2016 Presidential Election: Federal Tax Reformby Mark Sipos, LFG Tax Services Accountant

It has been an interesting campaign season thus far with many hopeful candidates throwing their hats into the presidential ring. Throughout the last few months, candidates from both parties have put tax policy at the center of their platforms. All of the candidates promise that their version of tax reform will make the federal tax system simpler, fairer, and better for the economy.

This article will attempt to explain the basic differences in the three types of federal tax reform being debated by the candidates. The three types of tax policies we will discuss are: 1) our current tax system, 2) a Flat Tax system, 3) a national sales tax system also known as FairTax. Each of the candidates has his or her spin on either changing our

A Quar ter ly Publication Vol . 7 Issue 4 / O c tob er 2015the WealthWATCHSM the WealthWATCHSM 1

INSIDE THIS ISSUE

2016 Presidential Election: page 1 Federal Tax Reform

Letter From The President page 2

LFG News page 2

Economic Commentary page 3

current system or implementing a Flat Tax or FairTax. Our objective is to make you aware of the basics of each system so that you may apply that understanding to each of the candidates’ specific tax reform plans.

Our current system is known as a progressive income tax – meaning that higher incomes get taxed at higher percentages than lower incomes. Specifically, the current system uses tax brackets (or ranges of income) to determine what a person pays. Taxable income and your amount of taxes paid can also depend on capital gains, specific deductions and exemption that apply, and certain tax credits that may be available to you.

The criticism of our current system is two-fold. First, the current system is too complex and impossible for the average taxpayer to decipher. Even the IRS Commissioner has admitted that the complexity of the tax code contributes to honest mistakes and tax evasion. Secondly, some critics of the current system say it is inherently unfair as it puts an excessive burden on the wealthy. Such a burden discourages behavior that would promote economic growth.

Let’s take a look at the two other systems being proposed: Flat Tax and FairTax. Although these are proclaimed as “new” ideas to tax reform, these two systems of taxation have been used before. The United States used the flat tax for a short time right after the Civil War and the U.S. federal government relied on sales tax before income tax was fully enforced in 1913. Many of our states currently use versions of each taxing system.

Supporters of a flat tax believe it is the only fair income tax because the flat tax would apply an equal percentage to all taxpayers regardless of their incomes. The candidates that support a flat tax use differing percentages usually between 15% - 20% of your income. So if the plan calls for a 15% flat tax rate, a taxpayer would pay 15% of their income regardless of how much they earn or what type of income it is. A true flat tax does away with all deductions, loopholes, credits and exemptions that cause the complexities of our current system. Some candidates propose some exemptions for families in their version of a flat tax.

The FairTax (or national sales tax) is unique in that it would completely abolish Federal income taxes for Individuals and Corporations as well as the Internal Revenue Service. Instead, this system will pull in tax revenues from what we spend rather than what we earn. The common rate being proposed for the sales tax is 23% on all

continued on page 3

LINEWEAVER FINANCIAL GROUP IS NOW ON FACEBOOK ! “Like” our page at facebook.com/lineweaverfinancialgroup

Mark Sipos

Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Lineweaver Wealth Advisors, LLC. Lineweaver Wealth Advisors is not affiliated with Triad Advisors. This is for informational purposes only and should not be construed as tax or legal advice. Consult your tax or legal advisor in regard to your specific situation.

2

by Jim Lineweaver, CFP®, President and FounderLE T TER FROM THE PRESIDENT

It won’t be long and you will see squirrels scurrying around the back yard gathering nuts to get them through what could be a long cold winter. While we don’t need to gather nuts to help us through our retirement years, we had better gather the financial assets to give us security that we will be able to maintain our lifestyle without having to move in with our kids.

How much do we need to save, and how much have we saved? According to the National Institute on Retirement Security, 45 percent of working-age households have no retirement savings at all. Among people 55 to 64, average household retirement savings total only $12,000. For those near retirement who have savings, the average balance is $100,000 – still not much money to finance the next 20 to 30 years.

