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Mitlin Financial Inc. - An SEC Registered Investment Advisor - Financial Future

"Free" is not Free

FreeIsNotFree

We at Mitlin Financial always communicate the importance of having a financial plan. As I have said in the past, people spend more time, energy and money on planning their family vacations than they do their financial lives. It is important to make sure you have a guide, a roadmap, for how you are going to be able to successfully retire and reach the financial goals you have in the future. We rely on tools to guide us all the time, such as Waze for the car, and it is important to have this tool to guide your financial life; a financial plan.

Recently we met with a prospective client who found us from our robust online presence. Once contacted by this family, which we will refer to as the Doe’s, we introduced the firm’s process and began to walk them through it. On the initial call we scheduled our “Is There A Fit” meeting with both Mr. and Mrs. Doe. It is key to have both spouses involved in the planning process, so it is a must that both attend our initial meeting.

The initial meeting was a huge success, the couple clearly had financial planning concerns that needed to be addressed and a financial plan would be paramount to their success. Following our meeting we forwarded the couple a proposal which outlined the areas we would cover in the plan and the detail they should expect to see in their personal financial plan. In addition, we quoted our fee for the plan.

When we contacted the couple, as we had scheduled during the initial meeting, to see if they felt we would be a good fit for them and confirm whether or not they were a good fit for us, things became interesting. As a firm, we felt this family would be an ideal client for us. They were in need of a financial plan to help organize and outline their financial life as they approach retirement and also needed assistance in managing their assets. I must say their assets were everywhere and invested in many different ways without a unified direction. In speaking with the prospective clients we learned that they too felt we were a good fit for their family and would provide the services and attention they need to work towards their goals.

The couple had a few questions about the financial plan and the fee. They felt that the fee was too high. When speaking with them to learn more about their questions, I came to learn that they had decided to choose to work with another firm. The reason they provided us was because the firm they were going to move forward with was not charging them for the financial plan.

Have you heard this before? Do you think a financial plan has no cost? I can tell you from personal experience that a good financial plan can take anywhere from five to thirty hours to produce, depending on its complexity. The pitfall with a free plan is typically it is simply used as a “sales” technique to get your assets under management. The financial plan is used as loss leader in order to have you move your accounts to the firm. Unfortunately, in many instances this may have consequences that you may be unaware of and it particularly problematic if you are not working with a fiduciary advisor like Mitlin Financial, Inc.

When offered a “free” financial plan by a non-fiduciary advisor you will typically see several outcomes that may come as a result. This is not to say that this is the case in 100% of the circumstances, but it does happen often. Many times the “free” plan is one you could probably do in five minutes using an online calculator and get the same result, not providing you much guidance. We have also seen outcomes that produce plans that are two hundred plus pages that are designed to confuse you and presented in a way you would never be able to follow or implement. One additional result we have seen with the “free” plan is the broker, or non-fiduciary advisor, using investment vehicles that will pay them handsomely in order to compensate them for the lost upfront revenue for the “free” plan. The “advisor” in this case is looking at the financial plan as a loss leader. Essentially they are using the plan as a tool to get you to transfer their assets to you and once that is done they will look to have you invest in high commissionable products. This will allow the “advisor” to recoup the money for the time spent on putting your plan together. This may involve you buying products that may require you to hold on to them for several years before you can get out of them without a penalty and/or purchasing products that may be in the “advisors” best interest and not your own. They have put several hours into this plan and need to be compensated somehow, did you really think they were doing this for free?

It is very important that you do your due diligence in advance, especially when working with a non-fiduciary advisor. This scenario can ultimately cost you way more than if you actually paid for the plan. We have not even spoken about the follow through and implementation of the plan, which many times will fall to the wayside once they are investing the assets and this is the most important part. We feel it would make more sense to work with a fiduciary advisor and pay for the plan on its own. This will allow you to implement the plan and incur those costs separately. More importantly, because you are working with a fiduciary advisor they will be required to work in your best interest and disclose any potential conflicts of interest.

Working with a fiduciary advisor in this instance is paramount. As a fiduciary, these advisors must disclose any costs and make investments that are in your best interest and not theirs. We have seen fiduciary advisors offer the financial planning component for “free”, but typically these are cases where the client is having them manage in excess of a certain dollar amount; typically over one million dollars or some higher threshold. When you think about, in this case the plan is not free either but is being done as part of the services for your family because of the size of your account and the benefit it produces.

There is no free lunch or financial plan and it is important when hiring an advisor that you understand all the costs. There is an unwillingness, especially among the non-fiduciary advisors, to have a discussion about the costs of doing business with a financial services firm. As a firm, this is something we disclose at our first meeting. Unfortunately, the Doe’s have most likely fallen into a trap that will end up costing them far more in the long run than if they move forward and worked with us. Chances are that they will learn this at some point down the road and either we or some other fiduciary advisor will have to charge them even more to fix and unwind the mistakes that were made.

We would welcome the opportunity to speak with you about your own experiences with financial plans and help you, your family and friends in any way that we can. Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know needs assistance in this area.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

2018 Happy New Year

New Year Photo Dream

 

Mitlin Financial Inc. would like to wish everyone that we work with a Healthy, Happy and Properous 2018! 

We hope that all of your dreams come true in the coming year.

5 Credit Card Myths Hurting Your Financial Future

Five Credit Card Myths Hurting Your Financial Future

 

Convenience and risk all with the swipe of the wrist. Credit cards are a tool that many of us use in order to buy things in a convenient fashion, eliminating the need to carry cash. When used properly this tool can add value to our financial lives. Credit cards offer the ability to buy things now and pay later, build credit and accumulate rewards. However, they can also be used to accumulate debt, huge interest costs, and put you in a financial hole if not managed properly.

