In This Issue
Featured Article
Yup, It's Time for Resolutions
Curt's Quick Comment
Long-Term Care Insurance
From the Financial Presses
Quick Links
Featured Article
I'm launching a Tax Preparation Service this year.  As some of you know I am an Enrolled Agent.  Lot's of folks don't know what the means.  According to the National Association of Enrolled Agents, "Enrolled agents (EAs) are America's Tax Experts. EAs are the only federally licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS."  To help me launch this new line of business and reward the loyal readers of Financial Strategies I'm offering discounted pricing.  See the coupon at the end of this eNewsletter for details.  
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Financial Strategies
Planning Techniques, Procedures and Guidance for Military Professionals
Greetings!


Happy New Year!
  
Well, I've been watching the Fiscal Cliff fiasco very closely and we've apparently Bungee Jumped off it.  There are still a lot of things to fix with our country's current fiscal and monetary picture.  I'm not going to go into the results of the tax legislation in this issue as the dust is still settling.  There are two things to know now though.
  1. The AMT patch has been fixed permanently.  Most of us don't realize how close we come each year to owing AMT.  Now at least the AMT exemption is indexed for inflation.  Smart tax planners will still consider it though.
  2. If you have income from employment (wages, salary) your Social Security taxes just went up about by about 47% from 4.2 percent to 6.2 percent of your earned income (Military Retirement Income is not considered earned income for tax purposes)

I hit one other consequence of the new tax laws in my Quick Comment below.  As far as main articles go, I start this issue with some things you might want to do to start off the year financially.  The second article talks about long-term care insurance...one of the toughest decisions when it comes to financial planning.

 

The From the Financial Presses section includes an article that explains how things can get goofed up if you don't properly designate beneficiaries for your IRA (one of the New Year resolutions I recommend).  The second article talks about the tax benefits of Real Estate.

 

Speaking of tax benefits.  I will be launching a tax preparation service this year.  Check the article to the left.

 

Happy New Year and Go Packers! (I didn't really think they would make the playoffs)


Curt
Curtis L. Sheldon, EA
C.L. Sheldon & Company, LLC
(703)542-400 or (800) 928-1820
Yup, It's Time For Resolutions
 

  

I went to the gym this morning (like I do almost every morning) expecting to see it packed.  It is, after all, the fourth of January.  I was surprised that there weren't that many people there.  Maybe it is because folks have given up on the "I'm going to get fit" resolution.  It is tough to keep resolutions.  But here are a few related to your financial life that you might want to consider

 

Increase your contributions to your retirement plans.  The limits for contributions to 401(k) plans (and its cousins 403(b) and TSP) have increased.  So you can put more away for retirement.  This will lower your taxes now or in the future (if you select Roth options) and also set you up for a more comfortable retirement.  You can increase your 401(k) contributions by $500 to $17,500 and your IRA contributions by $500 to $5,500.  If you have the good fortune of turning 50 in 2013 (or have already turned 50) you can increase your 401(k) contributions by an additional $5,500 and IRA contributions by $1,000.

 

Check Beneficiaries.  Has anything changed in your life?  You might want to change the beneficiaries for insurance policies and retirement accounts.  This makes sure the money goes where you want it to and can reduce probate costs and hassles.

 

Check Withholding.  Is your child no longer a full-time student or will turn 24 this year?  If this, or a similar change, has occurred with regards to your tax picture you might want to increase your withholding.  It is easier to swallow if you do it earlier in the year than later.

 

Store Documents Off-Site.  You might want to consider storing copies of important documents off-site.  If something happens to your primary home (where most of us store things like insurance policies) the documents you need to settle everything may have been destroyed or damaged along with the home.  You can store physical copies somewhere else or you could consider storing copies in the "Cloud".  Those of you who are clients can do this securely at Virtual Vault.  Just do it a little at a time. For example, when the new insurance policy comes in, scan it and load it up on the Vault.

 

Get a Credit Report.  Checking your credit report is important to confirm there are no mistakes and prevent identity theft.  You can get a free credit report through www.freecreditreport.gov .  There are also commercial agencies with similar names that do the same thing.

 

Those are some ideas.  None are too tough and if you do them all you will have accomplished some good planning for the future.
  
