(Newswire.net — 30, January, 2013) Wilmington, DE — The Fiscal Cliff proposal was agreed upon by the Senate at the last minute according to Lighthouse Financial source, Ken Brackett. Without the agreement, spending cuts and tax increases totalling $600 billion would have instantly gone into effect. It also introduces the ability for everyone to do Roth conversions, which was only available to those who earned lower than $150K per year, according to Brackett.
This Roth conversion opportunity is available to all those still working and have 401ks. Before this, only those retired, were 59 and a half years old or had changed jobs were able to take advantage of this. “This is great news to those of us who believe that tax rates will be much higher in the future,” Ken Brackett explained, “Individuals can do the conversion at lower tax rates today and buy our tax on sale.” In the short term, the government will benefit from this through extra revenue from the tax due after the conversion. In the long term, there will be a loss of revenue as the Roth withdrawals will no longer be taxable income.
Another benefit of the Fiscal Cliff is that there is a tax break for married couples earning less than $450k when filing jointly and $400k for individuals. Originally, just $250k was proposed. The tax rates will remain at 15% and individuals are able to stay on their current brackets for tax. They will be able to gain from the Long Term Capital Gains and Qualified Dividends reduced tax rate.
Estate Tax Exemption was also changed to $5 million per person with the Fiscal Cliff; anything over that will be taxed at the 40% rate. The Alternative Minimum Tax Exemption was also extended permanently.
There is a new hurdle to jump though, according to Brackett. The Debt Ceiling needs to be extended within the next two months. The spending cuts should have been completely resolved during the negotiations for the Fiscal Cliff, which would have allowed the Debt Ceiling to extend in the future at a continuous rate, but this never happened and the House is likely to want to enforce some of the cuts. “The probability of another USA downgrade is very likely”. Brackett stated.
However, there is some optimism in the fact that “there is always a bull market somewhere.” There is more focus on the Growth and Value Strategies and Brackett sees success within those areas.
Ken Brackett is the founder and owner of Lighthouse Financial Advisory Group and the Two-Time Winner of the Five-Star Wealth Manage Award by Philadelphia Magazine and Delaware Today Magazine. Lighthouse Financial is fully registered with the National Ethics Bureau, the Better Business Bureau, the National Association of Securities Dealers and Delaware State.
Within the New Castle County area, Ken is a well-known and important educator in finances and a Registered Investment Advisor. His classes for the retired are oversold on a consistent basis and he had worked on plans for the University of Pennsylvania, General Electric, DuPont and Rohm & Haas retirees. He graduated in 1988 with a Bachelor’s degree in accounting and finance and, since 1991, has worked with those in the senior age group.