Recently, when sitting with a client they shared with us the situation their mother was in and I saw the need to share this information. The client was working with their mother in order to obtain a mortgage for a new home. As far as the kids knew mom should be in a good position to obtain a mortgage, but unfortunately the mortgage was declined. When they investigated further, it was discovered that mom had significant credit card balances which were having a detrimental effect on her debt to income ratio. The children approached their mom and asked her why she was carrying these balances and she explained that she was told her credit score would benefit from having an outstanding balance on her credit cards.

Luckily the children were aware that this was not the case and she was most likely causing a negative effect on her credit score, not to mention the significant interest expenses she was incurring. Mom is lucky to have her children on her side as they are working with her to become debt free and educate her on what the “truths” are regarding credit cards.

This experience ignited the need for me to help bring to light the truth about credit cards. Here are five credit card myths that may be hurting your financial future. 

  • Carrying a balance on my credit card will help my credit score. This is a complete myth and will actually do the opposite, it will hurt your score. The credit bureaus want to see that you can pay your debts and do so on time. The best way to utilize a credit card is to simply pay off the balance each month. This demonstrates that you have the ability to take on manageable debt and pay it off on time. There may be instances where you cannot pay in full and you will want to pay at least the minimum payment. It is always vital to pay on time, paying late will certainly hurt your credit score. Bottom line, not paying your credit card in full because you believe it is helping your credit score is incorrect and you should develop a plan to correct this. 
  • You should not have a credit card and only use a debit card. This myth was born from the idea that with a debit card you will only be able to spend what you have, where with a credit card you can accumulate debt beyond what you may have saved. Though this thought process makes sense credit cards tend to be safer. We are living at a time where data breaches and fraud is on the rise. It is true that both debit and credit cards offer protections against these issues, but credit cards tend to have stronger protections for the card holder. Should you have a fraud while using a debit card (even if you are swiping it as a credit card) the funds could be taken out of your bank account and it may take your bank a few weeks to clear it up. This could tie up the funds in your account and even result in bounced checks or insufficient funds while the fraud is investigated. Fraud on a credit card is not going to cause an issue with your bank accounts as they perform an investigation. Also credit cards often provide additional protections for your purchases that debit cards typically do not.
  • Interest begins to accrue right after my credit card purchase. This is another complete myth with no truth behind it. It is true that credit cards can come with significant interest rates attached to them, but they do not start accumulating until after your payment is due. Essentially by paying your bill on time, you will not incur any interest expense and the credit card will simply provide you with an interest free loan from the date of purchase until the payment is due. This is the ideal way to use a credit card for the consumer, not the ideal outcome for the credit card company.
  • Never pay an annual fee for a credit card. Paying an annual fee for a credit card is not necessarily a bad thing. This is a personal choice and you need to evaluate the cost benefit of the fee. Many cards available today have tremendous benefits attached to them. There are cards available that provide you with anything from additional purchase insurance or warranty coverage, airline credits, internet access on flights, baggage fees, travel insurance, access to premier lounges, access to a concierge, and many other benefits. You need to review what the benefits are, evaluate whether you will use them and decide if the card is worth the expense. The benefits for many consumers outweigh the cost.
  • Having too many credit cards will hurt my credit score. This is another common myth and having several cards can actually help your credit. The credit bureaus will look at the amount of credit you have available and how you are using it. Your score can benefit by having a lower utilization of a higher credit amount. One caveat here, this may not hurt your credit, but it may present a hurdle when obtaining a mortgage. The mortgage company will love your higher score, but they will not be fond of you having access to a larger pool of credit and this could present a challenge. The number of credit cards you have, or will want to have, may depend on the stage of life you are in and what your goals are at the time.

Credit cards can provide you with a great way to pay for things, build credit and ensure against fraud, but there are many myths out there and it is important to understand the facts. We have outlined what we believe to be the top five myths we have seen, but there are many more. It is critical to educate yourself on what is fact and what is myth. You will want to use credit cards in a way that they will enhance and not hinder your financial future.

Mitlin Financial assists our clients in addressing these myths and we would be more than happy to assist you with any questions. Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone in your family needs assistance in debunking credit card myths.

 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

5 Habits You Should Start in the New Year

5 Habits Checklist

 

The New Year is underway, the holidays are behind us, and your financial situation is stabilizing now that you have paid all the bills.  Now it is time to begin to think about how you are going to help your financial future.  The New Year is always a good time to start new habits- realize I did not say “make resolutions”.  As a firm, we find that people who make resolutions typically end up retreating on them within 1 to 8 weeks of making them.  Habits, however, once started and continued will become a part of your daily life, and they tend to stick around for the long term.  Depending on the person, habits may take 21 to 60 days to become a part of your daily life.

There are five habits you should start today that will help you in reaching and attaining both your short term and long term goals.

1) Create a Budget

Take stock of how much income you have coming into your household each month and what expenses your income is paying each month.  You can do this by simply putting pen to paper or utilizing an online tool that will track this for you.  Each month, review the expenses and see if there are items that can be reduced or eliminated.  For instance, you may have forgotten about automatic monthly payments set up for services you no longer use.  This will put you in a position to review each expense and make sure it is a necessary one for your household.  In addition, you will have an excellent view of whether or not you are cash flow positive (having more income than expenses each month) or cash flow negative (having more expenses than income each month).

2) Start and Maintain an Emergency Fund

Years ago, our parents and grandparents frequently spoke about saving money for a rainy day.  The modern day term is an emergency fund.  Depending on your employment status, whether you are an employee or own your own business, and your level of comfort will dictate what size emergency fund you should maintain.  Each person is different, and we have recommended anywhere between a 6 month to 18 month emergency fund for clients.  This is money that should be kept in a separate account from the account by which you pay your monthly bills.  This account should be liquid, meaning you can use the money on a moment’s notice if needed.  A savings or money market account will work well for these monies.  You will want to determine what size your emergency fund should be and begin to accumulate funds until you reach that amount.  Once you reach the desired amount you should only use these monies for an emergency.  Things that may warrant you tapping into these funds may be the loss of a job or income, unexpected home or car repair, or simply any unexpected expense.  After the emergency is paid for, you will want to replenish this account at your earliest convenience.

