What’s at the core of your retirement portfolio? If it’s an inexpensive index fund or exchange-traded fund (ETF), you’re up on the latest in investment science – circa 1995. But now, science may be moving on, and a new way of looking at portfolio construction has emerged.

Stock index funds like the widely-held Vanguard 500 Index Fund give investors access to broad markets for pennies in trading and carrying costs. Boatloads of research have demonstrated that they typically beat most actively managed funds on an after-fee basis. So if you’re depending on a fund or ETF like that, you’re not doing too badly.

President Obama’s proposal for the fiscal year 2012 federal budget is just that: A proposal that would have to wind its way through a Republican-controlled House and a divided Senate to become law. So there’s no sense in panicking about what’s in it and what isn’t.

But here is why you need to pay attention: The wish list, released on Feb. 14, is indicative of the themes that will dominate the remainder of this presidential term and the 112th Congress. Individual taxpayers will find a tight budget. Retirees could get an extra break, and students may lose valuable subsidies.

If you’re getting investment advice for your Individual Retirement Account (IRA), Roth IRA or Rollover IRA, you’re probably paying for it, even if the charges aren’t obvious. But by making that payment explicit, and covering it with funds from outside of your retirement account, you can magnify your retirement savings and get an extra tax deduction, too.

That’s because the Internal Revenue Service has ruled that money paid to financial advisers for managing IRAs doesn’t have to count against the annual IRA contributions limit. Put simply, if the fee you’re paying to your adviser is a wrap fee, or a fee calculated as some percentage of the assets your adviser is managing, you can write a separate check for it and not allow it to deplete your retirement account. If, instead, your adviser is compensated by trade-related commissions, you can’t separate them from your account and take advantage of this break.

Taxpayers who stand out tend to draw the attention of Internal Revenue Service auditors. Claim too much in interest, health expenses or charitable deductions, and it’s like waving that proverbial red flag in front of the tax man.

The agency knows, to the dollar, how much people at your income level typically write off for these categories. When you claim a higher-than-average amount, it doesn’t necessarily mean that you’re cheating, but it raises questions. You could be claiming a much higher medical deduction because your family had a horrible year, healthwise. And that over-the-top charitable write-off could just signify your extreme generosity.

The Internal Revenue Service has some tried and true techniques for finding tax cheats.  Sometimes the agency auditors look at the lifestyles of taxpayers. If you’ve got an upscale Beverly Hills zip code and a really low income, you might be hiding money. Or, you might be between films — not every suspicious return is masking fraud.

The tax agency also looks at all of the reports it receives about you. It matches those 1099 forms and makes sure you’re declaring all the income it knows you are receiving.