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The Many Reasons Not to Look at your Life Insurance Policies

Life Insurance Henry Montag

 

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Henry Montag, CFP®: The TOLI Center East

It’s unpleasant, I don’t understand it, I don’t want to deal with a life Insurance salesman. But if you don’t your life Insurance policy may expire before you do.     If you’re like most people you think of life Insurance as a ‘Buy & Hold’ asset that requires no active management, when in reality a life policy is a ‘Buy & Manage’ asset, just like your stock and bond portfolio. You wouldn’t buy stocks and bonds and then place your investment portfolio in the bottom left hand drawer and not look at it for the next 10-15+ years. But that’s what many purchasers of policies do. Problem is if you purchased a life policy over the last 25+ years, there’s a 55% chance that the policy wasn’t guaranteed to last for the rest of your life.  

This is meaningful because interest rates went from a high of 18% in the mid 1980’s to the current rate of 2-3%. This reduced sustained interest rate coupled with neglect over the last 25+ years has caused 23% of those existing non- guaranteed policies to expire years earlier than anticipated (American Bar Association, Flagship book  ”The Life Insurance Policy Crisis”( Jan 2017)).

You may ask, how could that have happened? I paid all of the bills I received from the life Insurance Company on time, and in full. Yes you did but those premium bills haven’t changed over the last 20+ years when interest rates were much higher. As interest rates decreased, the premiums you paid should have been increased to make up for the reduced earnings in your cash value account. Why didn’t the Insurance Company send notices to ask me to pay a higher premium? It’s not their responsibility as managing your policy premium is the responsibility of the owner of the policy. The Insurer’s responsibility is to merely provide you with a death benefit and an annual statement/ bill. Yes, the Insurer could have done a better job of advising their customers of the danger of their policy expiring earlier than anticipated, but perhaps that’s intentional as the insurance company profits when a policy expires prematurely, because the insurer keeps all the premiums and never has to pay out a death claim.

So as a result of the reduced interest rates, the policy not being guaranteed, nor properly managed, an insufficient amount of premium was paid which resulted in an increasing number of individual’s life coverage beginning to expire years earlier than anticipated and requiring a significantly higher premium to keep the coverage in force to one’s life expectancy. (WSJ cover story Sept 2018).

In order to prevent becoming one of the statistics yourself, it is suggested that you meet with an independent experienced fee based life Insurance consultant and go over each policy to make certain you’re getting the most value for your premium dollars. Secondly to determine how long each policy will last, and compare that to how long you want the policy to last.  

Since the maximum guarantee period for a Term policy is age 80, 5-7 years earlier than normal life expectancy for a male. Anyone Insured with a term policy shouldn’t allow the conversion privilege that permits them to convert the term policy to a policy lasting to life expectancy, without any evidence of insurability, slip by. Depending on the Insurer the conversion feature expires between 65 -75.

Once an overall assessment where you compare what you think you have to what you actually have, is made you can resolve the problem and provide the tax free death benefit you intended for your beneficiaries. Keep in mind, the earlier you take the first step the more options you’ll have available and the less costly it will be. I’m happy to have a conversation and share my 35+ years’ experience as an independent CFP® and author so feel free to get in touch as I’m a good resource.

Henry Montag CFP®, in practice since 1976 in L.I N.Y has authored articles and acted as a source for NYSBA Senior Lawyer, NYSSCPA Tax Stringer, Tax Facts, Bloomberg’s Estates Gift & Trust Journal, Trusts & Estate Magazine, & The WSJ. Guest appearances for Wall Street Week, Fox Business News & News 12.

Has provided CPE & CLE credits to NYSBA, ABA, AICPA, NYSSCPA, & EPC. He co-authored an American Bar Association Flagship publication; Jan 2017, ’The Advisors & Trustees Guide to Managing Risk & Avoiding a Client Crisis’’.

Planning as a Process with Larry Sprung on the Money Savage Podcast

I recently had the opportunity to be a guest on the Money Savage Podcast with George Grombacher.  This podcast gave me the opportunity to discuss how planning is a process and not a one time event.  I hope you find this episode interesting and of value. 

In today's conversation, George and I discuss the following:

1) One of the driving factors that led me to enter the field of Wealth Management

2) How financial education plays a role in your life

3) The importance of planning for your family and buisness

4) My one difference making tip

Money Savage Podcast Larry Sprung

 

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

 

 

Where did my tax refund go?

 

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Does your family rely on your tax refund every year? Do you use your tax refund for a family vacation or use it to pay your real estate taxes for the year? This year is going to be an interesting year for taxpayers who rely on receiving their refund each year, because they may not get one. I bet that got your attention and interest to continue reading.

It is going to be more important than ever to sit down with your CPA and review your year-end tax planning, especially if you have not already. The IRS updated their payroll tax deduction tables earlier this year to better reflect the correct amount of tax withholdings for taxpayers. The new tables reflect the changes in the standard deduction, repeal of personal exemptions and changes in tax rates and brackets. What this means is you may be getting more each week in your paycheck, but at the expense of not over-withholding like you have in the past.

Those of you who have been used to receiving tax refunds each year were receiving them because you withheld more taxes from your weekly paychecks than you needed to. When you file your taxes it is determined how much tax you owe and what you have paid in over the course of the year. Whether the difference is positive or negative will dictate if you get a refund or need to pay. Those that have overpaid taxes over the course of the year will receive a refund and people who have underpaid will owe. Be careful if you are not paying enough into the system during the course of the year as this may cause additional penalties as well.