3) Pay Yourself First

Ideally you want to pay yourself first each time you get paid, and then learn to live on the monies that are left.  There are a few ways to pay yourself first depending on your type of employment.  As an employee, you will want to take part in your company’s 401(k) or retirement plan.  A small business owner or independent contractor may want to consider setting up a retirement plan if they do not have one.  The last option would be for those that do not have, or cannot set up, a retirement plan and they would have to use either an IRA or brokerage account.  A good target would be to try and pay yourself 10% of your pre-tax earnings if you are deferring to a retirement account, which is preferred.  You may need to adjust this a bit if you are contributing after tax.

4) Review Beneficiary Designations Annually

We all face critical financial and life events that will impact us during the course of a given year.  You certainly would not want your assets to end up going to beneficiaries which you did not intend them to go.  Beneficiary designations should be reviewed at least annually, or if you experience a major life event or change.  Examples of times that you would want to review these designations would be: the birth of a child or grandchild, marriage, divorce, death, disability, or job change.  Whether you are digital or analog, place a reminder on your calendar to review this each year.

5) Rebalance Your Portfolio Annually

Rebalancing is something you will want to make sure you review at least annually; whether you manage your portfolio yourself or use an advisor.  Typically rebalancing has a tendency to get forgotten when markets are going up because people tend to get complacent and think there may be no risk in waiting.  Rebalancing will help you maintain your portfolio allocation and risk with its intended targets.  You may recall back in the late 1990’s, when technology investments were booming, the technology bust.  There were many investors that saw their portfolios assets allocation change from 10% allocation to technology stocks to 70% in a relatively short period of time.  In many cases this large allocation to technology was a huge overweight, meaning more money was allocated to that sector than you initially intended.  This was great while those securities were doing well, but what these investors did not realize was the risk they were imposing on their assets.  When the technology sector busted they had 70% of their portfolio at risk instead of the original 10%.  Had they rebalanced along the way, a good deal for this risk could have been avoided.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Active Investing

As we had learned about the inner-workings of passive investing in the previous edition, we will now focus our attention on passive management’s counterpart, active investing (active management). Under this type of investment management, managers take a more proactive approach in effort to achieve optimal returns and to outperform the market.

What is active investing and how does it work? This investment strategy uses the human touch to actively manage an investment portfolio. Managers will utilize analytical research, forecasts, as well as their own investment experience, expertise and judgment in an effort to make the best possible investment decisions regarding what securities to buy, sell or hold. Active managers tend to believe that short-term price movements are significant and that these movements can often times be predicted. They are not bound by any single index fund’s performance potential and can deploy a multitude of strategies with the goal of outperforming an investment benchmark index. Some of the strategies used by active fund managers to construct their portfolios include risk arbitrage, short positions, option writing and asset allocation.

Are Your Adult Children Still On Your Payroll?

Are Your Children Still On Your Payroll

There has been a tremendous spike in financial support given by families to their adult children in the last twenty years. This can come in the form of a place to live, paying expenses like cell phone bills and care insurance and even paying off debt. We all want the best for our children, but at the same time this may present a tremendous burden to the parents if they do not have enough income or assets to continue this level of support.

The days of children leaving the home and being responsible for their own personal and financial wellbeing seems to have gone the way of the rotary phone. According to theU.S Census Bureau, 34.1 percent of people aged 18-34 lived under their parents roof in 2015. This is up from 26% in 2005. An astounding 25% of young people living in their parents’ home do not work or go to school. These are staggering statistics and yet another contributing factor to people working longer. The financial dependence of their children are draining resources that otherwise would have been available for their own retirement.

It is important for our kids to be prepared to take on the world and be financially prepared for it. Financial education is a key to their success and the earlier you begin the better. I remember when my kids were young we wanted to teach them about money. One of the best tools we used to help educate the kids was a piggy bank, but not your ordinary piggy bank. The bank we provided to our kids had three slots, instead of one. There were slots for savings, spending, and charity and when they would receive money they would portion out the funds to each of these areas. It created a great opportunity to discuss the concepts of needs, wants and helping others. Educational ideas like this will stay with a child for a long time. We find that many financial habits of adults come from what they learned as children and how they observed their parents with money.

The help provided to adult children come at a price, far more than the dollars you spend on their behalf, and have the potential to put them in a bad financial position for much of their adult life. What happens when you are no longer here? How will they be able to support themselves? Take a look at your household bills and see what type of support you are currently lending to your child. Sit down and provide them with a list of the current expenses you are paying and develop a game plan to shift those expenses from you to them. In addition, this will offer an opportunity to work to educate them about the importance of long term financial stability and independence for themselves. You will see that this is a gift that will help them immensely in their life going forward.

Helping your children become and remain financially independent will not only be a gift to them, but you as well. It will put you in a better position for retirement, remove worry and stress from your life and most likely help your marriage, if you are married. We find that usually when a child is being support by their parents one spouse is typically in favor, and the other not, of helping them out financially leading to stress in the relationship.   I think financial independence is summed up best by this proverb, “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.”. Provide your child with support, and you help them now. Teach your child how to handle money, and you help them for a lifetime.

We would welcome the opportunity to help you get your children on the road to financial independence. Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know needs assistance in this area.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Ask A CEO: Lawrence Sprung, President and CEO, Mitlin Financial

Our Founder, Lawrence Sprung, had the pleasure of sitting down (virtually) with Greg Demetriou on his Ask A CEO Series 

Listen in and learn more about how Mitlin Financial has adjusted to the new "normal", the financial markets in this environment, and Larry's involvement in suicide prevention.

