useful:

1. Increased the maximum annual contribution limit from $500 to $2,000 per beneficiary;
2. Increased the AGI limits for maximum contributions to these accounts, currently to $220,000 for a married couple filing jointly and $110,000 for single taxpayers;
3. Allowed a donor to make contributions to an ESA and a 529 plan for the same beneficiary in the same year; and
4. Allowed ESAs to be used to fund primary and secondary school.

ESA funds are to be used for qualified education expenses. Contributions must be made in cash and cannot be made after the beneficiary reaches age 18. The beneficiary’s parent or legal guardian controls the account (regardless of who makes the contributions) until the beneficiary attains the age of majority. A change of beneficiary is tax-free if the new beneficiary is a member of the prior beneficiary’s immediate family or a first cousin.

Contributions constitute a completed gift for gift tax purposes. For estate tax purposes, funds in an ESA are “owned” by the beneficiary and are includible in the beneficiary’s gross estate, not the donor’s.

Planning Tip: Clients should consider contributions to both 529 plans and Education Savings Accounts for the same beneficiary in the same year, to cover educational expenses of primary through higher education.

Planning Tip: ESAs vary significantly by administrator. It is critical that the advisor carefully review the terms of the particular ESA plan in question.

Life Insurance
A cash value whole life or universal life insurance policy generally gives its owner the option of borrowing against the policy’s cash value. Flexible premium universal life and variable universal life policies typically include the option to take partial withdrawals of cash value without triggering loan interest charges.

Withdrawals from a cash value life insurance policy (other than a modified endowment contract) are not subject to income tax until the cumulative withdrawals exceed the cost basis (i.e., the aggregate premium payments on the policy). Policy loans from cash value life insurance policies may be used to avoid current income tax on cash distributions in excess of cost basis. Policy owners may therefore take tax-free withdrawals and tax-deferred loans to pay educational expenses (or for any other use), while the cash value build-up continues to grow tax-free. If the policy continues until death, the income tax-free death benefit will repay any policy loans and the policy’s beneficiaries will receive the remaining net death benefit.

In the event of premature death, the life insurance benefit can complete the planned education funding. The interest rate on policy loans is typically no more than 8%, although the insurance company will credit 6% or more back to the policy’s cash value. If the owner chooses not to pay the interest when due, automatic policy loans to pay the interest charge will further reduce the policy’s cash value and may ultimately cause the policy to lapse.

Planning Tip: Clients should consider the use of flexible, permanent insurance to fund higher education and provide liquidity in the event of a parent’s premature death.

Planning Tip: If owned by an irrevocable trust, life insurance can be free from gift and estate tax, yet serve many planning purposes in addition to funding education.

2503(c) Minor’s Trust
Absent Crummey demand rights, a gift in trust is generally not a gift of a present interest. However, a minor’s trust under Internal Revenue Code Section 2503(c) is a statutory exception to this general rule. To qualify for the annual exclusion, a 2503(c) minor’s trust must meet three requirements:

1. The trust must give the trustee discretion to expend trust principal and income for the benefit of the beneficiary before he or she reaches age 21, without substantial restrictions;
2. The trust principal and undistributed income must pass to the beneficiary when he or she reaches age 21; and
3. If the beneficiary dies before reaching age 21, any remaining trust principal and undistributed income must be paid to the beneficiary’s estate or be subject to a power of appointment.

If the trust meets these requirements, contributions of up to $13,000 per beneficiary per year are not subject to gift tax (unless the donor’s annual gift tax exclusion for the beneficiary is applied to other gifts by the donor to the beneficiary).

For the 2503(c) trust to continue after the beneficiary reaches age 21, the beneficiary must have a reasonable period of time after attaining age 21 to withdraw all of the trust principal and undistributed income. The trust should also grant the minor a testamentary general power of appointment to avoid inclusion in the parent trust maker’s estate if the beneficiary were to die before reaching age 21.

