Exterior Balcony and Columns

W98 Westlake Malibu Lifestyle MAY 2015 www.wmlifestyle.com MAY 2015 www.wmlifestyle.com Westlake Malibu Lifestyle 99

MONEYSMART/ May 2015

For some, I included, we learned the hard lessons of life. My parents told me not to touch the stove when it’s hot, but I had to touch the stove to realize for myself I would get burned. Some of us had great financial role models (and I was one of those) to educate us on finance, teaching that easy money and plenty of credit do not encourage responsible lifestyles. Just ask a college freshman how easy it is to get a credit card. Then ask their parents how hard they have to work to pay it off. It’s a great lesson for us all. Today our country enjoys being the second largest economy in the world with a GDP of $17 trillion. China is third with a GDP of $9.2 trillion and Europe is number one when you add up all 28

nations; they have a combined GDP of $18 trillion. Yet, China’s debt is now double its GDP and our debt in the last six years has gone from $9 trillion to over $18 trillion and growing. And Europe will…Just think Greece and the answers will fall in place. Recently, a budget request was submitted to congress for the fiscal year for 2016. The budget request also starts to point in the direction that the government will be going in order to raise the revenue they will need to provide for the promises made to retirees and folks unable to meet their own needs to sustain their lifestyle. Some will tell you, we have a spending problem. Others will argue, we have a revenue problem. In reality, we have a math problem.

What would life be like if you could get to the essence of who you are and what you believe? In other words, why do you do the things you do? What if you could focus on doing what you are best at and love to do the most? What would our nation and our economy look like if we had more makers than takers? More people inspired and passionate about who they are and what they do. I can only imagine the feelings and the unbelievable success you would enjoy and our nation and economy would benefit from if you had the resources to focus on your passion.

According to Economics Professor Laurence Kotlikoff at Boston University, the “fiscal Gap” for the whole country is $221 Trillion. Currently Medicare and Social Security are $126 Trillion and growing. If our GDP is $17 Trillion and the Federal Government takes in roughly $3 Trillion and states and local taxes take in roughly $3 Trillion; that means the average American is taxed at a bit over 35% to the Federal, State and Local governments and that does not include sales taxes and other duties we pay. When the public sector takes too much from the private sector the economy cannot grow. The last six years we have seen the markets recover with very little to no growth. Ask yourself; are your wages higher, is your college graduate still needing help? Are you and your friends working harder and longer and are bonuses falling or salaries flat? While Corporate America is in great shape, are you? Ask yourself, as a society, are we going to let the 50% of the people who survive on handouts go without food, shelter or healthcare? Then ask yourself how will we pay for it? If you have assets, a retirement account and make a decent living, look in the mirror. The government is smart and calculating. They will pick every loop hole apart. They will say, “Only the rich itemize.” Deductions for state income tax, property tax, home mortgage interest, health insurance, and medical out of pocket and maybe even charity will disappear.

The current Budget proposal is asking for $4 Trillion in spending - $1 Trillion more than we bring in at the Federal Government level. First: where are we going to find an extra $1 trillion? Ask yourself, does our government live way beyond its means with easy money and cheap credit? Second, will the government get all that it is requesting? No, but this is why many of our elected leaders will say, “We must compromise and work together”. Review some of the tax proposals made in this budget and be amazed at how aggressively it attacks the middle class. First, they want to limit the tax breaks for Net Unrealized Appreciation or NUA. If you work for a company and they provide matching in company stock or you purchase it in your 401(k) this would eliminate that portion from being taxed at long-term gains and would then be taxed as ordinary income. Roth IRA’s – First they want to only allow conversions of pre-taxed dollars - essentially illuminating the back door Roth IRA conversion. Roth IRA’s would also require required minimum distributions (RMD) at age 70 ½ to match regular IRA’s. That would get taxable money back in to the system rather than continuing to allow contributions to the Roth to grow tax free. IRA’s - The budget also requests a maximum tax deduction of 28 percent of contributions to 401(K)’s and IRA’s and other qualified plans. This means, if your tax bracket is over 28% you lose out on the full deduction.

