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PFPG
News &
Views August 2011
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We've shared our perspective on the downturn in the
financial markets over the last couple of weeks with our clients. The
unsettling and stressful nature of a sudden market decline calls for
investors to remain objective, avoid emotional responses, and follow
a disciplined investment process. In an August
6 interview, Vanguard CEO Bill McNabb reminds investors of
the "utter unpredictability of events, both in the world at
large and in the financial markets". Experience has shown that
the most successful investors stay true to their long-term
investment strategies.
We were not
surprised by the reasons listed for the S&P downgrade of US debt
as we have been paying heed to these and related risks for
several years. Along the same lines, we have been surprised at the
long rise of both stocks and bonds despite all of the macro
level risks.
Despite the
downgrade, "worse-than-expected" U.S. GDP growth, increased
risk of a double-dip recession, and worsening European sovereign
debt, there is some good news as well. Now that the stock market
is starting to price in some of the risks, we anticipate better
long-term investment opportunities will arise. Plus, many measures of
economic and market health remain positive. We will continue to
evaluate the markets and their underlying drivers with an eye towards
minimizing risk and maximizing long-term returns.
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The Maine budget passed into law in June includes a
major overhaul of the Maine Estate Tax. The changes, which become
effective in 2013, double the state Estate Tax exemption from $1
million to $2 million per person. Through proper planning, married
couples will be able to pass up to $4 million of assets to their
descendants free of state tax.
Estate tax rates will also be cut under the new
legislation. Currently the tax is applied in such a way that an
estate worth slightly more than the $1M exemption amount bears a
disproportionately high rate of taxation (a so-called
"cliff" effect). Under the new structure, estates between
$2M and $5M will be taxed at a much more favorable rate of 8% -
applied only to the excess over the exemption amount. The Maine
estate tax will continue to be progressive, but the maximum rate will
cap out at 12% rather than the current 16%.
Starting immediately, the law also allows for better
trust-based planning to bridge the large gap between the federal and
state exemption amounts. (The current federal exemption amount of $5M
per person applies through 2012 and will potentially revert to $1M in
2013). In combination with the rate and exemption adjustments
coming in 2013, the end result will be a much more favorable structure
for Maine taxpayers.
The new Maine budget also contains provisions that will
bring a modest reduction in state income taxes. The
current maximum tax bracket is 8.5%, but that will drop to 7.9% in
2013 - when other adjustments are made to the marginal income
brackets.
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If you're feeling overwhelmed by the number of passwords
you have to remember, here's a free solution that may help. LastPass is
a password manager that stores your passwords and automatically logs
you on securely to your chosen site. You can select the sites
to include. In addition, LastPass can automatically fill in
forms, help you select a strong password, and protect against
identity theft by encrypting login information on your
computer. If you opt for the premium version for $1/month, you
can extend the coverage to your iPhone, Blackberry, Android,
etc.
You've probably
read suggestions about how to create a strong password, and despaired
at remembering them. Test your passwords for their strength with How Big is Your Haystack?. Though using
a combination of letters, numbers, and symbols may be a good start,
password length (minimum 10 characters) is key to foiling the
attempts of hackers. For example, 134fred$% tests as a weak password,
while Fred76!HamburgersDaily would withstand a hacker's most intensive
search methodology for . . . 1.04 hundred million trillion centuries.
Though some guidelines suggest avoiding words that can be found in
the dictionary, other experts disagree. Try generating your own
memorable passphrases and testing them for strength. To learn more
about the ins and outs of this topic, check out The New York Times
article "Guard That
Password (and Make Sure It's Encrypted)".
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We hope you're
having a happy summer!
Thomas Rogers,
CFP® Brian L. Dietz, CFP®, CFA®
Debra Yoo
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Information contained in this
newsletter does not serve as the receipt of, or as a substitute for,
personalized investment advice from Portland Financial Planning Group,
LLC. At any time you may request
a copy of our current written disclosure discussing PFPG's services and
fees.
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