Monday, January 7, 2013

InVestra Financial Outlook Report 01-2013




































































































































































 YOUR FINANCIAL FUTURE

Your Guide to Life Planning
January 2013
We thought of you when we
reviewed this article and
hope you find it interesting.
Please call if you have any
questions and we hope all is
well!
Erin Eiras
InVestra Financial Services
Inc.
Personal Financial Advisor
3390-1 Kori Road
Jacksonville, FL 32257
904-880-7878
Fax: 904-880-7884
Erin.Eiras@InVestraFinan
cial.com
www.InVestraFinancial.co
m
In This Issue
Weekly Economic Commentary | Week of December 31, 2012
2013 will get off to a quick start, as many market participants return from the holidays to face
several key economic reports at home and overseas.
Insurance Needs of Small-Business Owners
Your business is too valuable to risk exposure to a loss that could be avoided or minimized by
the right forms of insurance. Which coverage you need depends on the nature of the business
and the specific risks you're likely to face.
Five Strategies for Tax-Efficient Investing
After factoring in federal income and capital gains taxes, the alternative minimum tax, and
potential state and local taxes, your investments returns in any given year may be reduced by
40% or more. Here are five ways to potentially lower your tax bill.
New Client Engagement Survey
New Client Engagement Survey
Retirement and Health Plan Limits for 2013
The IRS has released the cost-of-living adjustments affecting dollar limitations for defined
contribution and defined benefit retirement plans.
2 Your Guide to Life Planning
Weekly Economic Commentary | Week of December 31, 2012
Highlights
We are still seeing a slow but sustained rebound in the U.S. economy in the year ahead.
We believe the U.S. unemployment rate is likely to decline modestly over 2013.
China's economy is poised to re-accelerate, and recent economic data support our view.
Weekly Economic Calendar
Quick Start
2013 will get off to a quick start, as many market participants return from the holidays to face several key
economic reports at home and overseas including:
China's Purchasing Managers' Index for December was released Monday, December 21 at 8 PM ET. In
our Outlook 2012, we said that China would avoid a hard landing, and instead achieve a soft landing, growing
real gross domestic product (GDP) at around 7% or 8%. Data released over the past few months in China-along
with a sustained rebound in Chinese equity markets-suggest that China has indeed avoided a hard landing, and
that the world's second-largest economy may be re-accelerating as 2012 turns into 2013.
The U.S. Institute for Supply Management (ISM) Report on Manufacturing for December 2012 is due
out on Wednesday, January 2, 2013. The ISM is a key gauge of the health of the manufacturing economy, and
in turn the health of the firms in the S&P 500 Index, which is heavily weighted toward the business and
manufacturing sectors of the U.S. economy. In recent months, the ISM has hovered near 50. A reading above
50 on the ISM indicates that the manufacturing economy is expanding, and a reading below 50 indicates a
contracting manufacturing economy. A reading of around 42 or below typically indicates that the overall U.S.
economy is in a recession [Figure 1]. The ISM is expected to remain around 50 again in December 2012, as a
rebound from Superstorm Sandy and acceleration in Chinese demand in recent months is offset by the
uncertainty surrounding the fiscal cliff.
U.S. light vehicle sales for December 2012 will be reported throughout the day on Thursday, January 3,
2013. In the United States, we are at a five-year high for both vehicle sales and production, but at a sales pace
of around 15 million units, we are still not at the all-time high of 18 million units per year seen in the early to
mid-2000s. Overseas, the picture is mixed, with vehicle sales in Europe stuck in first gear, but sales in China
booming. Looking ahead, continued Chinese growth-as China moves to a more consumer-oriented domestic
economy-along with a slow but sustained rebound in the U.S. economy should help to push vehicle sales
higher again in 2013.
The minutes of the December 11-12, 2012 Federal Open Market Committee Meeting (FOMC) are
due out on Thursday, January 3, 2013. The minutes are likely to reveal how much agreement there was among
FOMC members to abandon time-based monetary policy guidance in favor of "threshold-based" guidance. The
minutes will likely shed light on what other indicators, besides the unemployment rate, the inflation rate, and
inflation expectations the FOMC will assess as part of its deliberations. As noted in our Outlook 2013, we
expect the Federal Reserve (Fed) to remain accommodative well into 2015, and purchase $85 billion of
Treasury and agency mortgage-backed securities (MBS) per month in 2013 as part of its recently expanded
quantitative easing (QE) program.
