WHAT IF WE DO GO OFF THE CLIFF?

Will the economic stress be as severe as many assume?

What are the chances of a fiscal cliff deal? Every day seems to bring a new assessment from the media. If a deal isn't reached, what might result for the economy and the markets?1

What's the worst that could happen? For that scenario, we might as well check in with "Dr. Doom." That is the nickname for Nouriel Roubini, the economist who famously predicted the 2008 Wall Street downturn. Earlier this month, Roubini told Bloomberg TV that "there's a highly likely chance we're going to go over the cliff." Come January, "the market reaction is going to force the two sides to reach an agreement." Roubini thinks that even with an agreement, our 2013 GDP will be about 1.7%. On a positive note, he feels that "the [long-term] fundamentals of the U.S. are a lot stronger" than those of other key world economies.2

Roubini's forecast is far from the worst out there. In its gloomiest scenario, UBS sees a 2% contraction in GDP for the first half of 2013 with the S&P 500 trading at 1,000-1,100, demand for the dollar soaring, and prices of metals and energy futures sinking. Morgan Stanley thinks there could be as much as a 5% hit to GDP given that the payroll tax holiday will also likely expire; Bank of America sees anywhere from a 2.5%-4.6% impact on 2013 GDP, with a multi-stage fix for the problem on Capitol Hill wrapping up by April. The Congressional Budget Office's worst-case scenario includes a recession and 9.1% unemployment.3

Could we merely see a fiscal slope, or a fiscal pothole? If a deal is deferred until late January, the economic impact might not be as bad as feared. Congress could end up retroactively preserving the Bush-era tax cuts for most Americans, and the tax increases resulting from the cliff could be struck down.

Here's why it looks like a slope rather than a cliff: the so-called sequester (the $1.2 trillion in planned federal spending cuts) will occur gradually over the next decade rather than instantaneously. If no deal occurs, next year's across-the-board federal spending cuts will total only $109 billion, and they could even be smaller if Congress hastily opts for a package of selective cuts rather than a real fix; one proposal circulating around Capitol Hill this fall only called for slashing $55 billion in 2013, according to Reuters.4

In the fiscal pothole scenario offered by analysts at UBS, small concessions are made on Capitol Hill as 2012 ends (i.e., the payroll tax holiday and long-term jobless benefits expire while taxes increase temporarily), pursuant to a "grand bargain" in 2013 that cuts at least $4 trillion off the deficit in ten years.3

What sector would be hit hardest if there is no deal? As an article at TheStreet.com mentions, the consumer discretionary sector may be significantly impacted without a fiscal cliff fix for 2013. The automotive, apparel and entertainment industries in particular might see waning consumer demand.5

If the economy does fall off the cliff, the effect will probably be felt gradually by businesses large and small. The sudden shock may occur on Wall Street, which in the glass-half-full scenario prices the fall in without bulls fully retreating.

Citations.
1 - news.yahoo.com/reid-u-senate-return-dec-27-no-pre-180003533--business.html [12/20/12]
2 - blogs.marketwatch.com/thetell/2012/12/14/u-s-will-go-over-the-fiscal-cliff-and-markets-will-force-a-deal-nouriel-dr-doom-roubini/ [11/14/12]
3 - www.businessinsider.com/fiscal-cliff-worst-case-scenario-2012-11?op=1 [12/13/12]
4 - www.reuters.com/article/2012/10/22/us-usa-congress-fiscalcliff-idUSBRE89L0YB20121022 [10/22/12]
5 - business-news.thestreet.com/thestreet/story/3-hardest-hit-industries-if-us-goes-off-fiscal-cliff/11797229 [12/20/12]

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.

MERRY CHRISTMAS 2012

Christmas is fast approaching..."the most wonderful time of year", a time to be together and make new memories.

In the hubbub associated with the season, we sometimes forget that the "little things" can represent some of the greatest gifts. When people share their love, time, experience and traditions with others, the true Christmas spirit shines. We can all give (and receive!) these kinds of presents this holiday season.

We hope this time of year is filled with such wonderful gifts for you.

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.

THE SPECIAL NEEDS TRUST

A thoughtful financial move for a loved one with a disability.

If you have a child with special needs or care for an adult relative who is mentally or physically challenged, you face long-run financial demands. In all probability, federal and state assistance won't help you meet all of them.

Enter the special needs trust, an irrevocable trust designed to provide for an individual or family member's supplemental needs, assorted care and lifestyle needs that cannot be met using government assistance. A trustee uses such a trust to make various purchases of goods and services on behalf of a "permanently and totally disabled" person.1

Even wealthy families have these trusts in place - for good reason. Just to offer one example, the Autism Society estimates that 60% of autistic children will require adult services, with the average lifetime cost of care currently around $3.2 million per individual. So a special needs trust may be a wise move.2

These trusts were officially recognized by Congress in 1993; before that, they were established based on case law. They give families a smart alternative to other, potentially flawed arrangements to provide for these individuals over a lifetime.3

It is still common for a sister or brother of a newly disabled person to hold assets that once belonged to their sibling. Too often, these assets became "easy pickings" in a bankruptcy, litigation or divorce. Other families set up pooled trusts for distributing funds to their children, naming all their kids as beneficiaries; this move keeps disabled children eligible for federal and state benefits, but it also invites other siblings to fight over or lay claim to the pooled assets.2,3

Monies in a special needs trust are not exposed to creditors and are still non-countable assets so that the beneficiary can continue to qualify for social services programs and medical benefits.3

How do these trusts function? Trust assets are typically invested in securities, with the resulting income stream being used to pay for the beneficiary's needs. Conceptually, they work according to a sliding needs scale; for example, should government services somehow be able to provide for 100% of the beneficiary's needs, the trust will provide 0% and vice versa.3

The core principle is that the trust assets supplement the government benefits. This holds true if the beneficiary falls into Medicare's "doughnut hole"; it also holds true if the trust buys goods and services to improve and enhance the lifestyle of the beneficiary. The trust does not exist simply to pay for the beneficiary's basic living expenses; it may do more.3

Many of these trusts are funded with life insurance, others with assets from parents or grandparents. Still others are funded using a disabled individual's own assets, or money received from a settlement. (Intended beneficiaries of special needs trusts may not create or revoke them, even if they are mentally competent and pour their personal assets into them.)1

Sometimes parents will establish a special needs trust, yet not fund it until they pass away; a will transfers an inheritance that would go to a disabled child into the trust. The special needs trust can also be designated as a beneficiary of this or that asset, be it a life insurance policy or something else.1

Which requirements must be kept in mind? Here are some basics. The beneficiary of a special needs trust cannot have more than $2,000 in assets in his or her own name (this limit does vary by state). He or she must also be younger than 65 when the trust is established.2,3

In a self-settled trust created with funds owned by the disabled individual, leftover trust assets are wholly or partly paid back to Medicaid after the beneficiary dies to cover its costs for caring for the beneficiary during his or her lifetime. There is no such requirement for third-party special needs trusts funded by parents or grandparents. Assets within these trusts may be transferred to anyone after the death of the first beneficiary.1,2,3

The trust document's language must express a purpose to provide "supplemental and extra care" beyond what government and social services agencies offer to the trust beneficiary (not basic financial support). The trust must also be without a Crummey clause: a proviso allowing future interest gifts to be treated as present interest gifts, thereby making them eligible for the annual gift tax exclusion.3

If you wish for your loved one to have a good quality of life for years to come, a special needs trust may prove instrumental in allowing you to provide it.