Be sure to listen and feel free to contact us at (631) 952-4466 x11 if we can be of any assistance.

 Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.  Past performance is not indicative of future results.

Changing the Face of Financial Planning

 Black Financial Advisor

Over the last few weeks, the world has come to see how broken our system truly is. People of all colors have flocked to the streets to let their voices be heard, and to demand that the change starts now. This fundamental change has to come at all levels, and across all industries.

As a young black financial planner, I’ve come to realize that my industry needs a major shift of tides. Black people as a whole, make up 1.2 trillion of purchasing power yet are so underrepresented in financial services. In 2018, the CFP Board released a study that showed, out of the then, 80,000 CFPs only 1,200 of them were black. Now, why is this racial disparity here you ask? It stems from systematic issues that are so deeply ingrained in American culture. Issues such as redlining, which led to less economic activity, as well as poor funding of school systems in predominantly black neighborhoods. Historically, black people have had less opportunity, compared to their white counterparts. Which has changed the way we view money, family structure, as well as ourselves.

I believe that it’s time we change the face of the profession. America is a mosaic filled with people from all different races, and color and the financial planning industry should resemble it. Black financial planners, even though few, are a beacon of hope. We bring with us empathy for the trials and tribulations that our people face. We come with new and creative ideas that will help thrust the financial planning industry to the forefront. Then, most of all we uplift our communities. We inspire little black girls and boys to dream. To dare to be different, as well as do things they never thought they could, because they never saw someone who looks like them do it.

Where do we go from here?

To see the changes that we want in the profession I believe that we need to focus on the next generation of black planners. We must mentor the ones who are developing in the industry now so that they can survive the ups and downs of the business. Next, we must also be there and present in our communities as advocates for financial literacy. This is important because not only will it help to bridge the wealth gap in America, it will allow us to be visible and shed light on a profession that may not be known in the community. Then, we must eliminate barriers to entry, by donating to organizations such as the Association of African American Financial Advisors and the African American Diversity Scholarship through the American College, whose mission is to develop the next generation of advisors and provide them with a community to help them advance themselves and the profession.

I believe that we are at a turning point not only in our industry but, in America as a whole. It is up to every one of us, to put our best foot forward and be the change that we want to see.                                                                                               

 

                                                                                        Donation to AAAA              Donation to AmericanCollege

 

 

 

 

 

 

 

 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

CNBC Appearance by Lawrence Sprung

  CNBC Photo

 

Larry Sprung had the pleasure of sitting down with Sharon Epperson in the CNBC studios on Thursday, February 27, 2020 to discuss the topic of Adulting.

𝗜𝗳 𝘆𝗼𝘂 𝗺𝗶𝘀𝘀𝗲𝗱 𝘁𝗵𝗲 𝘀𝗲𝗴𝗺𝗲𝗻𝘁 𝘆𝗼𝘂 𝗰𝗮𝗻 𝗿𝗲-𝘄𝗮𝘁𝗰𝗵 𝗶𝘁 𝗵𝗲𝗿𝗲

mitlin.us/CNBCsegment

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Congress Set To Pass SECURE Act

 CapitalBuilding

The SECURE Act, Setting Every Community Up for Retirement Enhancement Act, has been in the news for many months now. Since the House passed this earlier in the summer there has not been much heard about it until recently. This piece of legislation has been attached to the spending bill that Congress is looking to pass before they break for the holiday. The House has already passed it and it is on to the Senate.

This is a complex act with many working parts. We will cover some of the highlights that will affect the largest majority of people.

We see one of the most sweeping changes in the way beneficiary IRA’s will be handled. The SECURE Act will eliminate the ability of the beneficiary (unless they are a spouse or fill another exception) to stretch the payments from the IRA over their lifetime, the well-known stretch IRA. Instead, beneficiaries will be forced to withdraw all the assets from the beneficiary IRA no later than 10 years after the account owner passes away. This will have significant impacts on the tax status, especially those in high brackets and their prime working years, of the beneficiary and could have other adverse consequences as a result too. This provision will have the potential for a negative impact over time.

The act does contain some provisions that will be helpful. Those who have IRA assets will not be required to take RMD’s (required minimum distributions) until the age of 72. This will only apply to those that have not attained age 70 ½ before the end of 2019. In addition, those who are working past the age of 70 ½ who currently cannot make IRA contributions will be able too.

The SECURE Act is being touted as the most sweeping piece of legislation in the retirement area since the passage of the Pension Protection Act of 2006. There are additional aspects of the act that will affect retirement plans which will potentially provide access to more people to save. In addition, the insurance industry has been a big proponent of this legislation because it will provide the ability for insurance products, specifically annuities, to be purchased inside of 401(k) plans. This is a big win for the insurance company, but I am not sure it is equally as beneficial for the general public looking to save.

The SECURE Act contains 29 new provisions and changes, far too many to cover in a blog post, but I believe we have covered the most important ones. It is going to be more important than ever in 2020 to make sure that you are working with a fiduciary advisor, who is working in your best interest, who understands how this act is going to affect you. There may be additional planning needed from an estate planning perspective if your current assets include a large retirement plan and/or IRA assets.

It looks highly likely that this legislation will pass later this week and you will want to make sure you know how this is going to affect you in 2020 and going forward. We will be addressing this with each of our clients in their upcoming meetings and suggest you make sure you are reviewing it too. Be sure to contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time if you would like to discuss the SECURE Act and what effect it could have on your family’s financial situation.

Be sure to share this article with friends, family and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there. 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Dessert Party at Epcot® Walt Disney World® Resort, Florida hosted by Mitlin Financial, Inc.