The December 2012 employment report is due out on Friday, January 4, 2013. In mid-December 2012, the
Fed said the "exceptionally low range for the federal funds rate will be appropriate at least as long as the
unemployment rate remains above 6.5%." In November 2012, the unemployment rate stood at 7.8%, and it is
3 Your Guide to Life Planning
expected to dip to 7.7% in December 2012. The latest projections of the FOMC put the unemployment rate at
6.5% sometime in 2015, while the nonpartisan Congressional Budget Office (CBO) does not see the
unemployment rate reaching 6.5% until 2016. Our view is that the unemployment rate is likely to decline
modestly over the course of 2013, which is consistent with employment gains in the 150,000 per month range
in 2013. As detailed in our Outlook 2013, our Bull path for 2013 would lead to stronger economic growth (and
job growth) than what the economy experienced in 2012, but this still keeps the Fed in accommodative mode
for 2013 and beyond.
A Look at the Weather:
Much warmer-than-usual weather in the United States artificially boosted economic activity beginning in
November 2011, and warm weather extended into late winter 2012. The winter of 2012-13 has started out even
warmer than the winter of 2011-12, and this could skew the economic data (like ISM, employment, vehicle
sales, retail sales, housing, etc.) to the strong side again this year.
In Figure 2, note that the period from November 1 through December 20, 2012 was 1.8 degrees warmer than
normal (the last 10 years). This is even warmer than the start of the winter of 2011-2012, when temperatures in
the six weeks ending December 20, 2011 were 1.4 degrees above normal. Importantly, there was a big swing
between a colder-than-usual start to winter in 2010-11 (1.9 degrees colder) and the warm start to winter
2011-12. While it is true that this winter is starting out to be even warmer than last winter, the swing (just 0.4
degrees) between early winter this year and last, is not even close to the 3.3 degree swing between early winter
2010-11 and winter 2011-12. Thus, the data may not be impacted as much as it was last winter.
IMPORTANT DISCLOSURES
Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a
country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes
all of private and public consumption, government outlays, investments and exports less imports that occur
within a defined territory.
Federal Funds Rate is the interest rate at which depository institutions actively trade balances held at the
federal Reserve, called federal funds, with each other, usually overnight, on an uncollateralized basis.
Private Sector - the total nonfarm payroll accounts for approximately 80% of the workers who produce the
entire gross domestic product of the United States. The nonfarm payroll statistic is reported monthly, on the
first Friday of the month, and is used to assist government policy makers and economists determine the
current state of the economy and predict future levels of economic activity. It doesn't include:
- general government employees
- private household employees
- employees of nonprofit organizations that provide assistance to individuals
- farm employees
4 Your Guide to Life Planning
The economic forecasts set forth in the presentation may not develop as predicted and there can be no
guarantee that strategies promoted will be successful.
Stock investing involves risk including loss of principal.
Mortgage-backed security (MBS) is a type of asset-backed security that is secured by a mortgage or
collection of mortgages. These securities must also be grouped in one of the top two ratings as determined by
an accredited credit rating agency, and usually pay periodic payments that are similar to coupon payments.
Furthermore, the mortgage must have originated from a regulated and authorized financial institution.
Mortgage-backed securities are subject to credit, default, prepayment, extension, market, and interest rate
risk.
The index of leading economic indicators (LEI) is an economic variable, such as private-sector wages, that
tends to show the direction of future economic activity.
International investing involves special risks, such as currency fluctuation and political instability, and may
not be suitable for all investors.
The Federal Open Market Committee (FOMC), a committee within the Federal Reserve System, is charged
under the United States law with overseeing the nation's open market operations (i.e., the Fed's buying and
selling of U.S. Treasury securities).
Quantitative easing is a government monetary policy occasionally used to increase the money supply by
buying government securities or other securities from the market. Quantitative easing increases the money
supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.
The Congressional Budget Office is a non-partisan arm of Congress, established in 1974, to provide Congress
with non-partisan scoring of budget proposals.
INDEX DESCRIPTIONS
China CPI: In total there are about 600 "national items" used for calculating the all-China CPI. The list of
items is revised annually for representativeness based on purchases reported in the household surveys. The
number of items can change from year to year, but rarely by more than 10 in any given year.
Chinese Purchasing Managers' Index: The PMI includes a package of indices to measure manufacturing
sector performance. A reading above 50 percent indicates economic expansion, while that below 50 percent
indicates contraction.
The Institute for Supply Management (ISM) index is based on surveys of more than 300 manufacturing
firms by the Institute of Supply Management. The ISM Manufacturing Index monitors employment,
production inventories, new orders, and supplier deliveries. A composite diffusion index is created that
monitors conditions in national manufacturing based on the data from these surveys.
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban
consumers for a market basket of consumer goods and services.
The Michigan Consumer Sentiment Index (MCSI) is a survey of consumer confidence conducted by the
University of Michigan. The MCSI uses telephone surveys to gather information on consumer expectations
regarding the overall economy.