Citations.
1 - clsf.info/Articles/Special_Needs_Trust.pdf [9/28/05]
2 - online.barrons.com/article/SB50001424052748704526104578117223803459976.html [12/1/12]
3 - www.nsnn.com/frequently.htm [2011]

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.

TO HARVEST OR NOT TO HARVEST?

The contentious fiscal cliff negotiations in Washington have drawn a lot of attention to taxes; specifically, to the possibility that tax rates on income, capital gains and qualified dividends will go up for many of us, beginning January 1. If there is no tax deal and the automatic increases kick in, people in the 33% tax bracket will find themselves paying taxes at a 36% rate, and those paying at the 35% rate currently would jump up to the 39.6% tax bracket. Capital gains rates, meanwhile, would rise to 20%--plus the 3.8% Medicare tax on investment income for people earning more than $250,000, which actually only applies to amounts over $250,000 in that year.


Some commentators are suggesting that, faced with higher taxes, investors should turn normal tax planning on its head. Instead of harvesting losses in the portfolio to create deductions (and a lower tax bill) in tax year 2012, why not harvest gains at today's low 15% (for most of us) or 0% (for some of us) capital gains rates, and pay MORE in taxes? That way, you would reset the cost basis of the investment up to its sales price, so that the gains would be lower when the investment is sold in the future. Future higher tax rates would be applied to that lesser amount.

Interestingly, there is no wash-sale rule to worry about when you harvest gains. When you sell at a loss, the IRS requires you to wait 30 days before you can buy the same (or a similar) security. When you sell a security that has gained in value, you can buy that investment position back immediately.

For example, suppose that you own stock that is currently worth exactly $30,000, and you paid exactly $20,000 for it more than a year ago. Between now and December 31, you sell the stock and then buy it back again immediately at the same price. Capital gains taxes on that $10,000 gain come to $1,500--rather than the $2,000 you would have had to pay if you had sold the same stock at the same price in January. You saved $500, right?

If you plan to sell the stock in January, and you know for sure that capital gains taxes are going to rise once Congress finishes posturing, then this is a terrific tax-savings strategy. But what if you were planning to hold onto the stock? What if taxes on capital gains stay at their current levels?

Let's look at some of the possibilities. If the current law expires and no tax deal is reached in Washington, then capital gains rates would rise to 20%--except for investments acquired after 2001 and held for at least five years, which would qualify for a special 18% rate. If you have more than $250,000 in yearly income, you might find yourself paying at a 23.8% rate once the Medicare tax is calculated in. And there is a small chance that Congress will decide to do away with the capital gains exclusion altogether, and at the same time raise ordinary income rates back to their former 39.6%.

How long would you have to hold your investment before you'd come out ahead by NOT harvesting gains this year? It depends on the average return on your investment, and also on the future tax rate. The table below offers some scenarios. If capital gains rates go up to 20%, and you achieve an average 7% annual rate of return, then if you hold the investment for five years or more before selling and paying your taxes, your best choice would be to hold for the future. If you plan to sell before that, then taking gains now is your best option.

At the extremes, if you believe that returns will be dramatically lower than 7%, or if you believe that the 39.6% rate will apply to your future capital gains, you'll probably be better off having harvested gains today. At the other (not so extreme) side of the debate, if Congress decides to keep capital gains where they are, then harvesting gains will have increased your 2012 tax bill for no good reason. And if you hold the stock without selling for the rest of your life, then your heirs would receive it at a stepped-up cost basis--the accounting world's fancy way of saying that all the gains you earned during your lifetime would never be taxed.

Of course, this exercise doesn't take into account state taxes or AMT calculations, both of which can make the numbers vastly more complicated without greatly changing the conclusions. Nor does it take into account the trading costs involved in selling investments and then buying them back again. Over the next few weeks, we may get a bit more clarity on how investments will be taxed in 2013 and beyond. We may also see a lot of other people selling their holdings, harvesting their gains and, potentially, putting selling pressure on the investment markets--which (we are not predicting this, only suggesting it as a possibility) could cause share values to drop and make December an especially poor month to sell.

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.

BIG SPENDERS vs. BIG SAVERS

Who would you rather emulate?

You stand at your window and look across the street. Nice house, you think. Nice landscaping. Nice sports car. Nice driveway. New bikes for the kids. Wow, your neighbors are really well off. If only you had that kind of money.

That plain home down the street with the older model sedan parked out front pales in comparison. A couple in their seventies lives there, and the front yard hasn't been spruced up in a decade. Who knows, maybe they struggle just to get by.

If you could somehow look into the financial lives of those two households, you might be surprised. The couple with all the toys might not be as wealthy as the neighborhood perceives, while the vanilla exterior on that humble rancher might hide a multimillionaire next door.

Remember that affluence does not = net worth. When you look across the street at the house of that well-to-do family, you are not necessarily gazing at a portrait of wealth. You are seeing a portrait of their spending habits.

What are they spending their money on? Perhaps, quite literally, a façade; their house may be the best house in the neighborhood, but what of kind of mortgage payment are they grappling with? Are they making payments on that sports car? That vehicle is a depreciating asset (unless they keep it garaged for a few decades). The flat-screen, the pool, the home audio system ... they have put their dollars into things that their neighbors can see. They may be engaging in all-too-common financial behavior: thinking of wealth in terms of material items, spending money on toys instead of their lives.

Real wealth may not be advertised. Perhaps the older couple down the street isn't interested in the hottest new luxuries. Decades ago, they put extra money toward their mortgage; even with housing values currently depressed, their residence is still worth much more than they paid for it. Most importantly, it is paid off.

Maybe they are good savers, always have been. When they were the age of the flashy couple up the street, they directed money into things that their neighbors couldn't see - their investments, their retirement accounts, their bank accounts.

Years ago, they could have lived ostentatiously like that high-earning couple up the street - but instead of living on margin, they chose to live within their means. They saw some of their friends "rent" a luxury lifestyle for a few years, only to lose homes and cars they couldn't really afford. Sometimes the economy or fate had a hand in it, but too often their friends simply made poor decisions.

It could be that it was just more important for them to think about the future rather than the moment. Parenting reinforced that philosophy. Their good financial habits kept their family away from a bunch of bad debts, and helped them build wealth slowly. Indirectly, it also helped their kids, who grew up in a household with less financial stress and with an appreciation and understanding of key financial principles. Now, they are applying those principles to build wealth in their own lives.