Dessert Party at Epcot® Walt Disney World® Resort, Florida hosted by Mitlin Financial, Inc. on Norway's patio.

After enjoying dessert on the Norway patio in the World Showcase at Epcot® we enjoyed an up close and personal viewing of IllumiNations: Reflections of Earth; Epcot® nighttime spectacular and fireworks event! 

 This was an excellent night with great authors!

Does It Matter When I Start Saving for Retirement? Yes, it does…

Save Early It Matters

 

Many investors are curious as to when they should begin to invest for their retirement. You will often hear people saying that you should start as early as possible, but what does that mean and how will that help? I wanted to take the opportunity to explain when you should begin saving, if you can, and what the effects can be if you do not.

We would recommend that you start saving for your retirement as soon as you have an income. Income does not necessarily mean a full time job. You could be receiving income as early as you are able to get your working papers. Starting this early will help instill a number of great values in our kids: it will expose our children to the fact that they need to plan for their future, the benefits of investing, tax deferred or tax free growth, and a discipline to live below their incomes. These are all great life lessons that some learn too late.

In order to outline this, let’s look at a real life example. Let’s assume that you have two children; Jane and John. Jane will begin to save at the age of 25, and John will begin at the age of 35. Jane and John will each begin to contribute $5500 per year from their beginning age until the age of 70 and invest it in a way that will compound at an annual rate of 6%. So what would Jane and John have accumulated by the age of 70? Jane’s account would be over $1,200,000 and John’s account would be just shy of $650,000.

This large difference is predominately due to John’s late start. He was affected by the fact that he was not able to contribute as much money and therefore lost the benefit of the extra 10 years of compounding. Both these concepts significantly impacted his long term balance. Jane would have contributed $247,500 over the 45 years she invested, and John invested $192,500 (a $55,000 difference). The key here is that starting early really benefitted Jane and will benefit you too.

Keep in mind that our example does not account for fees, taxes or inflation. I would also like to point out that the likelihood of receiving a 6% return every year is somewhat unlikely and it is more likely that you would have a different rate of return each year.

As you, your children, or grandchildren begin to work (even on a part time basis), be sure to have the conversation about having them “pay” themselves first and begin to think about their future. Setting up a Roth IRA will really benefit them if they are younger and in a lower tax bracket.

In order to illustrate that I practice what I preach, I would like to share a personal example with you: my 14 year old son works for me during the summer months in order to have spending money for the summer and school year. We sat down and discussed what he would be earning and devised a plan that would provide him with the spending money he wanted and funded a Roth IRA as well. Think about how your financial position may be different if you began saving at the age of 14. Not only has this put him in a position to be ahead when planning for retirement, but it has taught him the value of saving and how to manage money. We discussed how to invest the money and he has the ability to monitor his account and see how it is performing. We need to get ourselves, our kids and grandkids retirement ready and this will surely help.

We are here to help you instill these concepts within your own family. Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone in your family needs assistance getting started saving today.

 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Finally, Consumers Are In The Driver's Seat With Financial Advisors

Pam Krueger
Pam Krueger: CEO of WealthRamp 

If you follow the news on personal finance-related matters at all, you’ve probably heard about the delay in implementing the third part of the Department of Labor’s fiduciary rule. This is the rule that mandates financial advisors who offer retirement investments—no matter who they are—must act in the “best interest” of their clients. It’s a code of ethics anyone would presume is already required, even though in reality, 90% of financial advisors are not legally required to follow this basic standard. That’s because 90% of financial advisors don’t work for you. They work for the brokerage firms who pay them to sell their products.

Here’s how to know if the delay in the rule affects you

Advisors at brokerage firms sell investments and strategies that typically cost you a lot more in hidden fees and then those investments tend to underperform the benchmark indices. That also goes for insurance companies that offer retirement investments. Take a look at this graph to see how much money you can lose by overpaying to invest using a typical big brokerage firm.


Performance calculated is an assumed 7% average annual return, compounded monthly for 240 months (20 years). “7% with 1.3% “All In” Fee” assumes a 5.7% average annual return while “7% with 2.5% “All In” Fee” assumes a 4.5% average annual return. For illustrative purposes only. This is a simple example and is not indicative of an actual account or composite at Shorepine Wealth Management. Investment Products are Not FDIC Insured. No Bank Guarantee. May Lose Value. Investing involves risk. This is neither a solicitation of offers to buy securities nor an offer to sell securities. Past performance is no guarantee of future results. Shorepine Wealth Management does not guarantee the validity of the data or performance calculations presented here.

Source: SHOREPINE WEALTH MANAGEMENT 

Worse than high fees and lousy advice, according to Harvard Business Review, too many, 1 in every 12 advisors at brokerage firms have complaints and serious violations on their background records.

Delaying the full implementation of a rule that protects consumers from subpar advice means clients who rely on the big name broker-advisors for serious investment advice for their retirement savings are leaving themselves wide open to conflicts of interest and more potential risk. The conflicts includes aggressive sales tactics, but most of all, these brokerage clients may not even realize when they opened their brokerage account, they also waived their legal right to sue the advisor (or his firm) if the advice turns out to be totally inappropriate and the client loses money.

“Please, excuse me from working in your best interest”

If you’re working with a salesperson or representative at a brokerage firm right now, you especially need to know about something called the “best-interest contract exemption,” or BICE. This clause sounds like some kind of joke, but it’s not. This is a contract that does exactly what it says. By signing it, you’re giving your advisor permission to sell you an investment that may not be in your best interest, and the DoL’s fiduciary rule allows brokers can ask you to sign one. It’s a loophole for brokerage firms and insurance companies and also a concession the rule is allowing for brokers who want to call themselves “fiduciaries” but still plan to do business as usual by selling investments with hefty commissions that are only “suitable” rather than “best” for their clients—adhering to the lower suitability standard instead of being a true fiduciary.

