Monday, October 29, 2012

IRA Holding Allocations: Do Demographics Matter?

  •">Who Allocates What in IRAs

  • A recent study by the Employee Benefits Research Institute indicates that older investors and investors where the source of funds were rollovers as opposed to initial investments had the lowest proportion of equity (versus debt, balanced or annuity) holdings (one exception: young investors with small balances tended to have the lowest equity percentage).  Balanced funds were particularly valued by investors 45 or younger while Roth IRA investors had the highest proportion of equity investment.  There was little difference in male and female investors.

    These findings are not terribly surprising.  Young investors might be cautious when first investing, but would soon realize that equity investments give themselves the best protection against future inflation.  Older investors, expecting a shorter life horizon, would be more likely to be cautious.  Roth investors would tend to be well off and willing to take some risks to grow wealth and women generally have significantly increased in investing savvy over the last 20-30 years.

    2012 Presidential (and down ballot) Predictions

    Disclaimer: While I have tried to make this as objective as possible; I early voted for Romney/Ryan

    Preliminary notes: 2008: Obama 350 electoral, McCain 188
    Present House: 193 D, 242 R (need D +25 to change hands)
    Present Senate: 53* D, 47 R (*includes two independents voting as Democrats)
    Scenarios: 1-5 for Presidential popular vote and Senate; 1-6 for Presidential electoral votes and House
    1--most favorable for Democrats; 5 or 6--most favorable for Republicans
    Real Clear Senate: 13 Swing Seats: 4 presently Republican, 9 presently Democrat

    Presidential Popular Vote Percentage Difference (2008: Obama +6%)
    [1] Obama/Biden +3% or more:   5%  (late September 2012)
    [2] Obama/Biden +1-3%: 20%      (early September 2012--after conventions)
    [3] Within 1%: 30%                     (flip of 2000 election--Obama probably would win Electoral college)
    [4] Romney/Ryan + 1-3% 30%       (present state of tracking polls)
    [5] Romney/Ryan +3% or more: 15%        (rerun of 1980)
    My Guess: Romney/Ryan +1-2%

    Presidential Electoral College, Democratic count on left (2008: Obama +178)
    [1] 347/191 (D adds AZ; R adds IN and NE District 2) 5%
    [2] 303/235 (from [1], add AZ, FL and NC to R) 20%
    [3] 284/254 (from [2], add IA and VA to R) 25%
    [4] 267/271 (from [3], add CO, NH and WI to R) 25%
    [5] 237/301 (from [4], add NV and OH to R) 20%
    [6] 201/337 (from [5], add MN, NM and PA to R) 5%
    My Guess: cannot guess yet, do not except race to be called before 10 pm CDT

    Senate (see above):
    [1] 55/45 (11 swing states go Democrat), net D +2, 20%
    [2] 53/47 (9 swing states go Democrat), no net change, 25%
    [3] 51/49 (7 swing states go Democrat), net R +2, 40%
    [4] 49/51 (8 swing states go Republican), net R +4, 10%
    [5] 47/53 (10 swing states go Republican), net R +6, 5%
    My guess: R +1 or +2, Democrats barely keep Senate

    House (see above)
    [1] 215/220; D +22, 5%
    [2] 203/232; D +10, 15%
    [3] 198/237, D +5; 30%
    [4] 195/240, D +2: 30%
    [5] 190/245, R +3; 15%
    [6] 185/150, R +8; 5%
    My guess: D +2 to 7

    Monday, October 08, 2012

    Presidential Debates and Changing Accountants

  •">Obama/Romney Debate and Accountants

  • In last Wednesday's Presidential Debate, President Barack Obama challenged Republican challenger Mitt Romney about tax loopholes for the wealthy.  The challenge included an assertion that a tax break was available for moving businesses overseas, thus causing U.S. job losses.  Governor Romney said that he was not familiar with such a break, saying "I may have to get a new accountant."  The challenge was part of an overall strategy by Obama to "flush out" the details of Romney's tax proposal.

    I suspect that other bloggers have already addressed whether Obama's claim of a tax deduction for moving jobs overseas was accurate or not and I do not claim to be a political expert regarding how specific or vague a candidate's proposed legislation should be.  I will address the question of when, if ever, to seek a change in accountants [note: I suspect some readers will disagree with my conclusions].  Generally speaking, phrases like "guaranteed refund on taxes" or "what would you like depreciation to be" are good reasons NOT to choose an accountant.  While your accountant should be supportive, there is no reason for an accountant to zealously represent a client in the way a trial lawyer represents a defendant in a criminal trial.  It is fine and appropriate for an accountant to choose accounting principles or tax positions with reasonable support that favor a client's position, but at the end of the day an accountant should be an "honest broker."  Coming back to the original question: change an accountant if you have located to a place where your accountant doesn't serve (and with CPA mobility laws, this is less of an issue than it used to be except for Hawaii); if your accountant is so busy that he or she cannot give you the time that you need (not always the same as the time you want or think you deserve), if you believe that they are not acting in your best interest; if they appear to be unqualified or if you are less than confident that they can be trusted.  Otherwise, be hesitant to change.

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