Roughly every fortieth American is a millionaire. There are nearly 8 million people with a net worth of $1 million or more in the U.S., and their financial characteristics may differ slightly from what you expect.1

Fidelity's 2012 Millionaire Outlook survey (which polled 1,000 households with $1 million or more in investable assets) notes that 86% of millionaires are self-made. Not so amazing, perhaps, but here is a striking detail. Among the self-made millionaires, the top sources of assets were 1) investments and/or capital appreciation, 2) compensation and 3) employee stock options or profit sharing. Millionaires born into wealth were the most likely to cite entrepreneurship and real estate investing as key factors behind their fortunes.2

According to the survey, the average U.S. millionaire is 61 years old with $3.05 million in investable assets. Fidelity also found that with regard to the financial future, more than (30%) of these millionaires were focused on preserving wealth, rather than growing it (20%).2

What will you spend your money on, tomorrow or today?

As Thomas J. Stanley and William D. Danko noted in their classic study The Millionaire Next Door, the typical millionaire lives on 7% of his or her wealth. That was in 1997; the percentage could be lower today. Call it frugal, call it boring, but such financial conservation may help promote lifetime wealth. Today, with so many enticements to spend your money as soon as you earn it, this mindset may have a lot of financial merit.1

Citations.
1 - www.investopedia.com/financial-edge/0411/why-many-millionaires-dont-feel-rich.aspx#axzz2AM2TWb3m [4/13/11]
2 - www.reuters.com/article/2012/07/19/idUS126070+19-Jul-2012+BW20120719 [7/19/12]

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.

AN ABUNDANT THANKSGIVING WEEK

This is a very special message written by a good friend and colleague, Ed Jacobson. His message could make your Thanksgiving and life a little more joyous. Enjoy the message and Thanksgiving!

Chapter 32:

An Abundant Thanksgiving Week

My mind's been cooking lately about the rapidly-approaching Thanksgiving holiday and the piece I've wanted to write about having An Appreciative Thanksgiving Day. Then a new notion arose: Why not think about an Abundant Thanksgiving Day? I love the concept of abundance. It can refer to financial or material abundance, but it embraces much more than that. I conceive of it as a sense of fullness, ripeness, brimming with life, in various sectors of our lives: financial, familial, spiritual, religious, community, work, health, psychological ...the list of abundance areas goes on and on. In fact, I've created an instrument called the Life Abundance Portfolio© which gives people the opportunity to explore their sense of abundance in a range of key areas in their life. So, let's call it an Abundant Thanksgiving Day, and explore what that might consist of.

When I think of an abundant Thanksgiving, I think first of food. Then my mind goes to the people who have gathered together. Whether it's a small family dinner, a large group of friends and family, or a gigantic church dinner, there's generally good cheer and at the very least a temporary cease-fire. We tacitly agree to put aside our differences and our weapons of mass reactivity. We break bread together, instead of bristling at Aunt Maud or grimly tolerating cousin Max. We enjoy the good fellowship while we can. Someone is likely to say that we should do this more often, and not just on our national Turkey Day.

Instead of simply nodding your agreement, respond instead with "What a wonderful idea! How can we make that happen?" See what energies arise, both in you and others. Maybe a couple of you who have energy around the idea can nominate yourselves as the group to make it happen. It only takes a couple of committed people. Recall Margaret Mead's classic statement: "Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has."

Thinking more about an Abundant Thanksgiving Day, I think about gratitude and thanksgiving, and then about the people who spend Thanksgiving Day either alone, in prison, or in the hospital. Then I call to mind people on a street in a far-off land or, with alarming frequency, in our cities and even our rural areas. It's a stretch for some of us (myself included) to hold the uncomfortable paradox of being surrounded by abundance while knowing that others near and far are so much less blessed materially. I wonder how other people make peace with that paradox, while at the same time asking someone to pass that fabulous-looking stuffing. This Thursday at Thanksgiving dinner with my family, I intend to verbally acknowledge our own bounty and others' lesser material abundance, and vow to do more to contribute somehow more to these unknown others' well-being.

How might we honor the spirit of giving thanks this year in a way that does two things:

•Creates as much appreciation as we can stand, and
•Addresses the question, How can we get more of this sense of appreciation, more days of the year?

Here are a couple of rituals of appreciation and abundance for Thursday, and three for the week leading up to the Big Day:

Thanksgiving Day

1. The host or other Designated Appreciator (the D.A., for short) can tap a glass with a spoon, get everyone's attention, and propose the following: "Could we capture the spirit of Thanksgiving by going around the table (or the room), and each one of us saying two or three things that you feel especially grateful or thankful for today?" And the host or the D.A. models the process by going first, thereby making it safe for people to be personal (and even profound) in their declarations. When everyone who wishes to has taken a turn, it might be appropriate for the D.A. to add, "I wonder if anyone has any thoughts about what we could do to have that sense of gratitude or thankfulness not just today, but more of the time?" And just wait. See what thoughts and insights are offered. If none arise, the D.A. might offer their own thoughts, and leave it at that. And then, of course, pass the stuffing.

2. Alternatively, the host or D.A. can suggest after dinner (if a football game isn't on the TV and if everyone isn't in the throes of a Tryptophan-induced nap) that folks share stories about a time during the past year when they felt especially blessed, in whatever area of their life. Depending on the size of the gathering, it may be best not to go around the room. It might more comfortable and lead to a deeper experience to gather in threes or fours, and give each person a couple or three minutes to tell their story to the listeners, whose job is simply to listen. Afterwards, the D.A. might say, "Wow! Here are some things I learned in listening," relate what he heard, and wait to see who else wants to share.

The Week Before

1. Right now, look within yourself and look around you, and enumerate all the things you're grateful for. Then at dinner this evening, report on your experience, mentioning a few of the items on your gratitude list. Invite others to do the same. Make the point that a day of thanks-giving doesn't have to always fall on the fourth Thursday in November. You might be surprised at who reports, and at what they say.

2. Before Thursday, make an Abundance List. Write down the following Abundance Areas, or make up your own:

•Family
•Work
•Community
•Religion / Spirituality
•Health
•Friends
•Finances
•Stuff ( iPods, a car that works, comfortable shoes, toothpaste)

In one or more of the above areas, list the things you feel abundant about. Place a check mark next to items that you can do something about having more of. You might then jot down specific actions to take. You may find, however, that simply making a check-mark serves to plant it in your mind and prompts you to take action. As always, do whatever works for you.

3. Here's a final exercise to do in your mind's eye before Thanksgiving Thursday: Picture each person you'll be spending Thanksgiving Day with. Mentally make the rounds of the anticipated dinner table. For each person, silently identify what you love most about them, their most admirable qualities, or a memory of a happy time spent with them. Experience the positive feelings that go with these positive memories. Repeat these mental rounds each day before Thursday, and watch what happens. You may find that it increases your sense of anticipation (which we can call Anticipatory Savoring), and your enjoyment of Thanksgiving Day. And because of the positive energy you'll be exuding when Thursday rolls around, you'll be amplifying others' enjoyment of the day.

I wish you and yours a Thanksgiving Week filled with abundance and appreciation. And 364 other days like that.