Unfortunately, this ‘best-interest contract exemption’ may give some investors a false sense of security at a time when they need to continue being just as vigilant as ever, and the fact that the rule’s implementation was delayed doesn’t change this.

Consumers don’t hear as much about the 50,000 or so independent financial advisors who aren’t salespeople or insurance agents. These are investment advisors, wealth managers or financial planners who register with the SEC and therefore, must strictly follow the higher fiduciary standard. With or without the fiduciary rule in place these independent advisors have to put your interests first, and they typically have access to every available investment product. The difference is, they work only and directly for you so it is in their best interest to find the best performing investments at the lowest possible cost.

Here’s how to put your knowledge to work right now

  1. Demand full transparency so you can easily see and understand all fees and expenses.
  2. Only choose an advisor who follows the fiduciary standard and is willing to put that oath in writing.
  3. Go over every page of the contract with your advisor before you sign any of it so you can understand what each page means as far as your rights and your advisor’s responsibilities. This will also protect you from signing any ‘best-interest contract exemption’ without being aware of it.

Consumers should always be entitled to the protections the fiduciary standard sets forth without needing a new rule or pressure to force an advisor into a fiduciary role. If a financial advisor doesn’t want to bother acting as a fiduciary, why would you bother with him?

Pam Krueger is the founder of WealthRamp, and co-host of MoneyTrack on PBS and here is a link to her full article: https://wealthramp.com/content/finally-consumers-are-driver%E2%80%99s-seat-financial-advisors

Financial Markets and The Media

Financial Markets and The Media

 

One of the most prolific changes in the financial markets, since I started my career, has to be the onslaught of media outlets reporting on the financial markets and the speed by which information is released. Today we are inundated with financial information on a daily basis from national broadcasts that are solely dedicated to financial news 24/7, posts on social media, down to your local television and radio stations that are providing financial reports and information.

Looking back over the last thirty-plus years there has been a tremendous shift in how much and the medium by which information is shared about financial markets. In the beginning, information was primarily disseminated through a few financial institutions, brokerages houses, and the brokers that worked for them. Investors were reliant on speaking with their broker in order to obtain the most up-to-date information about what was taking place. Brokers were provided with Quotron machines that were available for them to check stock prices and tickers were used to keep on top of news for their clients. It allowed them to share the most current information with their clients on a somewhat real-time basis. The only other place to receive information regarding your portfolio would have been the nightly news or the financial newspapers the following morning.

Fast forward to current times and we have a much different world. Essentially we are bombarded by financial data and information in a 24/7 news cycle and it is broadcast live and disseminated online as it takes place. This information is no longer simply available to brokers or financial professionals, but it is readily available to everyone. The amount of information and the places by which it can be received can become somewhat overwhelming and confusing. Having this information available and the transparency is key to the success of financial markets, this is a positive, but overall it is a distraction to many.

Is this information, or the access to, it helpful or a detriment to our portfolios? People have access to financial information through many channels, including social media, 24/7. The lion’s share of this information is giving you an in the moment view of what is taking place. A trader, someone who is investing for a short term profit, may find this information very useful, actionable, and help to their performance. However, an investor who is positioned for the long term may find this information confusing and troublesome. Long term investors who subscribe to making changes to their portfolios based upon the news at the moment can have long term dramatic effects to their portfolios and reach their goals. The power of staying invested vs. timing the markets can mean the difference between a positive and negative return, as seen inJP Morgan Asset Management’s 2019 Retirement Guide.

Perfromance Chart

Think about it, does it really behoove an investor with a long term time horizon to make major portfolio changes based upon interest rate changes at the moment or if GDP is higher or lower than expected? Making changes for the long term, based upon short term events is really counterproductive to the investment process.

The keys to being a successful investor over time have not changed much, build an asset allocation strategy and take on the amount of risk you are comfortable with, know what your goals and time horizon are, and build a strategy that will work towards this. The newest key is to either turn off the barrage of financial information or listen and filter it with the fact that you are a long term investor and not a short term trader. Long term investors that act as traders are typically not successful in reaching their goals.

Due to the plethora of financial information available, having a financial advisor that is a fiduciary will be a huge help too. They will be able to help you stay on track if you are tempted to deviate from your plan based upon something you heard on television or read on social media. Many advisors are a tremendous help to their clients during volatile times where the news media tends to take advantage. They get investors quite agitated and to a point, they feel like doing something, and this is where a good adviser can earn their stripes and put things in perspective.    

The news media, social media, and all financial outlets can be convincing. They are in the business of entertaining and keeping you glued to their programs and they are not concerned about your portfolios. Do not be swayed by what you are reading and hearing and be sure to build a solid plan. Feel free to give us a call, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time if you are feeling overwhelmed by what you are reading, listening to and watching so we can help put it all in perspective for you. Be sure to share this article with friends, family and business acquaintances who might be experiencing this too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Finding My Tribe at Wealth/Stack

I recently had the opportunity to attend theWealth/Stack Conferencein Scottsdale, Arizona. There are so many conferences for our industry that it is sometimes hard to determine what will be a good one to attend and which will not be a good use of your time. I must say, Wealth/Stack was a great conference and worth the time I spent away from the office. This conference, being held for the first time, brought 700 plus attendees who represented a “Who’s, who” of the #FinTwit and Fintech community. It was also the first conference that I have gone to where the vast majority of attendees were advisors.

The sessions were all informative, helpful and interesting, hands down, but I want to spend my time sharing with you the sense of community that was projected at this event. Some would say that many of the attendees were competitors to a degree, but that was never felt. What I did feel was a community of likeminded people coming together to help, support and bring each other’s respective businesses to the next level while providing the best level of advice and service for their clients.

