Fiscal Cliff

[ripper1]

Is everybody staying pat on their portfolio before we hit this so called fiscal cliff where all the tax rates will increase by the end of the year?

 

[REWahoo]

What do you propose we do?

 

[MichaelB]

What do you propose we do?

Panic, of course.

 

[LOL!]

Very little changes for us little guys, so I see no reason to do anything. We weren't paying any income taxes before and we won't be paying any income taxes after.

The Numbers Behind the Tax Debate - WSJ.com

In 2011, according to the Tax Policy Center, about 46% of households didn't pay any U.S. income taxes,....

 

[ripper1]

One could move everything to cash and bonds until there is some clarity.

 

[LOL!]

One could move everything to cash and bonds until there is some clarity.

That sure seems foolish to me. If I do nothing, I pay no income taxes. If I move everything to cash and bonds, I will pay thousands in income taxes.

 

[Andre1969]

That sure seems foolish to me. If I do nothing, I pay no income taxes. If I move everything to cash and bonds, I will pay thousands in income taxes.

I might rebalance a little in my 401Ks and IRAs, but in the after-tax accounts, probably do nothing. Although, if there's enough of a dip at some point, I'd buy more. But, I'm not going to do anything drastic.

 

[MichaelB]

One could move everything to cash and bonds until there is some clarity.

What happens if there is no greater clarity?

 

[Midpack]

One could move everything to cash and bonds until there is some clarity.

I think market timers are in the minority here, but it's your portfolio to do with as you see fit. If negative real returns on cash and low yields/uncertain bond fund NAVs (a lock to drop when interest rates rise; who knows when) look better than equity returns to you...

There will always be uncertainty...guaranteed.

 

[ripper1]

Very little changes for us little guys, so I see no reason to do anything. We weren't paying any income taxes before and we won't be paying any income taxes after.

The Numbers Behind the Tax Debate - WSJ.com

What happens if there is no greater clarity?

Refer to your earlier post and panic of course

 

[FIREd]

The fiscal cliff could have pretty substantial consequences for us. It could hit us on the earned income side (not much we can do there), as well as on the passive income side (especially if dividends are taxed as ordinary income once again). We will have to pay the new Medicare surtax too. Finally, there is also a real chance for us to see higher income tax rates at the state level in 2013. Still, I am not going to make any changes until we can see what changes actually need to be made.

 

[ziggy29]

What happens if there is no greater clarity?

Then we kick the can and it gets even worse the next time we approach the cliff.

I don't think the folks who are bringing us this brinksmanship with the debt and the budget seem to realize how much economic damage is being done by the massive uncertainty they are causing by refusing to do anything but repeatedly kick the can. Employers, consumers and investors are paralyzed by not knowing what the "rules" are for the long-term. So they sit on their cash and wait for a clarity that may not come.

 

[eytonxav]

The way things work in Washington DC, when will we ever be off the fiscal cliff? That said, I see nothing to do.

 

[donheff]

I suspect we will slip over the edge on December 31 and we may get a bit of a hit on the markets. Then some sort of compromise will get hammered out in January and the markets will bounce back (everything else being equal at the time). Bit of a hassle for payroll offices jumping back and forth on the withholding rates. The worse mess is the debt ceiling. We shouldn't even have such a thing. It should be handled automatically to cover whatever obligations the Congress vote into law. This artificial wall serves only to enable suicidal brinksmanship on the Hill by people who often voted for the very cause of the debt. I see no end to that cyclical madness.

 

[ripper1]

Like Bob Brinker said, This group in Congress is dysfunctional.

 

[Semiretired2008]

I suspect we will slip over the edge on December 31 and we may get a bit of a hit on the markets. Then some sort of compromise will get hammered out in January and the markets will bounce back (everything else being equal at the time).

That is what I believe and I have my mouse hovering over the Buy button when it happens... Some body will want to push the threshold and test the economics of letting it slip past the 31st...

 

[marko]

The chart I'm using shows a $69K AGI income (or IRA AGI withdrawal) will go from 15% to 28% tax rate with $58K @ 15%.

If that is so, I'd certainly be making some minor withdrawals from my IRA portfolio toward the end of December.