How about this: The budget asks to eliminate inherited or stretch IRA’s for anyone except the spouse. This probably has the best chance to pass because the government feels these portfolios are for retirement and if your kids inherit they feel that non-spouses are not retirement recipients. Who would be motivated to save in these accounts if they are punished for being good stewards of their money? Are we punishing the wise to help the foolish? Step up in basis – The budget also asks to eliminate the step up in basis. This means if you inherit a piece of property or investment you lose the ability to get a step up to the value or price as of the date of death and would pay taxes based on the original cost basis. This could destroy family businesses, family farms and ranches or real estate. These are only a few of the proposals that attack the American worker and middle class who make up the majority of participants in 401(k) and other qualified plans and Roth IRA’s. If you are a business owner, entrepreneur or own income property, you still have options. Seek true financial planning and advice. Understand your options, and most importantly, strive to get your business goals in line with your financial goals. Often business owners find themselves in the enviable position of a liquidity event and have not prepared for that situation and leave millions of dollars on the table in the form of taxes. Make sure your business is in concert with your financial plan to maximize what is most likely your largest asset. Our firm focuses on providing our clients clarity on complex financial issues. Together we can build solutions that allow our clients to focus on what they do best. Enjoy doing what you love most.

Doug De GrooteManaging Director

Located in Westlake Village 800.984.3302 805.230.0111

http://www.Degrootefinancial.com.

De Groote Financial Group, LLC is a federally registered invest-ment adviser that maintains a principal office in the State of California. De Groote Financial Group, LLC provides advice and makes recommendations based on the specific needs and makes recommendations based on the specific needs and cir-cumstances of each client. Investing in securities involves risk; please contact your financial adviser with questions about your specific needs and circumstances. The information contained in this newsletter is intended for information only, is not a recommendation to buy or sell any securities, and should not be considered investment advice.

MONEYSMART/ Your Passion or Their Why?

YOUR PASSION OR THEIR WHY?By Doug De Groote, MBA, CFP®

Exterior Balcony and Columns

W98 Westlake Malibu Lifestyle MAY 2015 www.wmlifestyle.com MAY 2015 www.wmlifestyle.com Westlake Malibu Lifestyle 99

MONEYSMART/ May 2015

For some, I included, we learned the hard lessons of life. My parents told me not to touch the stove when it’s hot, but I had to touch the stove to realize for myself I would get burned. Some of us had great financial role models (and I was one of those) to educate us on finance, teaching that easy money and plenty of credit do not encourage responsible lifestyles. Just ask a college freshman how easy it is to get a credit card. Then ask their parents how hard they have to work to pay it off. It’s a great lesson for us all. Today our country enjoys being the second largest economy in the world with a GDP of $17 trillion. China is third with a GDP of $9.2 trillion and Europe is number one when you add up all 28

nations; they have a combined GDP of $18 trillion. Yet, China’s debt is now double its GDP and our debt in the last six years has gone from $9 trillion to over $18 trillion and growing. And Europe will…Just think Greece and the answers will fall in place. Recently, a budget request was submitted to congress for the fiscal year for 2016. The budget request also starts to point in the direction that the government will be going in order to raise the revenue they will need to provide for the promises made to retirees and folks unable to meet their own needs to sustain their lifestyle. Some will tell you, we have a spending problem. Others will argue, we have a revenue problem. In reality, we have a math problem.

What would life be like if you could get to the essence of who you are and what you believe? In other words, why do you do the things you do? What if you could focus on doing what you are best at and love to do the most? What would our nation and our economy look like if we had more makers than takers? More people inspired and passionate about who they are and what they do. I can only imagine the feelings and the unbelievable success you would enjoy and our nation and economy would benefit from if you had the resources to focus on your passion.