During the few days I was at this conference I connected with people I knew, met others I had never met previously in person and those that I met for the first time. Each conversation I had allowed me to learn something new or build a relationship with someone that I wanted to stay in touch with so we could continue the conversation. This conference allowed me to find my tribe and put us all in a position to learn and grow together.

As we go through life it is important for us to find our tribe, community, which helps build you up and inspire you. Wealth/Stack did that and more. I have a community of experts in all different areas of financial services following this trip, from all over the country. This community will be valuable to me and my clients as time goes on. I have seen this in a few other areas of my life, the author and hockey communities. Like the financial services community, the author and hockey communities also serve to build up, inspire and help those that are part of it.

It is important to find your community and become active in it. Once you find the right community you will know as you will feel inspired, feel great about what you do and know that you have a network of others like you there to help in a moment if needed. Thank you Wealth/Stack for providing a great opportunity to learn and grow!

 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Great News!! Join Us in Congratulating Jorrell!

Please join us in congratulating, Jorrell Bland! 

Jorrell is beginning his studies to obtain his Certified Financial Planner (CFP®) designation via the American College of Financial Services African American Diversity Scholarship which was obtained through a competitive application process. 

 
Please join me in congratulating Jorrell  and feel free to contact him at (631) 952-4466 x13 or via email at This email address is being protected from spambots. You need JavaScript enabled to view it..  Jorrell looks forward to speaking with you and meeting you in the near future.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Happy Birthday! Be Sure To Review These 5 Things

Happy Birthday Be Sure To Review These Five Things

 

Using your birthday as a reminder to review and address things in your life is something we have been told to do from a very young age. As an example, I try and schedule my dermatologist and physical appointments around my birthday each year. I simply use this event as a reminder that I must take care of these things to maintain my health.

In the same vein, there are five things you should be reviewing each year financially in order to maintain your financial health. Using your birthday as a reminder for this is also a great way to make sure they get addressed.

  • Review your retirement plan contributions and see if you are in a position to increase them. Many people elect their retirement plan contribution amounts when they first start working for a company, and then hardly ever look at it again. Saving for retirement is now the responsibility of the employee, and it is important to make sure that we are doing our best to reach our goals. It would be a shame if you began contributing three percent when you started working for the company and still are today, but could afford to do more. Simply looking at and addressing this each year will allow you to make sure you are maximizing your retirement savings. 
  • Debt is something that is used when purchasing major assets, such as a home. It is vital to evaluate your debt to see if it is still working in the way you intended or if there are opportunities to put you in a better position financially. When used appropriately in a financial plan, debt can be a very useful tool. I would recommend that you look at the outstanding loans you have, and their rates and terms to see if they are still ideal for you. Would it make more sense for you to pay it off or continue the loan? Perhaps refinancing the debt would be a good move? This should be reviewed annually. 
  • Estate planning documents are key to making sure that your assets and wishes are carried out upon your death. These planning documents could include your will, trust, healthcare proxy, living will, and power of attorney. It is important to review the documents and make sure they are still relevant based upon your current circumstances. In many cases, you will find that these documents will only require updating every five to seven years, but by reviewing them each year, you will assure that they are properly addressing your current situation. 
  • Check the beneficiaries on all of your accounts. It is crucial that you make sure that your beneficiary designations are appropriately maintained. Many times, we establish our beneficiaries and never look at them again. We have encountered clients that are married with families who still have their parents named as beneficiaries. Checking them each year is a great way to make sure your financial assets will pass along to the people you want to receive them. 
  • Your financial plan should be reviewed annually to make sure it is accounting for any changes to your life circumstances or goals. In addition, it is important to review the plan in regards to the assumptions that are being utilized, such as inflation, returns, life expectancy, and savings. Once you have updated the plan, it is key to review the new outcomes and create an action plan for any items that should be addressed in the coming year. A plan is not static, but a living breathing document that needs to be updated and reviewed at least each year. 

Mitlin Financial assists our clients in addressing these five areas over the course of the year, but it is important to make sure you do address them yourself. A birthday is a great time to take a look, reflect, and make sure your financial health and wellbeing are being looked after.

Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone in your family needs assistance in getting started on reviewing these areas today.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

How Much Do I need For Retirement?

 retireclock 2015

One of the most searched phrases on search engines today is “How Much Do I Need For Retirement?”.  I recall people when I was growing up saying that you need $1MM saved in order to live comfortably in retirement, was that true and/or is there a new number today?
 
This is a very complex question and not one that can be answered simply by asking Alexa or Siri.  I would also argue that many “rules of thumb” cannot be used either.  There are many variables that contribute to determining an individual/family need for retirement savings.  Let’s just give you two different scenarios to see how widely this retirement amount can vacillate.
 
Family A:  They plan on retiring at the age of sixty-five and downsizing somewhere that the cost of living will be significantly lower than where they live now.  Family A expects that they will need around $50,000 per year in order to live the lifestyle they want to live in retirement.  Based upon their respective families they expect to live until their mid-nineties and this would mean they would need this income stream for the next thirty years.  A rough back of the napkin calculation would tell you that they will need at least $1.5 MM in assets to fund their retirement. 
 
Family B:  They plan on retiring at the age of sixty-five and remaining where they live now so they can be close to their children and grandkids.  Family B expects that they will need around $100,000 per year in order to live the lifestyle they want to live in retirement.  They really enjoy traveling and do not want to give that up in retirement, but want to increase their budget for it.  There is longevity in their family too and expect to live until their mid-nineties and this would mean they would need this income stream for the next thirty years.  A rough back of the napkin calculation would tell you that they will need at least $3.0 MM in assets to fund their retirement.
 
In full disclosure, the above examples are missing a number of components.  To name a few, they are not taking into account inflation, return on their investments, health care expenses, and potential long term care issues and/or the death or disability of an income earner prior to retirement.  These are just a shortlist of many variables that can take place pre and post-retirement which could impact the amount you will need.
 
