What It Takes to Join the 1%

How much do you need to make to be in the top 10% earners in the U.S.? What about the top 1%?

The top 1% is a politically vilified group, but they may not be who you think they are. So, who are the 1%? What is the price of membership in this club? Could you be in the top 10%? Finally, do the rich pay their share of taxes?

Who Is In the Top 10%?

"The top 10% had at least $116,623 of adjusted gross income" [Tweet this]

Let's start with the top 10%, because more people belong to that group than you may expect. Based on 2010 income tax returns using adjusted gross income (basically the number at the bottom of page 1 of your Form 1040, before exemptions and deductions):

• The top 10% had at least $116,623 of adjusted gross income (AGI).
• The top 10% includes 45% of the total AGI.
• The top 10% paid 70.6% of the total income tax burden.

The bottom 90% of taxpayers paid less than 30% of the total national income tax.
The bottom 50% of taxpayers paid 2.36% of the total federal income tax revenues.

• The top 5% had at least $161,579 of AGI.
• The top 5% includes 34% of the total AGI.
• The top 5% paid 59.1% of the total income tax burden.

Now, a drum roll for the top 1%:

• The top 1% had at least $369,691 of AGI.
• The top 1% includes 19% of the total AGI.
• The top 1% paid 37.4% of the total income tax burden.

Now you know what it takes to "join the club."

Income equality and tax fairness are challenging dilemmas. Be well informed and draw your own conclusions as the debate continues over the fiscal cliff and other economic policy issues.

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

New Retirement Plan Limits for 2013

The 2013 retirement plan contribution limits have been announced. Whether your retirement is around the corner or a long way off, now is the time to start planning and thinking about how you might be able to take advantage of next year's higher retirement plan contribution limits!

2013 Retirement Contribution Plan Limits

$17,500	Employee 401(k) and 403(b) elective deferrals, an increase of $500.
$5,500	Catch-up elective deferrals if age 50 or older—no change.
$51,000	Annual defined contribution plan limit, up $1,000.
$255,000	Annual compensation limit for defined contributions plans, up $5,000.
$115,000	Highly compensated employee threshold.
$12,000	SIMPLE plan deferral, up $500.
$113,700	Social Security tax wage base, up $3,600.

If these terms and concepts are Greek to you, it's time to consult your independent, fee-only financial planner! He or she can help you create a plan that takes full advantage of the retirement contribution options available to you.

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

Alzheimer's Disease, Long-Term Care and More: Plan for the Unexpected in November

For you trivia lovers, November is:

• Alzheimer's Disease Awareness Month
• Long-Term Care Awareness Month
• National Family Caregivers Month

Certainly, no one really wants to dwell on Alzheimer's disease, long-term care or family caregiving, especially around the holidays. Unfortunately, while we don't want to think about these topics, we should.

You or someone you know may have had personal experience with one or more of these issues. These tough situations involve both financial and psychological considerations. Hurricane Sandy should remind us that advance planning is always beneficial and no planning at all leaves people most at risk.

So ask yourself:

• Have you and your siblings had a discussion about who would help take care of Mom or Dad if they develop Alzheimer's disease?
• Can you identify the most common early symptoms of Alzheimer's disease?
• Have you had discussions with your parents about how they would like to be cared for if and when the day comes when they can't live independently?
• Have you educated yourself about long-term care insurance? Do you know how benefits are triggered, what services are covered and what the costs are?
• Whether or not you choose to buy insurance, do you know the local care providers that you could call when you need advice?
• If you have a family member or friend who is a caregiver, is there anything you can do to help?

While we would rather feast on turkey and watch football at Thanksgiving, starting a conversation while the family is together may make you all more thankful in the long run.

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

Presidential Election Holds Scant Impact on Private Business Views of 2013

The Cincinnati Enquirer recently published the results of the Deloitte Cincinnati USA 100 Top Privately Held Businesses Survey.

Many positive elements were identified in the survey. Most importantly, sales and employment levels both hit records in 2011, signaling a recovery from the Great Recession.

