In This Issue
Featured Article
Where to Put Your Nest Egg
Curt's Quick Comment
When to Collect Social Security
From the Financial Presses
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Featured Article
I was recently quoted again in the financial presses.  This time it was on H.R. Block's, Block Talk.  You can see the reference Here
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Financial Strategies
Planning Techniques, Procedures and Guidance for Military Professionals


Well, my Green Bay Packers are off to a rough start this year.  But...the season is still young and it doesn't really start until the playoffs. 


It is hard to believe it is already October.  Welcome to Financial Strategies.  This month's issue has a definite Retirement flair.


The main article talks about the different types of accounts that may be available to you to save for your retirement and how those accounts interact. 


The second article scratches the surface of Social Security Planning.  Most people take Social Security with little thought put into the timing, maximization of benefits or survivor protection.  The first thing to understand is how your individual benefit is calculated.


The last two articles also look at planning for retirement.  First, the value of diversification is explained as it is critical for the returns you need to accumulate assets for your retirement.  The final article looks at the decision to retire early.


Have a great October and don't get too scared come Halloween! 


Curtis L. Sheldon, EA, AIF®
C.L. Sheldon & Company, LLC
(703)542-400 or (800) 928-1820
Where to Put Your Nest Egg


For those of us who spent most of our life in the military, the different ways that we can save for retirement can be a little confusing. It can be even more challenging to figure out how the different types of retirement savings vehicles interact. So in this article I'll see if I can make it a little clearer for you.


401(k) plans. 


401(k) plans (and its cousins 403(b) and TSP) are the most popular retirement option offered by employers. The amount you can contribute to a 401(k) is dictated by law and generally is adjusted for inflation.


For 2013 you can contribute $17,500 to a 401(k). If you are age 50 or older you can contribute an additional $5,500 for a total contribution of $23,000.


Contributions to a 401(k) can be pre-tax (you don't pay income taxes on the amount contributed) or post-tax if your employer offers Roth 401(k). Combined pre-tax and post-tax contributions are limited to the amounts previously listed. The amount that you contribute to a 401(k) does not affect how much you can contribute to other retirement accounts....with a couple of caveats.


  1. If you work for multiple employers or are self-employed the total you can contribute to all your 401(k)s is $17,500/$23,000 respectively (solo 401(k) plans have some additional rules/limitations)
  2. If you have a 401(k) it may affect the deductibility of IRA contributions


Traditional IRA.


First of all, let me clear up a little confusion. Anyone with earned income or married to someone with earned income can contribute to a Traditional IRA.


As of 2013 the annual limit is $5,500 per individual with a $1,000 additional "catch-up" contribution for those 50 or older.


Not everyone can deduct the contributions. The rules vary and depend on the individual and whether the individual has a retirement plan at work. In the case of spouses, the variables include whether the spouse is employed outside the home, and whether the other spouse has a retirement plan at work. Let's take a look at the different scenarios.



  • No retirement plan at work. Traditional IRA contributions are deductible regardless of income.
  • Retirement plan at work (Defined Contribution Plan, Defined Benefit Plan or 401(k)). Deductibility of the contributions is limited by Adjusted Gross Income (AGI). The ability to deduct the contributions starts phasing out at $95,000 AGI for Married Filing Jointly (MFJ) and $59,000 for Single and Head of Household (HoH). The ability to deduct the contributions is completely phased out at $115,000 for MFJ and $69,000 for Single/HoH.


  • Employed. Same rules as above
  • No Earned Income, Employed Spouse Not Covered by Retirement Plan. Contributions to a Spousal Traditional IRA are fully deductible (subject to annual limits)
  • No Earned Income, Employed Spouse Covered by Retirement Plan. Contributions are deductible if AGI is below $178,000 and are completely phased out at $188,000 AGI


Roth IRA


The amount you can contribute to a Roth IRA is the same as for a Traditional IRA. The total combined contributions to Roth and Traditional IRAs cannot exceed the $5,500/$1,000 annual limit. However, depending on your income you may not be able to contribute any amount to a Roth. The ability to contribute to a Roth IRA begins to phase out at $178,000 AGI for MFJ and $112,000 AGI for Single and HoH. You cannot contribute to a Roth IRA if your AGI is above $188,000, MFJ or $127,000 Single/HoH.