PRACTICES

1. Apply the first Designated Appreciator ritual during your Thanksgiving dinner, no matter how many people are around the table. Alternatively, apply the second Designated Appreciator ritual after the meal. (You can do either or both Practices even if you're dining alone. It may sound a little weird, but I've done it, and it works.) Almost invariably, when it's over someone will express their thanks for your suggesting the exercise. After acknowledging their appreciation, then ask "How did this work for the rest of you?"

2. Before Thursday, make your own Abundance List. Invite others in your household to make their own lists. On Thursday, suggest that everyone share their lists.

3. Invite members of your household to experience the pre-Thanksgiving guided imagery exercise of picturing who would be seated around the Thanksgiving dinner table. Ask them to share their images. Wonderful things can happen.

•Noting similarities between people in what they anticipate can be very confirming and enriching, and can also increase the savoring when Thursday comes.
•Discovering differences in what is anticipated can broaden everyone's sense of abundance, and can also increase people's understanding of each other's frame of reference -- always a good thing.

4. At least once per month, review your own Abundance List. See what happens when you de-link it from a milestone event like Thanksgiving and make it part of your ongoing routine.

5. Invite your family to conduct a monthly review of everyone's Abundance List. It can become a meaningful family ritual.

This chapter excerpted from Appreciative Moments: Stories and Practices for Living and Working Appreciatively. iUniverse, 2008. Permission of the author.

Here's a thought: signed copies of Appreciative Moments make a thoughtful holiday gift for family, friends, colleagues, and clients. Interested? Contact me at ed@edwardjacobson.com.

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO ED JACOBSON.

NEGOTIATING A PATH AWAY FROM THE EDGE

We're hearing a lot about the fiscal cliff in this post-election time period, and surprisingly, considering the angry partisanship of the campaign, some of the news is encouraging. The White House and Congressional leaders, elected officials from both sides of the aisle, are saying that they believe they can reach agreement before the end of the year.

What is this fiscal cliff? The term refers to a lot of different tax and budget provisions that are all scheduled to take place automatically at midnight on December 31. These include:

Higher tax rates. When the clock strikes twelve, the Bush-era tax cuts will expire, eliminating the 10% tax bracket altogether, and moving the current 25%, 28%, 33% and 35% brackets up to 28%, 31%, 36% and 39.6% respectively. At the same time, the 0% capital gains tax rate for lower-bracket Americans would bump up to 10%, and the tax rate on dividends would rise to 15% or 28%, depending on the recipient's income tax bracket.

The loss of deductions--including a provision that eases the so-called "marriage penalty," some deductions for college tuition, child tax credits, dependent care credits and a particularly harsh phase-out that would eliminate up to 80% of some taxpayers' itemized deductions for mortgage interest, state and local taxes, and charitable donations.

Random across-the-board budget cuts that nobody intended to see enacted. The Budget Control Act of 2011--what most of us remember as the tense compromise that ended last year's budget standoff--calls for automatic government spending cuts of $1.2 trillion from the federal budget over the next 10 years. The cuts apply to just about every discretionary (non-Social Security, Medicare, Medicaid) program in Washington, although most of what you're hearing about are reductions in the defense and education budgets.

The expiration of stimulus measures: The Obama-era payroll tax cuts will go away, raising taxes by about two percentage points for workers.

Why do we call this a "cliff?" Because everything on that list would take money out of the hands of taxpayers and, at the same time, lower government spending-essentially providing the U.S. economy with the opposite of a government stimulus, what some have called a hard punch in the gut. The Congressional Budget Office estimates that if we go over the cliff--that is, if Congress and the President don't act between now and the end of the year--a total of $560 billion would exit the economy. The CBO estimates that this would reduce America's total economic activity in 2013 by four percentage points. Hello recession!

So what are the odds that Washington will get its act together and choose a course that doesn't take us over the cliff? As it happens, there is reason to hope. Leaders on both ends of the partisan divide agree on many things in this negotiation: that the tax cuts are too painful and random to allow in their present form, and that tax rates on American taxpayers with less than $250,000 in income should continue as they are today. The sticking points are if or how much tax rates should rise for Americans in the higher tax brackets, and where to apply the budget knife.

This rare moment of meaningful negotiation offers Washington policymakers a chance to expand the discussion and come up with a long-term solution to the nation's debt problem-which is, after all, the topic of debate which led Congress to create this fiscal cliff in the first place. If you're optimistic, then cross your fingers that the leaders in the room will want to do something more with this conversation than just address the immediate problem.

As you follow the debate, pay attention to whether our elected officials are actually tackling the issues or just kicking the can down the road yet again. If you hear discussion about permanent laws, such as a balanced budget amendment, or a framework that forces Congress to offset any expenditures with cuts elsewhere, or a change in tax rates, or some kind of entitlement reform (Means testing? Raising eligibility ages?), that will be a sign that Washington is getting serious about addressing real issues.

If, on the other hand, you hear about caps on future appropriation bills, or frameworks for deficit cutting, or solutions which sunset in 12 or 24 months, that means that we'll be going through a version of this debate for the foreseeable future, and the can could be kicked, once again, far enough down the road to become a 2016 Presidential election issue and a headache for the next President to deal with.

We should also pay attention to the timing. The longer the U.S. economy continues to march straight toward the edge, the longer businesses will be reluctant to hire or invest in the future. But for now, this moment may be something to enjoy. How often do we see Democratic and Republican leaders in the same room together, promising to get something done? Maybe it will become a habit.

Sources:
http://news.yahoo.com/blogs/ticket/obama-lawmakers-hold-constructive-talks-taxes-deficit-174256300--politics.html
http://www.smartmoney.com/taxes/income/how-the-expiring-bush-tax-cuts-affect-you/
http://bonds.about.com/od/Issues-in-the-News/a/What-Is-The-Fiscal-Cliff.htm

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.

SOME FISCAL CLIFF SCENARIOS

What could play out in the near future?

Will 2013 be as severe as some economists think? The fiscal cliff is getting closer and closer. How will Congress respond?

In the worst-case scenario, Congress argues and deadlocks. Tax hikes and roughly $109 billion in federal spending cuts take a bite out of GDP and another recession becomes a possibility.1

There are other possibilities, however. The fiscal cliff may yet be averted, or at least we might back away from its edge. One of several scenarios might come to pass.