The S&P/Case-Shiller U.S. National Home Price Index measures the change in value of the U.S. residential
housing market. The S&P/Chase-Shiller U.S. National Home Price Index tracks the growth in value of real
estate by following the purchase price and resale value of homes that have undergone a minimum of two
arm's-length transactions. The index is named for its creators, Karl Chase and Robert Shiller.
The Empire State Manufacturing Index is a seasonally-adjusted index that tracks the results of the Empire
State Manufacturing Survey. The survey is distributed to roughly 175 manufacturing executives and asks
questions intended to gauge both the current sentiment of the executives and their six-month outlook on the
sector.
This research material has been prepared by LPL Financial.
To the extent you are receiving investment advice from a separately registered independent investment
advisor, please note that LPL Financial is not an affiliate of and makes no representation with respect to
such entity.
Tracking # 1-128093 Exp. 12/13
5 Your Guide to Life Planning
The trend toward
increasing
specialization in
commercial policies
has made it
necessary for more
businesses to
purchase additional
coverage addressing
specific risks.
Insurance Needs of Small-Business Owners
As a business owner, you understand that your business is too valuable to risk exposure to a loss that could be
avoided or minimized by the right forms of insurance.
Which coverage you need depends on the nature of the business and the specific risks you're likely to face. The
size of the business, its operations, and the products and services it offers help determine the types and
amounts of coverage to purchase.
Types of Policies
At one end of the spectrum, if you are a sole proprietor working from home, you may only need to obtain a
rider to your homeowner's insurance policy that will cover business use of the property. However, if you own a
professional office or retail shop, you may find a business owner's policy is the economical solution that suits
your needs. Similar to a homeowner's policy, a business owner's policy covers bodily injury to business visitors
as well as property damage. Coverage to protect against product liability claims and loss of income due to
business interruption can be purchased at an extra cost.
On the other hand, many types of businesses -- for example, manufacturers and restaurants -- typically don't
qualify for business owner policies and must obtain commercial policies. These tend to be more expensive but
more flexible than owner policies, covering certain basic risks supplemented by additional coverage based on
the particular needs of the insured.
There are three types of commercial insurance:
General liability -- These policies provide protection against payments that arise from bodily injury
or property damage to a third party and the costs of defending against lawsuits. Depending on your
business, you may need other types of liability coverage, such as product, auto, malpractice, and
workers' compensation insurance.
Property insurance -- The broadest form of property insurance is called "all risk." More specialized
property policies insure cargo carried in company vehicles, losses from a crime such as embezzlement
and burglary, and inland marine.
Special -- As the term suggests, special policies deal with a diverse range of special purposes.
Examples include business interruption, plate glass, boiler and machinery, fire sprinkler, credit life,
and surety bonds.
Although standard packaged policies intended to cover a range of common business perils can help simplify
insurance selection, such policies tend to be less comprehensive than they used to be. The trend toward
increasing specialization in commercial policies has made it necessary for more businesses to purchase
additional coverage addressing specific risks.
Shopping and Maintenance
Because identifying specific risks is so critical to obtaining appropriate coverage, it's important to work with an
insurance professional who knows how your business operates, as well as the policies that can address your
particular needs. If your business entails a variety of higher risks, you may want to consider employing a
consultant to objectively evaluate the risks of your business and help you obtain appropriate coverage at the
most economical cost.
Once you have purchased appropriate coverage, make a habit of reviewing your overall insurance protection
annually; and when it's time to renew a policy, carefully check it for possible changes to exclusions, limitations,
and deductibles. In addition, be sure to keep insurance policies and all documents and data files you would
need to support a claim in a safe place. Safeguarding them ensures that you will be able to submit a timely,
well-substantiated claim in the event of a loss.
Although the details of commercial policies can be complex, it's well worth taking the time to understand the
risks your business faces and the types of insurance that can protect against potentially crippling losses.
© 2013 S&P Capital IQ Financial Communications. All rights reserved.
1-125681
6 Your Guide to Life Planning
You may be able to
use losses within
your investment
portfolio to help
offset realized gains.
If your losses exceed
your gains, you can
offset up to $3,000
per year of the
difference against
ordinary income.
Five Strategies for Tax-Efficient Investing
After factoring in federal income and capital gains taxes, the alternative minimum tax, and potential state and
local taxes, your investments' returns in any given year may be reduced by 40% or more. Here are five ways to
potentially lower your tax bill.1
Invest in Tax-Deferred and Tax-Free Accounts
Tax-deferred accounts include employer-sponsored retirement accounts such as traditional 401(k)s and
403(b) plans, individual retirement accounts (IRAs) and annuities. In some cases, contributions may be made
on a pretax basis or may be tax deductible. More important, investment earnings compound tax deferred until
withdrawal, typically in retirement, when you may be in a lower tax bracket. Contributions to nonqualified
annuities, Roth IRAs and Roth-style employer-sponsored savings plans are not deductible. Earnings that
accumulate in Roth accounts can be withdrawn tax free if you have had the account for at least five years and
meet the requirements for a qualified distribution.