That said, I'm fairly sure our fearless leaders will reach an agreement right after the election.

 

[Animorph]

I assume the Bush tax cuts resume next year in my retirement plan. If they don't, that's just more to spend for me.

 

[Midpack]

Like Bob Brinker said, This group in Congress is dysfunctional.

Reflecting a more polarized electorate than ever...every one of them was elected.

 

[samclem]

The worse mess is the debt ceiling. We shouldn't even have such a thing. It should be handled automatically to cover whatever obligations the Congress vote into law. This artificial wall serves only to enable suicidal brinksmanship on the Hill by people who often voted for the very cause of the debt. I see no end to that cyclical madness.

None of them voted for any irresponsible spending or imprudent tax policies. Each assures us they voted only for the necessary stuff. It's the >other< irresponsible legislators that are the problem. The debt ceiling is like the "you've hit your limit" notice from the credit card company to the married couple that is spending irresponsibly (each on different "priorities"). It serves to make the problem a collective one (for the whole organization) and the pain focuses their efforts. It's crazy, but apparently it's necessary. The national debt seems to only hit the news when the debt ceiling looms.

 

[sunnysideup]

Well, I personally have learned (the hard way) you can't time the market.

In my dividend investing I try to stick with good companies so I don't have to do ANYTHING when the market shifts, I just sit it out. As long as the companies are still paying their dividend, I am happy to let the dividends reinvest and buy bargains. Of course, I am still working so I continue to add to my savings.

In my 401lk, where I have no choice but to put money in funds that are governed by mass hysteria (IMHO at least 65% of people in 401ks are not investment savvy and move in herdlike fashion). I may move money to the stable fund when they all drop 12%. That's my magic number that it's time to get out. I would move it back when the market levels off.

If we go down the road Japan has traveled for the past decade, we will not see a turnaround anytime soon. This is what scares me. We have been bouncing back over the past decade but what happens if we don't for an extended period?

 

[donheff]

None of them voted for any irresponsible spending or imprudent tax policies. Each assures us they voted only for the necessary stuff. It's the >other< irresponsible legislators that are the problem. The debt ceiling is like the "you've hit your limit" notice from the credit card company to the married couple that is spending irresponsibly (each on different "priorities"). It serves to make the problem a collective one (for the whole organization) and the pain focuses their efforts. It's crazy, but apparently it's necessary. The national debt seems to only hit the news when the debt ceiling looms.

It is insane. With or without Bush tax cuts, with or without a recession, everyone in Congress understands that the debt ceiling will be breached every few years based on budget choices already made. Having made those choices to then allow brinksmanship with an artificial "shall we pay for it or go bankrupt" Russian Roulette game on the Hill is nuts. And in this game the gun is pointed at us.

 

[MuirWannabe]

I think having a debt ceiling is a huge plus. Brings attention to one of our biggest problems we have as a nation. Now...attention can be a great thing. But actually doing something about the problem would be substantially better.

 

[Texas Proud]

Reflecting a more polarized electorate than ever...every one of them was elected.

To bad the electorate is a small percent of the citizenry...

As an example, the new Senator from Texas will be Ted Cruz... he got 631,316 votes from just over 13 million registered voters... or less than 4.9% of people who could vote...


It is a formality in the general election.... nobody would give any odds on a Democrat winning, including the Democrats (I am not trying to be political here, just stating what is true).....


I would bet that this is similar to other elections on both sides, it is not specific to this party or this candidate....

So, until the people who do not like the way things turn out start to vote in the primary, we will continue to get more and more polarized...

 

[ripper1]

To bad the electorate is a small percent of the citizenry...

As an example, the new Senator from Texas will be Ted Cruz... he got 631,316 votes from just over 13 million registered voters... or less than 4.9% of people who could vote...


It is a formality in the general election.... nobody would give any odds on a Democrat winning, including the Democrats (I am not trying to be political here, just stating what is true).....


I would bet that this is similar to other elections on both sides, it is not specific to this party or this candidate....

So, until the people who do not like the way things turn out start to vote in the primary, we will continue to get more and more polarized...

What is the sense in voting. They are all the same. It is all about special interests and taking care of the wealthy and big business. Nobody is interested in moving the agenda of this country forward.