Planning Tip: The third requirement above may serve to defeat the purpose of the trust. If the assets are distributed to the beneficiary’s estate, they will likely pass via intestate succession, often ending up back in the estate of the parent trust maker where the parent trust-maker will have to disclaim them to avoid estate inclusion. Therefore, it is wise for the trust to grant the minor a testamentary general power of appointment. This will result in the trust assets being includible in the gross estate of the minor for estate tax purposes. In the likely event that the minor does not die before reaching age 21, or if he or she does die but does not exercise the testamentary general power of appointment, the trust maker can otherwise control distribution of the trust assets on the beneficiary’s death.

Planning Tip: The donor of a Section 2503(c) minor’s trust should never serve as trustee of the trust. This would cause the value of the trust assets to be includible in the donor’s gross estate for estate tax purposes.

Demand (Crummey) Trust
Demand rights convert what would otherwise be a gift of a future interest to a gift of a present interest, thereby qualifying the gift for the $13,000 gift tax annual exclusion. To qualify, the trustee must adhere to the strict procedure requirements for Crummey trusts: the trustee must notify the minor beneficiary (through the child’s legal guardian) that the donor has made a gift to the trust and give the beneficiary the trust-specified period of time (typically 30 days) to demand a distribution from the trust up to the amount of the gift. If the demand right lapses, the gift will stay inside the trust and continue to be governed by the trust terms.

This demand right allows the trust maker to make contributions of up to $13,000 per year, free of gift tax and possibly GST tax, in the latter case only for the beneficiary’s generation.

Demand trusts remove the trust assets from the trust maker’s estate, even if the trust maker acts as trustee, as long as the trust instrument limits the trustee’s discretion to make distributions to “ascertainable standards,” i.e., the health, education, maintenance and support of the beneficiary (and provided the trust instrument does not give the trust maker too much control over the trust). If a demand right beneficiary dies during the time that a demand right is outstanding, the amount of the outstanding demand right is includible in the beneficiary’s gross estate for estate tax purposes.

Planning Tip: A demand trust is a flexible savings vehicle for education expenses and other expenses set forth by the trust maker in the trust agreement. While typically funded with life insurance, the trust maker can also fund a demand trust with other assets.

Health and Education Exclusion Trust (HEET)
Health and Education Exclusion Trusts are designed specifically to take advantage of the gift tax-free and GST tax-free nature of direct payments to providers for a beneficiary’s health and education expenses. With this type of trust, the donor transfers property to a trust carefully drafted to be exempt from GST tax. Oftentimes the donor establishes the trust in a jurisdiction that permits perpetual trusts because, once exempt from GST tax, the trust can pay direct health and education expenses for grandchildren and their descendants without anyone ever having to pay the onerous GST tax (a tax at the highest federal estate tax rate, currently 35%).

To prevent imposition of GST tax, a HEET must have a charitable beneficiary with a significant interest that is not separate from the non-charitable beneficiaries’ interest.

Planning Tip: The charitable beneficiary requirement of the HEET makes it an unattractive choice for clients who are not charitably inclined or do not have taxable estates and a desire to fund future generations’ health and education expenditures.

Direct Payments
Another educational funding option is for the donor to make transfers directly to an educational institution. Under the Internal Revenue Code, these transfers are not subject to gift, estate, or GST tax. Therefore, prepaid tuition payments by a donor can achieve a significant estate tax reduction. Direct payments are not deductible as a charitable contribution for income tax purposes, however, because they are made for a particular student.

Since only direct payments to the educational institution qualify, it is highly recommended that the donor make contributions to the school while the child is presently enrolled. If the donor wishes to make advance payments for numerous years’ tuition, the donor (and the parent(s) if the donor is the student’s grandparent) should enter into a written agreement with the educational institution providing that the prepayments are non-refundable. In a 1999 Technical Advice Memorandum, the IRS used as an example a situation where the beneficiary’s parent also agreed to pay any tuition and fee increases.