Private business owners reveal rising optimism for 2013:

• Nearly 80% expect gross sales/revenues to increase.
• Nearly 70% expect pre-tax profit to increase.
• Over 65% expect their number of employees to increase and less than 10% forecast a decrease in the number of employees.

The November election was the focus of specific questions in the survey. The responses show that the election is clearly not a dominant factor in the business outlook.

Owners of the Top 100 businesses were asked to answer "agree," "disagree" or "neither" to the following questions:

• "In terms of demand for our products, the outcome of the election will have little or no effect." Nearly 60% answered "agreed" or "neither."
• "Regardless of the winner, the U.S. economy will probably improve after the uncertainty surrounding the election ends." Nearly 70% answered "agreed" or "neither."
• "Clarity and certainty are more important than which party captures the White House." Nearly 70% answered "agreed" or "neither."
• "We are putting off significant business decisions until after the election." Only 25% agreed.

This optimism is important because, even though private businesses are not included in public stock market valuations, they are major drivers of employment and economic activity.

The next time you think there isn't any good news in the economy, stop and think again!

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

In October, Think Fire Prevention

October is upon us and Fire Prevention Week is October 7 to 13.

Why is a financial planner writing about Fire Prevention Week? Consistent with our theme of "let's manage what we can control, not what we can't control," there are basic preventative steps to take for fire prevention and safety.

"Have Two Ways Out" is the Fire Prevention Week theme for 2012, which should be easy for Cincinnatians to remember with our three-way, four-way and five-way chili! If you accomplish only one thing this year, have two ways out of every room in your house. This may include having a foldable escape ladder for the second floor of your house.

Here are a few other basic fire safety tips:

• Change your smoke detector batteries when you change your clock for the end of daylight savings time.
• Replace your smoke detectors when they are 10 years old. The detection sensitivity drops with age, even if they still function.
• Kitchen fires are a high-risk source in your home. Have a fire extinguisher in your kitchen and know how to use it.
• Clean your dryer vent at least once a year, all the way from the dryer to the exit source.
• Have an outside meeting spot for your family, such as the mailbox if it is by the street or a neighbor's tree.

If you do only one thing to improve fire safety this year, it will be a step in the right direction. Don't let a fire be an opportunity to test your healthcare power of attorney form or last will and testament. See, there is always a financial planning connection!

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

International Investing: The Big Picture

The face of international investing is changing.

There is no connection between where a company is headquartered and where it makes its money.

Using an example cited in The Wall Street Journal, Novartis AG is headquartered in Switzerland and Johnson & Johnson is based in the U.S., but they're both global healthcare companies. Johnson & Johnson generates 52% of its sales outside the United States. Novartis generates 67% of its sales outside the United States.

Most U.S. companies make the majority of their profits on foreign soil. According to Ned Davis Research, as of December 31, 2011, 52.6% of pretax profits for companies in the Standard & Poor's 500 index came from outside the U.S.

Of the roughly 14,000 companies that went public over the past decade, more than 90% of them are outside the United States.

Conclusion: We live in an increasingly global world where one cannot be insulated from international economic events. The best growth opportunities exist on a truly global basis. As with all investment themes, a long-term perspective and patience is required for success.

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

How Does Your 401(k) Compare?

Do you ever wonder how the balance in your 401(k) and how much you are contributing to your retirement accounts compares to the rest of the working world?

According to Fidelity Investments, the nation's largest 401(k) administrator:

• The average balance among its nearly 12 million shareholders was $72,800 at the end of June 2012.
• The average employee contribution for the latest quarter was $1,660, up $30.
• The average employer contribution was $950, also up $30.
• The average employee contribution in Fidelity-administered 401(k) plans has remained steady at around 8% of annual pay for the past three years.

In the latest quarter, about twice as many participants increased their contributions as decreased them.

Over the past 10 years, about two thirds of annual increases in 401(k) account balances have come from workers' contributions and company matches, with one third the result of investment returns.

What the moral of the story?

The amount you contribute matters more than the investment returns.

Your contribution probably needs to be larger than the percentage matched by your employer.

About Bruce J. Berno, CFP^®
Bruce J. Berno, CFP^® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.