Scenario A: Congress buys time. Many analysts think this is exactly what will happen. Congress is in a lame-duck session. The option for legislators to "pass the buck" may prove tantalizing. So we could see a short-term, stopgap deal with the idea that the next session of Congress will tackle the problem later in 2013. The debt ceiling could be raised, and a "down payment" might be made on longer-term liabilities.1

Scenario B: Congress can't make a deal. This may not be so improbable; if you remember the "super committee" assigned to craft a deficit reduction plan in 2011, you will also remember that it didn't accomplish the set task. In fact, we are facing the fiscal cliff because of that committee's failure.2

The "fiscal cliff" already amounts to Plan B. When Congress and the White House reached an accord to raise the debt ceiling back in August 2011, $1 trillion in federal spending cuts were greenlighted and Congress was told to find $1.2 trillion more to slash. As that didn't happen, $1.2 trillion in automatic cuts are set to begin next year. So Congress would actually be following federal law if it did nothing to respond to the issue.2

Doing nothing seems unsuitable, but there is the risk that history could repeat itself. Election outcomes may alter political assumptions and interfere with consensus. If it looks like we will go over the cliff in the waning days of 2012, there is a strong possibility that the incoming 113th Congress could vote quickly to reinstate select spending levels and tax breaks. That might mute some of the clamor from global financial markets.3

Scenario C: Middle ground is reached. Some degree of compromise occurs that leaves no one particularly satisfied. Certain short-term provisions are phased out, such as the payroll tax holiday, the recent increases for small business expensing, and assorted tax credits and tax breaks for education. The Bush-era tax cuts are preserved (at least temporarily) for the middle class, but rates rise for those making $1 million or more per year. The clock turns back to 2009 with regard to estate taxes. The rich face higher taxes on capital gains and dividends. Perhaps some defense cuts are postponed.

Scenario D: The "Grand Bargain." Congress and the White House boldly arrive at a something more than an incrementally enacted deficit reduction plan. They reach a "grand bargain," a deal designed to cut the deficit by $4 trillion by the mid-2020s, after historic, long-range compromises are made to reach stability on assorted tax and spending issues. With a lame-duck Congress, this may be a longshot.1

Scenario E: The "Down Payment." Legislators could always tear a page from another playbook in trying to solve this problem. The Bipartisan Policy Center, for example, thinks a "grand bargain," or anything approximating a real deal on the fiscal cliff, is unlikely given the short interval between the election and 2013. It recommends a "down payment" of deficit cuts that could be approved by a fast-tracked simple majority vote. If Congress didn't take further steps to cut the deficit next year, then certain tax breaks would disappear and cuts would hit social welfare programs (excepting Social Security).2

Whatever happens in Washington, this is a prime time to consider financial moves with the potential to lower your taxes and insulate your wealth. Explore the possibilities before 2013 arrives.

Citations.
1 - articles.marketwatch.com/2012-10-25/economy/34719282_1_fiscal-cliff-tax-cuts-defense-cuts [10/25/12]
2 - thehill.com/blogs/on-the-money/budget/262893-bipartisan-policy-center-floats-fiscal-cliff-solution [10/12/12]
3 - www.salon.com/2012/11/01/a_look_at_3_scenarios_as_the_fiscal_cliff_looms/singleton/ [11/1/12]

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.

POST-ELECTION POLITICS: THE 30-YEAR MISSION

One of the most interesting aspects of every presidential election is the inevitable post-election trauma suffered by the roughly 50% of Americans who supported the unsuccessful candidate. Those of us with long memories will recall Americans vowing they would leave the country after George W. Bush won the disputed 2000 election, and again four years later. Judging by President Bush's extremely low profile during the 2012 presidential election campaign, his eight years in office were not considered an unqualified success even by his own party. Yet the country has survived, and one can predict with confidence that it will weather any political issues (and policies) that arise during a second Obama presidency.

In fact, if the citizens whose candidates won can come down from their highs, and those whose candidates lost can shake off the depression, they would notice that the country's economic system has been remarkably resilient despite the dysfunctional political process that virtually everybody, on both sides of the spectrum, rightly deplore. Despite the selloff the day after the recent election, the American stock market has actually delivered better performance under Democratic than Republican presidents--for no visible economic reason. (The accompanying chart shows the evidence pre-Obama.)

The biggest economic problems that America faces today have actually accrued slowly, gradually, and under the stewardship of multiple presidents from both parties. There is some evidence that the U.S. electorate doesn't yet understand the high cost of avoidance, of political one-liners offered by candidates from both parties that have trivialized very real long-term problems or suggested that they can be solved quickly if the right person is elected.

Fortunately, it is possible to understand the nature of these bigger-picture, bigger-than-a-sound-bite problems--and the solutions. You just have to put up with a lot of charts.

The charts can be found here: http://www.businessinsider.com/politics-economics-facts-charts-2012-6#
courtesy of Business Insider. What you see first is a long, relatively smooth avenue of growth in the U.S. economy since 1947, punctuated by a significant drop in 2008 and a recovery to the former highs since then. A second chart shows real per capita income--the amount of money, inflation-adjusted, that the average worker takes home, and here we see a bigger drop for a longer period of time. Perhaps the most remarkable chart shows essentially the same thing for corporations: you see a very steep drop in corporate profits after tax from 2008 through 2010. But then, unlike the worker income, corporate profits zoom back up again, surpassing record highs. What is most remarkable is that most of the rise in corporate profits--literally much more than half--has been recorded in the last 11 years. Before that, corporate profit growth was slow and steady. In the past decade, it has been very uneven and spectacularly fast. The next chart shows that companies are making more profit per dollar of sales than ever before.

The next set of graphs is about jobs, and you see a big drop in civilian employment as a percentage of the total population during the recession, which bottomed out in 2010 and continues to scrape along at roughly 58%--well below the late 1990s high of 64%. But if you look at the chart as a whole, those high employment rates were a historical anomaly. The current total employment-population ratio is actually higher than it was at any time from 1940 to 1976, and is well above levels in the early 1980s. In the following chart, we see that wages as a percent of the economy have reached an all-time low (roughly 44%). Companies are sharing less of their revenue with employees than ever before.

What about debt and spending levels? You already know that total debt in our economy is at an all-time high, although it has leveled off since 2008. In subsequent charts, this is broken down into household debt, corporate debt, state and local debt, and federal government debt. All of them have risen dramatically over the past 30 years; the lines practically jump off the page. So, of course, you look for where to cut. A chart looks first at the number of state and local workers, and finds that they now represent about the same percentage of total U.S. employees as there have been for the last 40 years. The next chart--the 39th in the series, shows that, despite what you may have heard about a ballooning Washington bureaucracy, the total number of federal government employees has held steady for nearly 50 years, and is actually below levels in the late 1960s. Looked at another way, federal government workers now make up a smaller percentage of the total workforce than at any time since the 1940s.

The federal debt problem is not complicated: charts show that spending has gone up as federal tax revenue (due to the recession and slow recovery) has fallen dramatically. The most interesting subsequent chart shows that by far the biggest contributor to the increase--really, the reason there has been any increase at all--has been an explosion in the cost of Social Security, Medicare and Medicaid. You look at the line rising from 1960 through 2011 and it looks a bit like the slope of the Matterhorn: straight up. These programs now make up a record 16% of all American economic activity--up from roughly 4.5% in 1960. And, of course, every year sets a new record.

The inescapable conclusion of this economic graphic slideshow is that corporations have done very well during the four-year term of a president who business leaders have accused of being a socialist. Individual workers have suffered under what many have called a "populist" president. Overall debt has leveled off, but somehow, the U.S. is going to have to gradually fix the out-of-balance social programs, by reducing benefits and collecting more revenue to pay for them.