Impact on Financial Aid
For many clients, the availability of financial aid plays a role in the planning process, because assets placed in the student’s name may reduce (or even eliminate) the amount of otherwise available financial aid. According to FAFSA’s 2011-2012 Application and Verification Guide, the need-based financial aid rules state that 12% of the parent’s assets (special rules determine this amount for financial aid purposes) and 20% of the child’s assets are available for education. Therefore, shifting assets from the parent to the student through the use of UGMA/UTMAs, ESAs and 529 plan distributions may reduce the student’s need-based financial aid. Alternatively, life insurance should not impact need-based aid, whereas a demand trust may, depending upon the child’s access through the trust terms.

Planning Tip: Consider strategies that avoid shifting assets to the student to prevent reduction of need-based financial aid.

Conclusion
Numerous options exist for funding educational expenses. As with most planning, no one option is best for all clients in every circumstance and often a combination of options will best meet the client’s needs and objectives. Advisors who understand the options and who can ask the right questions are in a position to assist their clients in an area where there is great demand, and will provide great value to the advisory team.

From Richard M. White

White & Crouch PA

Suite 200 SunTrust Bank Building
5303 Sw 91 Drive Gainesville FL 32608
352-372-1011

Board Certified Wills, Trusts & Estates Attorney

Courtesy of Ajay Makan and Dan McCrum at the FT.

Barclays Capital estimates that based on reporting thus far, earnings growth for S&P 500 companies was 7 percent in Q4. But if you strip out Apple, that plummets to 2.9 percent.

One company, in other words, is responsible for most of the earnings growth among the large cap firms in the index.

“In that case,” says the agent, “yes, dear!”

My comment: The following few paragraphs are the start of a lengthy explanation that deals with the fact that people are living longer these days, and living longer means the next question is where will the money come from to pay for groceries, medical care, shelter, etc. Or do you want to die and get it over with. There’s also a great short video that summarizes the problem.

By Charles Passy

Call it the new death calculus: the 21st-century equation for determining human longevity. Or call it misguided guesswork, as some critics have. Either way, it’s hard to imagine a math problem that has flummoxed humanity for longer. (Actuaries, in fact, have been fumbling for an answer since 1583, when the first life insurance policy was issued.) And it’s even harder to conceive of one with more at stake in the outcome.

The dollar figure affected is so staggeringly enormous that it takes a while just to write out all the zeros. Start with $1.6 trillion, which is the amount currently invested in life insurance annuities — products typically tied to the longevity of the owner. Add another $6.5 trillion. That’s the amount in private and government pension plans, according to the Investment Company Institute. (Were the average U.S. life span to increase by just one year over current government projections, the country’s private pension systems — already struggling to keep pace after the recent market upheavals — would take a roughly $115 billion hit, based on data from Swiss Re, a prominent reinsurance firm, and ICI.)

Now throw in another $4.3 trillion (what Americans have in 401(k)s and other defined-contribution plans), plus $4.6 trillion (what we’ve saved in IRAs), plus $10.5 trillion (the face value of individual life insurance policies in force in the U.S.) and you begin to get a sense of the ante. Leaving aside the matter of Social Security — a 14-digit-dollar question of its own — the pool of money tied to the death calculus is somewhere on the order of $27 trillion.

Read the full article HERE…

And for you and me, the larger question remains: How will this affect the world economies, both in the short and long term, and by extension, the money we are accumulating for college and/or retirement. What steps should we take to protect ourselves?

By Thomas P.M. Barnett | 13 Feb 2012

While the debate over whether Israel will strike Iran ebbs and flows on an almost weekly basis now, a larger collision-course trajectory is undeniably emerging. To put it most succinctly, Iran won’t back down, while Israel won’t back off, and America will back up its two regional allies — Israel and Saudi Arabia — when the shooting finally starts. There are no other credible paths in sight: There will be no diplomatic miracles, and Iran will not be permitted to achieve a genuine nuclear deterrence. But let us also be clear about what this coming war will ultimately target: regime change in Tehran, because that is the only plausible solution.

Read the rest HERE…

Taxes and politics are never far away from my role as a financial planner and investment advisor. And this is a big year for politics. In spite of the efforts of everyone to distinguish themselves from their rivals, I’m a cynic in that I believe the outcome to the world, to this country, and to us here in Gainesville is likely to be much the same regardless of who wins the White House and who controls Congress. The weight of global economics is going to drive the train with an inevitability that no one person or political party can influence greatly.