Curt's Quick Comment
Form 1040
One of the consequences (intentional or otherwise) with the permanent extension of the Bush Tax Cuts is that non-deductible contributions to a Traditional IRA are a lot less inviting.  That is because for many readers of Financial Strategies, capital gains earned inside a Traditional IRA will be taxed at a higher rate than capital gains earned outside a Traditional IRA.  Contact me if you'd like to discuss this issue in more depth.
Long-Term Care Insurance:
Is it a Good Idea?
 

There is a good possibility that you or your spouse will eventually require some form of long-term care. According to the U.S. Department of Health and Human Services, about 70% of people aged 65 or older will enter a nursing home for some period of time during their lifetimes.1

 

Whether you or your spouse will be among this group is impossible to predict. But it is wise to consider how you might pay for long-term care and whether long-term care insurance (LTC) is a good idea for you.

 

Long-term care policies are complex and vary widely. But in general, LTC insurance typically covers the following:

         Nursing home care

         Adult day care

         Visiting nurses

         Assisted living

         In-home assistance with daily activities 

 

LTC includes a range of nursing, social, and rehabilitative services for people who need ongoing assistance due to a chronic illness or disability. LTC insurance can be used by anyone at any age who suffers an accident or debilitating illness, but it most frequently is used by older adults who need assistance with essential physical needs, such as bathing, dressing, or eating.

 
Cost of Care

 

Perhaps the first consideration is determining the potential cost of long-term care. Below is a summary of average current costs.2

         $200/day for a semi-private room in a nursing home

         $222/day for a private room in a nursing home

         $3,300/month for care in an assisted living facility (for a one-bedroom unit)

         $19/hour for a home health aide

         $18/hour for homemaker services

         $61/day for care in an adult day health care center 

 

With health care costs rising every year, these expenses can be expected to grow substantially over time. Furthermore, neither Medicare nor Medicare supplemental coverage, also known as Medigap insurance, typically cover long-term care. Medicaid will cover a large share of such services but only if you meet stringent financial and functional criteria. What's more, most employer-sponsored or private health insurance plans follow the same general rules as Medicare. Therefore, most people who need long-term care must pay for some or all of it on their own.


Cost of Insurance

 

Like life insurance, LTC insurance policy premiums largely depend on your age and health. If you take out a policy when you are young, you can expect to pay comparatively low premiums during the life of the plan, while starting a new policy when you are older will entail significantly higher monthly premiums. A 65-year-old in good health can expect to pay between $2,000 and $3,000 a year for a policy that covers nursing home care and home care, with premiums adjusted for inflation.3

 

Most long-term care policies sold today are federally tax qualified, which means the premiums paid and out-of-pocket expenses for long-term care may be applied to the medical expense deduction of the federal tax code. (Typically, taxpayers may deduct the portion of medical and dental expenses that exceed 10% of adjusted gross income.) Additionally, long-term care benefits received are not taxed as income up to certain limits. Consult with a tax advisor to learn more about the tax implications of LTC insurance.

 

Source/Disclaimer:

 

1Source: U.S. Department of Health and Human Services, National Clearinghouse for Long-Term Care.

2Source: Genworth Financial, Cost of Care Survey 2012, March 2012.

3Source: AARP.org, 2011.


Required Attribution

Because of the possibility of human or mechanical error by S&P Capital IQ Financial Communications or its sources, neither S&P Capital IQ Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall S&P Capital IQ Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

2012 S&P Capital IQ Financial Communications. All rights reserved.
From the Financial Presses

 

Ghost Story Can Haunt Your IRA 

The rules for contributing to an IRA are relatively simple. You put in the money for each tax year by the required deadline-the tax return due date for the year of the contribution-and tell the account custodian how you want the funds invested. In addition, you might roll over funds to an IRA from a 401(k) or another kind of "qualified plan" at work when you change jobs or retire. That way, your money can continue to grow without being eroded by taxes until you make a withdrawal...(To read more click here)

 

Don't Overlook the Tax Benefits of Real Estate

Though it was a lesson learned the hard way, Scarlet O'Hara eventually realized the value of land in "Gone With the Wind." Of course, moguls such as Donald Trump-and many other wealthy investors-have long known the secret to turning rental real estate into profits, and even investors with much lower profiles can benefit from owning property... (To read more click here) 

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC 's current written disclosure statement discussing our advisory services and fees is available for review upon request.
 
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To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication (or in any attachment).
Military Professionals have unique financial benefits and unique financial needs.  If you think you would like some help developing your Financial Strategy please give us a call at (703) 542-4000 for a free initial consultation or for more information go to our website at .www.CLSheldon.com .
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