The slide show commentary suggests that it took us 30 years to get into this mess; it may well take us 30 more to climb back out of it. Let's see; that covers the span of between four and seven future presidents, and the White House will almost certainly change hands (or parties) several times over that time period. We will need all of them, plus Congress, to recognize what you now know. And we will need all citizens, even those who were disappointed by the recent election, to continue to push for meaningful solutions rather than take their money and vote to Canada.

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc. wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.

THE ONE PERCENT SOLUTION

During the run up to the Presidential and Congressional elections, you might sometimes get the idea that certain voters line up reliably behind certain policies. In fact, the biggest stereotype has been that people with above-average wealth -- the so-called "one-percenters" -- never want to pay any taxes. Instead, corporate executives and financial leaders expect the government to reduce spending, and somehow reduce the federal deficit without calling on them to make a contribution.

But in the real world, business leaders are trained to apply business logic to the problems in front of them, and when they look at the challenges facing America's finances, the conclusions they're coming to don't fit neatly along partisan lines.

For example? Recently, a coalition of more than 80 CEOs of major U.S. corporations have joined together to tell Congress that it needs to find a bipartisan solution to the so-called "fiscal cliff" -- the changes in tax law and the federal budget that will take place at midnight, December 31. Longer term, they have asked Washington to address the deficit in a realistic way. The group, which includes such one-percenters as the CEO of General Electric, Boeing, Verizon, Aetna, Microsoft, Cisco, Blackrock and Goldman Sachs, has publicly argued that, despite the "no new taxes" pledge that many in Congress have signed, raising taxes in some form is inevitable if we are serious about paying down the federal debt. So far, the coalition has raised $29 million to carry this "raise taxes" message to various Congressional districts.

The One Percent Solution came right out of their respective accounting departments. The CEOs say that it makes no mathematical sense to try to fix the deficit without raising taxes, but they also believe there is a significant amount of waste in current government spending. The group has asked Congress to follow a deficit reduction model similar to the Simpson-Bowles deficit reduction committee recommendations, which called for both spending cuts and temporarily higher taxes which fall hardest on persons with the most income and wealth.

Why would the one-percenters lobby for a higher tax bill? Interestingly, their letter makes clear that they are not necessarily putting the good of the country ahead of their own interests, but they are putting the welfare of their companies first. They say that the looming fiscal cliff and uncertainty over the budget is costing their corporations meaningful business. Goldman Sachs cited a report which shows that capital spending has weakened over the past few months, and 6-month forward capital spending levels have fallen to pre-recession levels.

Meanwhile, another group of one-percenters are asking for similar measures. The Financial Services Forum -- which brings together the nation's largest banking institutions -- has sent a letter to the White House and Congress asking them to negotiate a bipartisan deficit agreement as soon as possible -- and the term "bipartisan" is clear code for "we will accept Democratic proposals to raise taxes as part of the deal." The letter repeats warnings that have been sounded by Fed Chairman Ben Bernanke, the Congressional Budget Office, various ratings agencies and even the Chinese government.

The CEOs of big banks and big businesses would almost certainly benefit personally from lower tax rates. Their respective calls to action suggest that the threat of inaction on the economy has finally become too dire to ignore. America's one-percenters, who have been spoken for throughout the election cycle, and now speaking out on their own, saying they are willing to sacrifice a bit of their own income to help the country climb out of its fiscal woes and restore economic growth and prosperity. It is possible that forecasts delivered by their own accounting departments suggests that higher economic growth will more than pay for the temporary cost of higher taxes -- in the long run.

Economists and accounting professionals from these various firms are sitting down with members of Congress through the remainder of the year to help explain not just the importance of these fiscal issues, but also the best, most realistic ways to move past them. Dare we hope that Congress will finally listen?

Sources:
http://yhoo.it/T1zTBv
Big Banks Blast Washington

http://on.wsj.com/TLTzz1
Business Leaders Press Congress to "Fix the Debt"

http://onforb.es/VJfMjv
80 CEOs to Obama and Romney

http://yhoo.it/WLyjL9
CEO's Launch Campaign

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.

THE AFTERMATH OF SANDY

Gauging the economic and market impact of the storm.

Hurricane Sandy's fury has exacted a considerable and tragic toll. Even with the relief efforts now underway, it will be some time before things return to normal in many communities. How has Sandy impacted Main Street, Wall Street and the broader economy?

Repairing Main Street. How do you begin to total the damage from a storm affecting 20% of the U.S. population?1

EQECAT, a risk-modeling firm, thinks it could run as much as $10-$20 billion, with $5-$10 billion reflecting insured losses. This is an important distinction, as many analysts feel a tally of $10 billion or less in covered losses could have a comparably diminished effect on the insurance industry beyond the fourth quarter. However, respected University of Maryland economist Peter Morici told MarketWatch that total losses could reach $35-45 billion if the superstorm ultimately proves more powerful than Hurricane Irene... exactly how Sandy was being described the morning after. That would fall well short of the economic hit from Hurricane Katrina, from which the damage totaled about $108 billion; 1992's Hurricane Andrew was responsible for roughly $60.5 billion of destruction. Federal government officials say they have about $3.6 billion ready to pay for relief efforts.1,2,7

If there is any good side to this, it is that the collective response to Sandy's destruction may amount to an economic stimulus. MarketWatch notes that as much as $20 billion could be spent over the next 12 to 24 months on new construction, remodeling and renovation, which could further invigorate the construction industry, indirectly aid the job market, and bring about increased consumer spending.1,2

Resuming trading on Wall Street. Will the New York Stock Exchange's goal of reopening Wednesday morning turn out to be realistic? Just in case, NYSE Euronext will test a backup plan Tuesday morning, a plan B that could permit trading in case things aren't up to speed by Halloween. In this scenario, NYSE Arca would become the primary market for New York-listed stocks - we're talking about the NYSE's electronic market that could operate even if its trading floor or headquarters were closed for the day.3

As for Tuesday, all NYSE and NASDAQ exchanges will close across all asset classes. While the CME Group's Nymex floor will be closed today, its products are still available electronically. CME Group opened trading of equity-index futures and options Monday night, but that trading ended early today; however, trading of interest-rate futures and options will resume with normal trading hours. The CBOE and CBOE Futures Exchange are shuttered today; CBOE Holdings will update traders if the closure is forced to stretch into Wednesday.3

With the end of the month coming, there is extra impetus to get the market open - fund managers need to adjust holdings before November starts.