But, today is “politics day” so…

David Abromowitz

Feb. 9 (Bloomberg) — For all the attention devoted to Mitt Romney’s tax returns last month, one element went largely unnoticed: They directly refute the Republican candidate’s argument that higher tax rates deter capital investment.

Simply put, all of the investments made by Bain Capital LLC, the private-equity company Romney cofounded in 1984 and ran until 1999, occurred when capital-gains rates were much higher than they are today. Yet Bain consistently attracted massive amounts of private capital, and thrived.

Bain’s haul is further evidence that fair tax rates don’t hold back profit-seeking capitalists, at least until those rates reach a point that no one is proposing. From 1984 until 1999, the top rates on capital gains — the profit from investments as opposed to compensation for work — were often at 28 percent, and never lower than 20 percent. Indeed, in 1987, under President Ronald Reagan, the 20 percent rate rose to 28 percent — a 40 percent increase in potential taxation of Bain investment profit. (Yes, Reagan did raise taxes, even on capital.)

An analysis by the Wall Street Journal of 77 Bain deals in that time period showed that the firm “produced about $2.5 billion in gains for its investors,” on about $1.1 billion invested. Clearly, even with capital-gains rates almost double those today, fund managers such as Romney didn’t lack investors.

Others can debate whether the private-equity crucible created more jobs than it destroyed. One thing is certain, though: Investors signing up for a chance to earn, say, a gross $10 million profit on a deal weren’t deterred by the prospect that taxes meant they would only keep a net $7.2 million.

Potential taxes were certainly disclosed to investors, and figured into the expected rate of return. And individual investors might have had offsets, such as the carried-forward losses from other deals reflected in the Romney tax return.

Particularly remarkable is the windfall Romney received from steep reductions in the capital-gains rate that took place after most of the deals he oversaw had closed. In 1997, the rate was cut to 20 percent, from 28 percent. It was reduced to the current 15 percent in 2003.

No one investing in a private-equity deal in 1990 could possibly say they anticipated the rate would be only 15 percent on profit still being paid out in 2010. Applying the reduced rate to deals previously closed couldn’t possibly be viewed as an incentive to investors.

At the same time, because these rate cuts were applied retroactively, the Romney family enjoyed a windfall of about $600,000 each year in lower taxes paid (assuming the Romneys received the same $12 million in income from carried interest and other capital-gains returns since 2001 as they did in 2010).

When multiplied by thousands of similarly situated taxpayers, this after-the-fact tax-cut windfall contributed significantly to the budget deficit, even though its value to the economy remains dubious, as numerous analysts of capital- gains rate cuts have concluded.

At a time of ballooning federal deficits and frayed social safety nets, higher capital-gains rates can contribute meaningfully to deficit reduction and to helping a middle class that is struggling to stay afloat, without hampering good investments in American businesses.

The Romney tax returns vividly illustrate that fair tax rates don’t deter those whom Republicans now routinely call “job creators” from investing.

As Warren Buffett so aptly put it, “I have worked with investors for 60 years and I have yet to see anyone — not even when capital-gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain.”

Conservative commentators will continue to recite their credo that letting the lower Bush-era tax cuts on capital gains expire — and returning to the pre-2001 percent rate of 20 percent — would kill investment and jobs. It will be hard for them to ignore the window provided by Romney’s returns into the real world of private-equity investing and the economy.

(David M. Abromowitz is a senior fellow at the Center for American Progress Action Fund. The opinions expressed are his own.)

 You can borrow money for college, but you cannot borrow money for retirement.

If you are the parent of a child who has yet to become an adult, then you probably understand the pressure that surrounds the effort to graduate from high school, go to college and become a self-sufficient adult.

In our society, getting a college degree is an almost mandatory rite of passage. As parents, we coach, we encourage, we compromise, we do whatever it takes to persuade our children to continue their academic career. Some follow this path naturally, some have to be pushed. But we know in our hearts that having a college degree is likely to make a huge difference in their financial future.