According to Economics Professor Laurence Kotlikoff at Boston University, the “fiscal Gap” for the whole country is $221 Trillion. Currently Medicare and Social Security are $126 Trillion and growing. If our GDP is $17 Trillion and the Federal Government takes in roughly $3 Trillion and states and local taxes take in roughly $3 Trillion; that means the average American is taxed at a bit over 35% to the Federal, State and Local governments and that does not include sales taxes and other duties we pay. When the public sector takes too much from the private sector the economy cannot grow. The last six years we have seen the markets recover with very little to no growth. Ask yourself; are your wages higher, is your college graduate still needing help? Are you and your friends working harder and longer and are bonuses falling or salaries flat? While Corporate America is in great shape, are you? Ask yourself, as a society, are we going to let the 50% of the people who survive on handouts go without food, shelter or healthcare? Then ask yourself how will we pay for it? If you have assets, a retirement account and make a decent living, look in the mirror. The government is smart and calculating. They will pick every loop hole apart. They will say, “Only the rich itemize.” Deductions for state income tax, property tax, home mortgage interest, health insurance, and medical out of pocket and maybe even charity will disappear.

The current Budget proposal is asking for $4 Trillion in spending - $1 Trillion more than we bring in at the Federal Government level. First: where are we going to find an extra $1 trillion? Ask yourself, does our government live way beyond its means with easy money and cheap credit? Second, will the government get all that it is requesting? No, but this is why many of our elected leaders will say, “We must compromise and work together”. Review some of the tax proposals made in this budget and be amazed at how aggressively it attacks the middle class. First, they want to limit the tax breaks for Net Unrealized Appreciation or NUA. If you work for a company and they provide matching in company stock or you purchase it in your 401(k) this would eliminate that portion from being taxed at long-term gains and would then be taxed as ordinary income. Roth IRA’s – First they want to only allow conversions of pre-taxed dollars - essentially illuminating the back door Roth IRA conversion. Roth IRA’s would also require required minimum distributions (RMD) at age 70 ½ to match regular IRA’s. That would get taxable money back in to the system rather than continuing to allow contributions to the Roth to grow tax free. IRA’s - The budget also requests a maximum tax deduction of 28 percent of contributions to 401(K)’s and IRA’s and other qualified plans. This means, if your tax bracket is over 28% you lose out on the full deduction.

How about this: The budget asks to eliminate inherited or stretch IRA’s for anyone except the spouse. This probably has the best chance to pass because the government feels these portfolios are for retirement and if your kids inherit they feel that non-spouses are not retirement recipients. Who would be motivated to save in these accounts if they are punished for being good stewards of their money? Are we punishing the wise to help the foolish? Step up in basis – The budget also asks to eliminate the step up in basis. This means if you inherit a piece of property or investment you lose the ability to get a step up to the value or price as of the date of death and would pay taxes based on the original cost basis. This could destroy family businesses, family farms and ranches or real estate. These are only a few of the proposals that attack the American worker and middle class who make up the majority of participants in 401(k) and other qualified plans and Roth IRA’s. If you are a business owner, entrepreneur or own income property, you still have options. Seek true financial planning and advice. Understand your options, and most importantly, strive to get your business goals in line with your financial goals. Often business owners find themselves in the enviable position of a liquidity event and have not prepared for that situation and leave millions of dollars on the table in the form of taxes. Make sure your business is in concert with your financial plan to maximize what is most likely your largest asset. Our firm focuses on providing our clients clarity on complex financial issues. Together we can build solutions that allow our clients to focus on what they do best. Enjoy doing what you love most.

Doug De GrooteManaging Director

Located in Westlake Village 800.984.3302 805.230.0111

http://www.Degrootefinancial.com.

De Groote Financial Group, LLC is a federally registered invest-ment adviser that maintains a principal office in the State of California. De Groote Financial Group, LLC provides advice and makes recommendations based on the specific needs and makes recommendations based on the specific needs and cir-cumstances of each client. Investing in securities involves risk; please contact your financial adviser with questions about your specific needs and circumstances. The information contained in this newsletter is intended for information only, is not a recommendation to buy or sell any securities, and should not be considered investment advice.

MONEYSMART/ Your Passion or Their Why?

YOUR PASSION OR THEIR WHY?By Doug De Groote, MBA, CFP®