What about earnings and the October jobs report? Many corporations are delaying the release of third-quarter earnings reports. Hertz, Spirit, and Waste Management will now report quarterly results on Wednesday; Pfizer, Pitney-Bowes, Ralph Lauren, Sirius XM, and TripAdvisor will follow suit Thursday; McGraw-Hill and Thomson Reuters will now report Q3 earnings on Friday. Time Warner Cable will announce Q3 results on November 5, and Office Depot is delaying issuing its Q3 results until November 6.4

"Our intention is that Friday will be business as usual," Labor Department public affairs specialist Jennifer Kaplan told CBS News regarding the release of October's employment report. While noting that the severity of the storm might hinder some of the report's final calculations, Labor Department officials are hopeful that the report can be released as scheduled November 2 (at 8:30am EST).5

Fuel prices. U.S. natural gas consumption could be greatly tempered this week, and prices may move significantly. New Jersey, Pennsylvania and Delaware are home to five of the most important gasoline refineries on the east coast, but analysts feel they could rebound decently from any storm-related problems. While RBOB gas futures rose Monday as traders assumed some disruption in supplies, it appeared the bigger blip might be demand, with commuting and trucking patterns potentially thrown out of whack for days.6

As to whether drivers might see a violent spike in gas prices, the Oil Price Information Service's Tom Kloza dismisses the notion: "My hunch is we'll get a wobble higher in the next couple of days, and then resume [heading] lower."6

After the stress of this superstorm, we can only hope that its economic effect will not be as severe as some anticipated.

Citations.
1 - online.wsj.com/article/SB10001424052970204840504578086290411855054.html [10/29/12]
2 - marketwatch.com/story/big-storms-rarely-dent-economy-for-long-2012-10-29 [10/29/12]
3 - www.businessweek.com/news/2012-10-29/u-dot-s-dot-stock-trading-canceled-as-new-york-girds-for-storm [10/30/12]
4 - www.cnbc.com/id/49596291 [10/29/12]
5 - www.cbsnews.com/8301-505123_162-57542196/will-hurricane-sandy-delay-the-jobs-report/ [10/29/12]
6 - www.cnbc.com/id/49596291 [10/29/12]
7 - http://www.reuters.com/article/2012/10/30/us-storm-sandy-insurance-idUSBRE89T0WT20121030 [10/30/12]

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.

YOUR ANNUAL FINANCIAL TO DO-LIST 2013

Things you can do before and for 2013.

What financial, business or life priorities do you need to address for 2013? Now is a good time to think about the investing, saving or budgeting methods you could employ toward specific objectives. Some year-end financial moves may prove crucial to the pursuit of those goals as well.

What can you do to lower your 2012 taxes? Before the year fades away, you have plenty of options. Here are a few that may prove convenient:

*Make a charitable gift before New Year's Day. You can claim the deduction on your 2012 return, provided you use Schedule A. The paper trail is important here.

If you give cash, you need to document it. Even small contributions need to be demonstrated by a bank record, payroll deduction record, credit card statement, or written communication from the charity with the date and amount. Incidentally, the IRS does not equate a pledge with a donation. If you pledge $2,000 to a charity in December but only end up gifting $500 before 2012 ends, you can only deduct $500.1

Are you gifting appreciated securities? If you have owned them for more than a year, you will be in line to take a deduction for 100% of their fair market value and avoid capital gains tax that would have resulted from simply selling the stock, fund or bond and then donating those proceeds. (Of course, if your investment is a loser, then it might be better to sell it and donate the money so you can claim a loss on the sale and deduct a charitable contribution equivalent to the proceeds.)1

Does the value of your gift exceed $250? It may, and if you gift that amount or larger to a qualified charitable organization, you will need a receipt or a detailed verification form from the charity. You also have to file Form 8283 when your total deduction for non-cash contributions or property in a year exceeds $500.1

If you aren't sure if an organization is eligible to receive charitable gifts, check it out at www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check.

*Contribute more to your retirement plan. If you haven't turned 70½ and you participate in a traditional (i.e., non-Roth) qualified retirement plan or have a traditional IRA, you can reduce your 2012 taxable income by the amount of your contribution. If you are self-employed and don't have a solo 401(k), a SIMPLE plan or something similar, consider establishing and funding one before the end of the year. Also, keep in mind that your 2012 tax year contribution to an IRA or solo 401(k) may be made as late as April 15, 2013 (or October 15, 2013 if you file Form 4868).2

In 2012, you can contribute up to $17,000 in a 401(k), 403(b) or profit-sharing plan, with a $5,500 catch-up contribution also allowed if you are age 50 or older. You can put up to $11,500 in a SIMPLE IRA in 2012, $14,000 if you are 50 or older.3

*Make a capital purchase. If you buy assets for your business that have a useful life of more than one year - a truck, a computer, furniture, a rototiller, whatever - those purchases are commonly characterized as capital expenses. For 2012, the Section 179 deduction can be as much as $139,000 (although it is ultimately limited to your net taxable business income). First-year bonus depreciation is set at 50% for most purchases of new equipment and software in 2012. The way it looks now, the 2013 deductions may be much less generous.2,4

*Open an HSA. If you work for yourself or have a very small business, you may pay for your own health coverage. By establishing and funding a Health Savings Account in 2012, you could make fully deductible HSA contributions of up to $3,100 (singles) or $6,250 (married couples). Catch-up contributions are allowed if you are 50 or older.2

*Practice tax loss harvesting. You could sell underperforming stocks in your portfolio - enough to rack up at least $3,000 in capital losses. If it ends up that your total capital losses top all of your capital gains in 2012, you can deduct up to $3,000 of capital losses from your 2012 ordinary income. If you have over $3,000 in capital losses, the excess rolls over into 2013.2

Are there other major moves that you should consider? Your to-do list might be long, for much financial change may occur in 2013...

*Pay attention to asset location. Here are two big reasons why tax efficiency should be a priority as 2012 leads into 2013:

Next year, dividend income is slated to be taxed as regular income. So tax on qualified stock dividends could nearly triple for the wealthiest Americans.

Capital gains taxes for high earners are scheduled to jump 33% in 2013. Long-term capital gains are now taxed at 15% for those in the highest four income brackets; that rate is supposed to rise to 20% next year.5

*Can you contribute the maximum to your IRA on January 1? The rationale behind this is that the sooner you make your contribution, the more interest those assets will earn. If you haven't made your 2012 IRA contribution, you still have until April 15, 2013 to do that.6

In 2012 you can contribute up to $5,000 to a Roth or traditional IRA if you are age 49 or younger, and up to $6,000 if you are age 50 and older (though your MAGI may affect how much you can put into a Roth IRA).3

What are the income limits on tax deductions for traditional IRA contributions? If you participate in a workplace retirement plan, the 2012 MAGI phase-out ranges are $58,000-68,000 for singles and heads of households and $92,000-112,000 for couples.3

*Should you go Roth before 2013 gets here?We all know federal taxes are poised to rise next year, but one little detail isn't getting enough publicity: the planned 3.8% Medicare surtax scheduled to hit single/joint filers with AGIs over $200,000/$250,000 will not apply to qualified payouts from Roth accounts.7

MAGI phase-out limits affect Roth IRA contributions. In 2012, phase-outs kick in at $173,000 for joint filers and $110,000 for single filers. Should your MAGI prevent you from contributing to a Roth IRA at all, you still have a chance to contribute to a traditional IRA in 2012 and then roll those assets over into a Roth.7

Consult a tax or financial professional before you make any IRA moves to see how it may affect your overall financial picture. If you have a large traditional IRA, the projected tax resulting from the conversion may make you think twice.