As a financial planner whose focus has shifted to retirement planning as I age and think about my own retirement, my clients have aged and the nature of our discussions has increasingly been about their retirement needs. Think of it as the third major step in our lives, that point where we stop working for money and money has to work for us.

The cost of a college education has increased dramatically over the past few years and there doesn’t seem to be any chance of this trend stopping, much less reversing. Increasingly, parents are looking at the money set aside for retirement to support the needs of their children as they prepare to graduate from high school.

You can borrow money for college, but you cannot borrow money for retirement.

Borrowing money for college is a costly alternative, but it is an alternative. My hope is that before you reach into your retirement stash, you consider positioning your child to be awarded endowment money from whatever school turns out to be the college of choice.

Of the 5000 colleges and universities across the country, all of them have funds available to help them persuade the students they want, to actually enroll, then graduate, and in turn provide funds to help the next generation of students get a college degree.

If you are a parent of a high school student, I encourage you to watch this short presentation. If you have a neighbor, a friend, or family member who is a parent of a high school student, please forward this blog post to them.

The financial rewards to be found using this process are staggering. But you have to know how to work the system. The foundation behind this effort has been involved in this effort for about 30 years. In simple terms, it works. Call or email me with your questions or concerns.

Click on this link now to learn more: CollegeMoneyNow.info

The name of the fund was Keystone S-4, but can you imagine that happening today? There was never a question about fees, about whether I could get my money back. I might have asked but the answer might not have been truthful. There was probably a prospectus that I never read. A few years later I cashed in the account to pay my attorney for something. I have no idea how much it was or whether or not I had a profit; at the time, it was an exciting new thing to do.

Today, after reinventing myself several times over the past 50 years, and sensitive to the needs of my clients, I focus heavily on what we euphemistically call Risk Management. This can take many forms but the objective is to limit the risk of loss that someone is exposed to whenever they invest money. If you minimize the risk, the assumption is you will have a better outcome.

We ( the “advisors” ) have to be very careful about making promises we cannot keep ( or risk being fined and/or driven out of business by the regulators ). I’m sure you’ve been exposed to the phrase “past performance is no guarantee of future performance” or something to that effect. Hell, I don’t know what I’m having for dinner, much less what the markets are going to do next week, next month, or next year!

I do know, however, that past performance allows you to introduce a risk measurement tool that effectively lets you compare disparate investment results. What you get is a number that represents an investment return per unit of risk. It’s called the Sortino Ratio. ( I have no idea if someone named Sortino was involved.)

Essentially, if you have two comparable investment portfolios, and the average return of each over a given time period, you can measure their respective returns in terms of units of risk. The one with the higher number had the greater return per unit of risk.

And while there is no assurance that what happens tomorrow will be the same, it does allow you to maintain a running analysis. And in the hands of people who know what they are doing, that allows you to minimize your losses, and hopefully, increase your chances of making money with your investments.

Which, in the final analysis, is why you take any financial risk at all. In our society, having more money is better than having less money. So you want to take steps to increase your chances of having more money in the future.

My job is to help you take intelligent steps, to help you embrace and manage risk. Because without risk, there is a strong possibility you will have less, since the stuff we need like food and shelter and gas for our cars is going to cost more over time.

Call or email me and I’ll show you an example.

Tony Kendzior, CLU, ChFC

By Steven Rattner for the Financial Times

Amid the finger-pointing about the failures of capitalism, we should not forget the responsibility of governments. They relaxed regulatory requirements, turned a blind eye to dangerous activities and indulged in their own excesses. Capitalism is like an energetic child who needs boundaries and discipline. If a toddler accidentally sets his home on fire, it is the parents who bear the blame. “Capitalism in crisis” could easily be subtitled “government in crisis”.

I am not trying to excuse capitalism or its principal actors from a generous portion of the blame for the pain of the past four years. Serious alterations are needed. But government has also let us down. The eurozone’s mess is hardly the fault of capitalism or the financial system. Public officials who created the euro went ahead with the hare-brained scheme of their own accord. Indeed, many financiers (myself included) proclaimed loudly that the euro was ill-designed and likely to run aground.

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