How much we need to save depends on our anticipated living expenses, our retirement income from outside sources, like Social Security and pensions, and our expected longevity. The answer to that question is different for each of us, but a very important question. But as a guideline, a rule of thumb for retirement accounts is that you should withdraw no more than 4 percent a year. If you have $100,000 in savings, that means $4,000 a year, or about $333 per month.

So we know why we save; why do we invest? You invest so that your money can work for you.

To get $100,000, you would need to save $5,000 per year for 20 years, unless your money was working for you. However if your money was making 3% per year, you would only need to set aside $3,600 per year to get the same $100,000. Or, if you could set aside the same $5,000, at 3% you would end up with $138,000.

Let’s see how time can work to your benefit. Let’s say we want to accumulate $600,000 for retirement at 65. Below, we can see the amount needed to be set aside depending on how long we have to save. Assume our investments earn 5% on average each year, the total savings amount would be worth $600,000 upon retirement at age 65.

START AGE AMOUNT NEEDED TO SAVE EACH MONTH TOTAL OUT OF POCKET SAVINGS TO ACCUMULATE $600,000 BY AGE 65 (ASSUMING 5% INTEREST RATE)

Age 55 Save $3,850 per month for 10 years $462,000Age 45 Save $1,455 per month for 20 years $349,200Age 35 Save $720 per month for 30 years $259,200

As you can see, the sooner you start the easier it would be to have $600,000 when you retire.

If you would like to learn more about this, we are having an educational program on October 13th at 1:00pm and October 15th at 6:00pm. Call us today to reserve your seat!

LFG NEWS2015 Client AppreciationThank you to everyone who came out to our Client Appreciation picnic! We hope everyone enjoyed the dinner, games and company! A HUGE thanks for your generosity toward our kickoff of the 2015-2016 Harvest for Hunger campaign- we will be donating over $1400 and several trunkloads of food to Harvest for Hunger after this event alone!! We collect canned goods throughout the year, so we will be adding to this total to reach our goal of donating 8000 meals to the hungry in our community.

Social Media UpdateLineweaver Financial Group is now on Facebook! “Like” our page at facebook.com/lineweaverfinancialgroup to stay up to date on events, the market and general financial news we hope you find useful and informative. We have also launched a blog on our website. You can view it at Lineweaver.net/blog. We will be posting new content often, so be sure to check it out!

Identity VerificationAs we discussed in our last newsletter, identity theft is a major concern- it seems like every day you hear of another company’s data being breached! Here at Lineweaver Financial Group, we take protecting your identity and personal information very seriously. And even though we’ve known many of you for a number of years and recognize your voices on the phone, we may still ask you to verify several pieces of personal information before being able to continue with things like distribution requests, password assistance or even something as simple as updating your address. Please know that this is only being done for your protection! We thank you for your patience and understanding!

continued from page 1

As the third quarter of 2015 winds down, there are a number of questions on investor’s minds.

• Did the Fed postpone raising interest rates because they are concerned about the global economy?

• Will slowing growth in China have a ripple effect on the rest of the world?

• Does the recent stock market selloff represent a typical correction (decline) of 10-12%, or does it portend something more sinister?

• Will the Browns have a winning season?

With stock market volatility recently reaching its highest level since the financial crisis, investors are understandably questioning what the outlook is for U.S. stocks in 2015 and beyond. While we don’t believe the recent volatility represents the start of a new bear market, caution is still warranted.

Over the last couple of months, we have noticed elevated risk levels in the markets that are historically consistent with potential weakness in stock prices. Consequently, our cash (money market) levels have been temporarily higher than normal.

That said, investors looking out 12 months or more may need to have modest expectations for U.S. stocks. While domestic fundamentals are solid, there are headwinds. Profit margins are at record highs and are likely to come under pressure as wages firm and rates creep higher. A strong dollar is proving problematic for U.S. companies that sell abroad. But arguably the biggest headwind is valuation. According to Bloomberg data, U.S. large cap equities, as represented by the S&P 500, trade at roughly 17.5x trailing earnings and more than 25x cyclically-adjusted earnings. Both measures are comfortably above their long-term averages. In the past, similarly high valuations have been associated with below-average returns over the longer term.