Effective, Tax-efficient retirement investing is critical to a successful retirement. However, the tax environment is very unforgiving. If you make a mistake such as transferring the funds incorrectly, contributing too much or not taking Required Distributions, the penalties can be devastating (in some cases as much as 50%). Make sure you know what you are doing or get help from a competent Financial or Tax Advisor.
Curt's Quick Comment
Remember, you have to take Required Minimum Distributions from Traditional IRAs and ALL Qualified Retirement Plans by 1 Apr of the year after you turn 70 1/2 (only Congress could make a rule like that).  Roth IRAs do not have Required Minimum Distributions.
When Should You Collect Social Security?

A growing number of Americans have been forced to delay their planned retirement date due to job and savings losses suffered during the most recent recession. According to a survey, nearly one-quarter of workers said they have resolved to retire later due to concerns about outliving their savings and fears of rising health care costs.(1)


Postponing retirement not only means working longer, but also delaying when you start collecting Social Security. Currently, workers can begin collecting Social Security as early as age 62 and as late as age 70. The longer you wait to start collecting, the higher your monthly payment will be. Your Social Security monthly payment is based on your earnings history and the age at which you begin collecting compared with your "normal retirement age." This normal retirement age depends on the year you were born.



Those choosing to collect before their normal retirement age face a reduction in monthly payments by as much as 30%. What's more, there is a stiff penalty for anyone who collects early and earns wages in excess of an annual earnings limit ($15,120 in 2013).


For those opting to delay collecting until after their normal retirement age, monthly payments increase by an amount that varies based on the year you were born. For each month you delay retirement past your normal retirement age, your monthly benefit will increase between 0.29% per month for someone born in 1925, to 0.67% for someone born after 1942.


Which is right for you will depend upon your financial situation as well as your anticipated life expectancy. Consider postponing taking your Social Security benefits if:


  • You are in good health and can continue working. Taking Social Security later results in fewer checks during your lifetime, but the credit for waiting means each check will be larger.
  • You make enough to impact the taxability of your benefits. If you take Social Security before your normal retirement age, earning a wage (or even self-employment income) could reduce your benefit.
  • You earn more than your spouse and want to ensure that spouse receives the highest possible benefit in the event that you die before he or she does. The amount of survivor benefits for a spouse who hasn't earned much during his or her working years could depend on the deceased, higher-earning spouse's benefit -- the bigger the higher-earning spouse's benefit, the better for the surviving spouse.


Consider taking your benefits earlier if:


  • You are in poor health.
  • You are no longer working and need the benefit to help make ends meet.
  • You earn less than your spouse and your spouse has decided to continue working to help earn a better benefit.


Whenever you decide to begin taking your benefit, keep in mind that Social Security represents only 36% of the average retiree's income.(2) So you'll need to save and plan ahead -- regardless of whether you collect sooner or later.



1Source: Employee Benefit Resource Institute, 2013 Retirement Confidence Survey, March 2013.

2Source: Social Security Administration, "Fast Facts & Figures About Social Security, 2013."

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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.


© 2013 S&P Capital IQ Financial Communications. All rights reserved.
From the Financial Presses

Five-Year Returns Show Why Diversification Is Key

The term diversification is used so often in marketing investment products that it's easy to take for granted. Yet it is crucial to investment success and diversifying a portfolio correctly is not so simple...(Click Here for More)


It's Tough To Decide If You Should Retire Early

Whatever you do for a living, and whether you're an employee, work for yourself, or own a small business, one of the toughest decisions you'll ever face is when to retire. A number of factors will be at play in your decision-making process, including your age, your health, your retirement and insurance benefits, the cost of living where you live, the income-producing investments you may have, and your overall savings. But perhaps the biggest question underlying all of the others is whether you will be able to afford the kind of lifestyle you want after you are retired...(Click Here for More) 

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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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 .