Withdrawals prior to age 59½ from a qualified retirement plan, IRA, Roth IRA or annuity may be subject to a
10% federal penalty. In addition, early withdrawals from annuities may be subject to additional penalties
charged by the issuing insurance company.
Consider Government and Municipal Bonds
Interest on U.S. government issues is subject to federal taxes but is exempt from state taxes. Municipal bond
income is generally exempt from federal taxes, and municipal bonds issued in-state may be free of state and
local taxes as well. Sold prior to maturity, government and municipal bonds are subject to market fluctuations
and may be worth less than the original cost upon redemption.
Look for Tax-Efficient Investments
Tax-managed or tax-efficient investment accounts are managed in ways that can help reduce their taxable
distributions. Investment managers can potentially minimize portfolio turnover, invest in stocks that do not
pay dividends and selectively sell stocks at a loss to counterbalance taxable gains elsewhere in the portfolio.
Put Losses to Work
You may be able to use losses within your investment portfolio to help offset realized gains. If your losses
exceed your gains, you can offset up to $3,000 per year of the difference against ordinary income. Any
remainder can be carried forward to offset capital gains or income in future years.
Keep Good Records
Maintain records of purchases, sales, distributions, and dividend reinvestments so that you can properly
calculate how much you paid for the shares you own and choose the most preferential tax treatment for shares
you sell.
Keeping an eye on how taxes can affect your investments is one of the easiest ways you can enhance your
returns over time.
1This information is general in nature and is not meant as tax advice. Always consult a qualified tax advisor
for information as to how taxes may affect your particular situation.
© 2013 S&P Capital IQ Financial Communications. All rights reserved.
Compliance Tracking #517635
This article was prepared by Standard & Poor's Financial Communications Tracking # 684350 Exp. 11/16/2011
7 Your Guide to Life Planning
New Client Engagement Survey
Dear Valued Client,
In an effort to learn more about you, your family and your interests I ask that you take a few
minutes to complete the following survey. Your answers will help me in my effort to provide the high
level of service you deserve. Thank you for your time and your business.
Start Survey
Compliance Tracking #517635
This article was prepared by Standard & Poor's Financial Communications Tracking # 684350 Exp. 11/16/2011
8 Your Guide to Life Planning
Retirement and Health Plan Limits for 2013
The IRS has released the cost-of-living adjustments affecting dollar limitations for defined contribution and
defined benefit retirement plans. The table below compares both the retirement plan and health insurance plan
limits for 2011 through 2013. Further guidance can be found on the IRS website.
Retirement Plans 2011 Limit 2012 Limit 2013 Limit
401(k), 403(b), 457(b)(2) elective deferrals $16,500 $17,000 $17,500
401(k), 403(b) "catch-up" contributions for ages 50+ $5,500 $5,500 $5,500
SIMPLE plan elective deferral $11,500 $11,500 $12,000
SIMPLE "catch-up" contributions for ages 50+ $2,500 $2,500 $2,500
Defined contribution plan maximum $49,000 $50,000 $51,000
Defined benefit plan maximum $195,000 $200,000 $205,000
Maximum includible compensation $245,000 $250,000 $255,000
Highly compensated employee $110,000 $115,000 $115,000
FICA taxable wage base $106,800 $110,100 $113,700
Health Insurance Plans 2011 Limit 2012 Limit 2013 Limit
Health Savings Account (HSA) contribution limit -- individual $3,050 $3,100 $3,250
HSA contribution limit -- family $6,150 $6,250 $6,450
HSA "catch-up" contributions for ages 55+ $1,000 $1,000 $1,000
Maximum deductible for high-deductible health plan (HDHP) -
individual
$1,200 $1,200 $1,250
Maximum deductible for HDHP - family $2,400 $2,400 $2,500
Maximum out-of-pocket for HDHP - individual $5,950 $6,050 $6,250
Maximum out-of-pocket for HDHP - family $11,900 $12,100 $12,500
Flexible Spending Account (FSA) contribution limit No limit* No limit* $2,500
*While there was no limit for contributions, most plans capped them at $5,000 or less.
© 2013 S&P Capital IQ Financial Communications. All rights reserved.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your
specific tax issues with a qualified tax advisor. Tracking #: 1-115220
The opinions voiced in this material are for general information only and are not intended to provide specific
advice or recommendations for any individual. To determine which investment(s) may be appropriate for
you, consult your financial advisor prior to investing. All performance referenced is historical and is no
guarantee of future results. All indices are unmanaged and cannot be invested into directly.
Erin Eiras is a Registered Representative with and Securities offered through LPL Financial, Member
FINRA/SIPC. Investment advice offered through Independent Financial Partners, a registered investment
advisor and a separate entity from LPL Financial.
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