We’re certainly apt to see more market volatility in the months ahead. It may be weeks/months before a resumption of an uptrend in the stock market. While we see a steady, moderate growth expansion continuing in the US, things look weaker and less certain in other parts of the world. In our view, markets are at more of an inflection point than a turning point. And yes, the Browns will have a winning season.

Tune in to WKYC Channel 3 at 11:30 am every other Sunday to see Jim Lineweaver on the Golden Opportunities show with Laurie Steiner. Jim and Laurie discuss current financial topics in an easy to understand format.

Upcoming shows and topics:

MONEY WATCH

GOLDEN OPPORTUNITIES SHOW

ECONOMIC COMMENTARY

3

DJIA: 16284.70YTD: -8.63%

10 Year Treasury Note Yield: 2.06%9/30/14: 2.51% 6/30/15: 2.42%

30 Year Mortgage Rate: 3.84%9/30/14: 4.13% 6/30/15: 4.16%

Source: Yahoo FinancePast market performance is no guarantee of future investment performance or success.It is not possible to invest directly in an index. Close of Market 9/30/15

Sunday, October 4, 2015Investing Today for Growth Tomorrow

Sunday, October 18, 2015Heading into the Homestretch

Sunday, November 1, 2015Tax Planning Tips

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

purchases of new goods and services at the final point of purchase. To ensure the poor do not suffer the brunt of these sales taxes, government would send a monthly check called a “prebate” to families that would cover taxes on necessary expenses. The check amount would be up to the poverty level; a family doesn’t need to fall below the poverty line to receive one.

The critics of these systems point out that the transition from the current tax code to either of these proposed plans would cause major problems in our economy as corporation and individuals adjust to the massive change. The critics also fear that the tax rates being proposed would not be enough to fully fund our government and all of its programs.

We hope this will assist you in assessing the various tax reform plans and systems being proposed by the candidates. As the election draws near and the candidate field narrows, the individual plans proposed by each will begin to be explained in greater detail. Knowing the basic principles of each system will help you make an educated choice.

Please join us on November 10 at 6:00pm or November 12 at 1:00pm for our Education Program where I will discuss these tax reform systems, give you last minute 2015 tax tips, and take a look ahead at the 2016 tax landscape. Give our office a call to reserve your seat.

9035 Sweet Valley Drive Valley View, Ohio 44125 1-888-313-4009

4

Melinda is a member of the Client Relations team. She coordinates the preparation work for client appointments, including Portfolio Reports, Summary Spreadsheets and Investment Downloads. She manages the financial consultants’ calendars. This includes scheduling appointments for annual reviews as well as new account packet appointments.

The origin of using jack-o-lanterns on Hallow-een dates back at least 3,000 years to the Celtic celebration of Samhain. This festival was held starting at sundown on October 31st and lasted until sundown on November 1st. On this night, glowing jack-o-lanterns, carved from turnips or gourds, were set on porches and in windows to welcome deceased loved ones and to act as pro-tection against malevolent spirits. Burning lumps of coal were used inside as a source of light, later to be replaced by candles. Melinda was born and raised in Murrysville, PA, where her family has owned

and operated a 180-acre livestock and crop farm for over 100 years. Melinda began participating in sewing competition at the age of 8 and after winning several state and national competitions, graduated from Lasell College in Newton, MA with a degree in Fashion Design and Production. Melinda currently resides in Medina with her two sons, and they enjoy farming, camping, kayaking and lots of other outdoor activities.

If you would like to receive our newsletter through email, please email Jennifer at Jennifer@lineweaver.net

EMPLOYEE SPOTLIGHTMelinda Endlich, Client Relations

TRIVIA