What else should you consider as 2012 turns into 2013? There are some other important things to note...

*Payroll taxes are slated to increase 2% next year.The payroll tax cut of 2011-12 has slim chance of extending into 2013. The maximum payroll tax paid by high earners is slated to be $7049.40 next year, $2,425 above 2012 levels. That isn't just because Social Security taxes for employees are returning to the 6.2% level; it also reflects a 3.3% increase in the upper salary limit subject to the tax to $113,700.8

*Review your withholding status. Aside from the presumed end of the payroll tax holiday, there are other reasons you may want to adjust your withholding status...

•You tend to pay a great deal of income tax each year.
•You tend to get a big federal tax refund each year.
•You recently married or divorced.
•A family member recently passed away.
•You have a new job at a much greater salary.
•You started a business venture or became self-employed.

*If you are retired and older than 70½, remember your RMD. Retirees over age 70½ must take Required Minimum Distributions from traditional IRAs, Roth IRAs and Roth 401(k)s and all employer-sponsored retirement plans by December 31, 2013. The IRS penalty for failing to take an RMD equals 50% of the RMD amount.9

If you have turned or will turn 70½ in 2012, you can postpone your first IRA RMD until April 1, 2013. The downside of that is that you will have to take two IRA RMDs next year, both taxable events - you will have to make your 2012 tax year withdrawal by April 1, 2013 and your 2013 tax year withdrawal by December 31, 2013.9

Plan your RMDs wisely. If you do so, you may end up limiting or avoiding possible taxes on your Social Security income. Some Social Security recipients don't know about the "provisional income" rule - if your modified AGI plus 50% of your Social Security benefits surpasses a certain level, then a portion of your Social Security benefits become taxable. For tax year 2012, Social Security benefits start to be taxed at provisional income levels of $32,000 for joint filers and $25,000 for single filers.10

*Consider the tax impact of any 2012 transactions.Did you sell real property this year - or do you plan to before 2012 ends? Did you start a business? Are you thinking about exercising a stock option? Could any large commissions or bonuses come your way before January? Did you sell an investment held outside of a tax-deferred account? Any of this might significantly affect your 2012 taxes.

*Would it be worth making a 13th mortgage payment this year?If your house is underwater, there's no sense in doing it - and you could also argue that the dollars might be better off invested or put in your emergency fund. Those factors aside, however, there may be some merit to making a January mortgage payment in December. If you have a fixed-rate loan, a lump sum payment can reduce the principal and the total interest paid on it by that much more.

*Are you marrying in 2013?If so, why not review the beneficiaries of your workplace retirement plan account, your IRA, and other assets? In light of your marriage, you may want to make changes to the relevant beneficiary forms. The same goes for your insurance coverage. If you will have a new last name in 2013, you will need a new Social Security card. Additionally, you and your spouse no doubt have individually particular retirement saving and investment strategies. Will they need to be revised or adjusted with marriage?

*Are you coming home from active duty? If so, go ahead and check the status of your credit, and the state of any tax and legal proceedings that might have been preempted by your orders. Make sure your employee health insurance is still there, and revoke any power of attorney you may have granted to another person.

Talk with a qualified financial or tax professional today. Vow to focus on being healthy and wealthy in the New Year.

Citations.
1 - news.cincinnati.com/article/20120919/BIZ/309190108/Businesswise-Make-most-charitable-contributions [9/19/12]
2 - www.inman.com/buyers-sellers/columnists/stephen-fishman/5-things-you-can-do-now-lower-your-2012-tax-bill [10/11/12]
3 - www.irs.gov/Retirement-Plans/COLA-Increases-for-Dollar-Limitations-on-Benefits-and-Contributions [8/2/12]
4 - www.bkd.com/articles/2012/tax-depreciation-changes-coming-in-2013.htm [3/12]
5 - www.thenewstribune.com/2012/10/02/2317249/consider-selling-investments-soon.html [10/2/12]
6 - www.sacbee.com/2012/09/28/4862291/tax-help-program-needs-volunteers.html [9/28/12]
7 - online.wsj.com/article/SB10001424052702304072004577325551162426954.html [10/11/12]
8 - www.forbes.com/sites/janetnovack/2012/10/16/social-security-benefits-to-rise-1-7-workers-face-up-to-2425-payroll-tax-hike/ [10/16/12]
9 - www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Required-Minimum-Distributions#2 [8/2/12]
10 - www.socialsecurity.gov/planners/taxes.htm [10/18/12]

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.

WILL THE MARKET LOSE MOMENTUM?

Some analysts question how well stocks can perform this fall.

Are fresh headwinds buffeting Wall Street? Stocks performed surprisingly well in the first three quarters of 2012, but developments in the fourth quarter are giving analysts pause. While no one sees the bulls turning tail and running, there are emerging factors that may challenge their advance in the near term.

This earnings season isn't shaping up so well. The Wall Street Journal believes it will be the poorest we've seen in almost three years, with an overall decrease in profitability for S&P 500 firms. Thomson Reuters has forecast a 2.9% drop in earnings. Alcoa kicked it off by beating estimates, but it cited lessening demand in China for aluminum. Then, Chevron warned the market that its earnings would be "substantially lower" than what was forecast. Even shares of some market leaders have declined in value since September.1,2

The IMF sees some gloom ahead. On October 11, International Monetary Fund director Christine Lagarde stated that the "slowdown of economic growth is affecting not only advanced countries but also emerging countries, particularly in Asia." This comment came on the heels of the IMF downgrading its global growth forecast for 2012 and 2013; it now projects global GDP of 3.3% this year and 3.6% next year.3,4

Political question marks abound. The presidential race has narrowed in the last couple of weeks, and that has added another degree of uncertainty to the future of the Bush-era tax cuts and scheduled health care reforms.

Profit taking might be popular. In only three quarters, stocks have had the equivalent of an excellent year - the S&P 500 ended September up 14.56% YTD. So if the bulls trot rather than run this quarter, institutional and retail investors may be predisposed to lock in some gains.5

These warning lights aside, Wall Street has swept away pessimism before. It may do so again. Although the S&P 500 was down approximately half a percentage point from its final September close in mid-October, indicators apart from corporate earnings might surprise to the upside and push stocks a bit higher.6

Citations.
1 - www.dailyfinance.com/2012/10/11/8-reasons-to-hate-earnings-season/ [10/11/12]
2 - www.philly.com/philly/business/20121011_Markets_down_as_earnings_season_off_to_dreary_start.html [10/11/12]
3 - online.wsj.com/article/SB10000872396390444799904578050172264021136.html [10/11/12]
4 - www.smh.com.au/business/markets/dollar-claws-back-overnight-losses-20121010-27bz2.html [10/10/12]
5 - www.cnbc.com/id/49210305 [9/28/12]
6 - markets.on.nytimes.com/research/markets/overview/overview.asp [10/11/12]

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO PETER MONTOYA.