As you can see, using a rule of thumb may work for one of these families and not the other.  Clearly this is not an ideal way to plan for your retirement unless you are comfortable with a potentially huge margin of error.  The reality is that you will never be able to plan the exact amount you will need, but the idea is to get as close as you can.
 
Determining how much you need in retirement is a very personal thing and not something that should be left to general rules.  It would be advisable that you go through the planning process, the earlier the better, to determine what the appropriate amount you would need for retirement.  In addition to clarifying the amount, you should also walk away with a game plan on how to get there.  The process does not end here.  In fact, this is where the heavy lifting begins and you must begin to implement the strategies determined in the plan to get you the retirement amount you will need. 
 
At this point, you cannot simply put the plan on cruise control and forget about it.  You must monitor the plan and your progress over time.  The outside forces we discussed earlier could have an impact on your success towards your goal and you will want to know that in real-time.  This will allow you to make adjustments and changes to the plan over time in order to maintain you on your path.  There may be lifestyle adjustments needed along the way too.  Maybe when you began the planning process you were most like Family A and as time went one your goals adjusted to look more like Family B.  It would be important at this point to adjust your plan to get you on the different track and keep you on target.
 
Retirement planning is not something you can simply set and forget, wait until you are five years away from retirement to start planning or simply use a rule of thumb and expect to live the retirement lifestyle you want.  It is important to work with a fiduciary advisor, as early as possible, to develop a personalized financial plan to your specific facts and circumstances.  
 
Your retirement is not something you want to leave to a rule of thumb.  This is an area of your life that you want to be as precise as possible, so you can live the life you want in retirement.  Be sure to contact us, Mitlin Financial, at (844) 4-MITLIN x112 to schedule a time if you would like to discuss a personalized financial plan for you.  Be sure to share this article with friends, family and business acquaintances who might be interested too.  We look forward to helping you, and them, get on the right path and stay there. 
 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Include A Life Plan In Your Financial Plan

Life Plan

 

Financial advisors are always preaching the importance of a financial plan, and I believe they are important too.  Mitlin Financial’s belief is that a financial plan is paramount to reaching and exceeding your financial goals.  Most people spend more time planning their family vacations than they do their financial lives.  Having a life plan is an important factor when designing and developing your financial plan, and it is frequently overlooked by financial professionals.

What is a life plan?  How does this integrate and/or affect my financial plan?  Essentially, a life plan is having a plan for what you are going to do with all the free time you will have when retired. 

As a firm, we spend a considerable amount of time having these types of discussions with clients when we begin the planning process.  This conversation continues as they approach their retirement date.  We all have different ideas as to what our ideal retirement is going to look like, or what it means to us.  In some cases, retirement may mean never working another day in their life, while others may look at retirement as the day they wake up in the morning and know they do not “have” to go to work, but may continue anyway.  Some may simply slow down and maintain a part-time job.

The fact is that most people are preparing themselves financially for retirement, but not thinking about the emotional and life fulfillment aspects of retirement.  Many of us will spend upwards of forty-plus years working, and raising a family, and we do not have time to develop hobbies and outside interests to keep us busy during retirement.  In most cases, people do not view their ideal retirement as not going to work and sitting home all day to watch television and old movies; there has to be something more meaningful than that.

When thinking of retirement, most people still want to be productive members of society.  It is for this reason that you must begin to think about a life plan as part of your financial plan.  It is imperative to think about how you will spend all of this free time that you will now have since you will no longer be going to work.  You may decide that golf, fishing, travelling, watching after your grandchildren, consulting or having part-time employment may be your life plan, and these are all great things.  It is important that you know what your plan is and refine it as time goes on.

Thinking about your life in retirement is the equivalent of using a telescope to look out and see how you would ideally like to be spending your time in retirement, and what you will need financially to support that.  Then, it is important to dial the telescope back and use a microscope to see what you can do today to help you get there.  This may mean adjusting your priorities to begin getting involved in some of those activities you plan on taking part in now so you have the knowledge, the ability, and the social circles to support your involvement.  You will also need to make sure that you are in the right financial circumstance to support it as well.  As an example, if you plan on retiring and travelling around the world sailing for a few years, you need to make sure that you have the skills and the desire to embark on that type of trip.  In addition, you need to make sure that you have the financial wherewithal to support it.

We find that those that have their life plan and retirement plan in place are the most successful at having an enjoyable retirement.  People who have addressed a retirement plan from a financial aspect- which is a minority- typically have not explored their life plan, and this is a recipe for disaster.  Imagine retiring and having the financial ability to sustain yourself for the rest of your life, but you have no idea what you are going to do with that time.  This is a major contributor to why we are seeing people working longer and later in life.  Although some of these individuals have no other choice than to work, for financial reasons, many of them continue to work because they failed to design their life plan for after work.  Not having a life plan for retirement has caused them to continue working so they can still be a productive member of society, and not someone that is sitting home doing nothing.

Mitlin Financial assists our clients in addressing both the financial and life planning they need to be successful in retirement.  We are here to help you instill these concepts within your own family.  Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone in your family needs assistance in getting started on their plan today.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

 

Last Minute IRA Contributions: Traditional & Roth IRAs

We at Mitlin Financial hope that you had a healthy and successful 2016. As we move full steam ahead into 2017 and into tax season, we want to make sure that you are all set when it comes to saving for your retirement. Contributing to an Individual Retirement Account, better known as an IRA, can be a powerful retirement saving tool. It is important to understand your time and contribution constraints for making last minute contributions. In addition to the inherent benefits of contributing to your IRA, staying informed of the correct contribution limits and deadlines can be the difference between contributing to your account correctly and incurring unwanted penalties or fees.