The ideal scenario would be: your taxes owed and what has been paid wash each other out. Keep in mind, although you may love that refund, you simply provided the government with an interest free loan for the majority of the year.

So why are things different this year? The payroll tax tables have been redrafted to reflect, as closely as possible, the actual taxes owed by the taxpayer. This has increased the amount you are receiving each pay period from your employer and lowered the amount of taxes you are paying into the system. Therefore, when it comes to filing your taxes early next year there is a good chance that you will not be getting the refund you have been accustomed to in previous years because you have received this money all throughout the year.

We see this year, because it is the first year with the new tables, as being a challenge for many CPA’s who work with clients that are unaware of these changes. I can just imagine their clients, who are used to receiving a several thousand dollar refund each year, reaction when they are told their refund is a couple of hundred dollars or worse yet that they owe tax. This is not going to be a pleasant conversation and one that is going to take the CPA time to explain and educate the client. It is not the CPA’s fault, nor did their client pay more in tax (not necessarily the case in all situations) but it was simply a situation where the client received more money all throughout the year.

It is highly suggested that you consult with your CPA now, before their busy season kicks in, and have the conversation so you know where you stand for the year. This will allow you to plan better over the next few months and make decisions that may allow you to improve your tax situation. It also will provide you a few months to make changes to your withholdings if it makes sense for you.

Planning is key and having the right people on your team is just as important. Mitlin Financial assists our clients in having these conversations with their tax advisors and look to help them plan appropriately. We would be more than happy to assist you with any questions that you may have on this topic, including recommending the right tax advisor for you. Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know needs assistance in planning for their taxes.

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

 

Seize The Awkward Campaign Receives Large Donation

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 AFSP Contact: Alexis O’Brien, PR Director, 347-826-3577, This email address is being protected from spambots. You need JavaScript enabled to view it.
 
Seize The Awkward Campaign Receives Large Donation
 
Donation to Support Digital-First PSA Campaign for Young Adults and Led by the Ad Council, JED and the American Foundation for Suicide Prevention
 
NEW YORK (November 8, 2018) – In memory of Keith Milano, who died by suicide in 2004, his family created the Keith Milano Memorial Fund at the American Foundation for Suicide Prevention. This fund contributed a generous donation that was earmarked for the new Seize The Awkward public service campaign. Launched in January, this campaign is an effort to empower young adults to reach out to friends who may be at risk for suicide. The campaign was created in partnership by the Ad Council, The Jed Foundation (JED), and AFSP through the ad agency Droga5.
 
“Since losing Keith and sharing our story we have had so many people reach out for resources. In today’s digital age tweens and teens see and hear about suicide whether we address it with them or not. Parents and educators need to be able to communicate effectively that there is help, support and that asking for help is a sign of strength,” said Denise Sprung, suicide prevention advocate and resident of Smithtown, New York. “This is why we chose to allocate such a large amount from the Keith Milano Memorial Fund to the groundbreaking Seize The Awkward campaign. As a parent, I know how important it is to talk to your kid about their mental health and about suicide.”
 
Seize the Awkward encourages teens and young adults, particularly those ages 16-24, to create a safe space for their friends to open up about mental health challenges. The campaign personifies an awkward silence that can happen between friends before a conversation about mental health, through the character, Awkward Silence, portrayed by actor and Broadway star Gideon Glick. It shows viewers the opportunity that exists in recognizing something is wrong and breaking through an awkward silence between friends – and encourages them to use this moment to check in and ask about mental health.
 
Keith Milano grew up on Long Island where he attended Newfield High School. He went on to the University of Buffalo, and then to Stony Brook University where he graduated with a bachelor’s degree in Geology. After graduation, he worked as a hydrogeologist for EnviroTrac. Denise Milano Sprung, Keith’s older sister by three years, also attended Newfield High School and the University of Buffalo. Denise and her husband Larry run the Keith Milano Memorial Fund in honor of her younger brother. The Sprung family also made a personal donation to Project 2025 and have been generous contributors to AFSP for many years.  
 
 
The Keith Milano Memorial Fund was established to help raise awareness about the devastating deadly disease that is mental illness. Keith’s spirit and laughter is kept alive through our efforts to increase awareness about mental illness and to raise money for education and imperative research. Keith often struggled with society’s perception of mental illness. Our hope is that by having the strength to say that Keith was “Bipolar” we can strip away the stigma and help others to be more open about their disease.
 
About AFSP
 
The American Foundation for Suicide Prevention is dedicated to saving lives and bringing hope to those affected by suicide. AFSP creates a culture that’s smart about mental health through education and community programs, develops suicide prevention through research and advocacy, and provides support for those affected by suicide. Led by CEO Robert Gebbia and headquartered in New York, and with a public policy office in Washington, D.C., AFSP has local chapters in all 50 states with programs and events nationwide. AFSP celebrates 30 years of service to the suicide prevention movement. Learn more about AFSP in its latest Annual Report, and join the conversation on suicide prevention by following AFSP on Facebook, Twitter, Instagram, and YouTube.

The Most Sacred Financial Document

Sacred Document Credit Report and Credit Score

Planning is important to make sure your financial house is in order. It is vital to know where you are today, where you want to be in the future and to have a game plan on how to get there. Many times we overlook one of the most sacred financial documents when devising this plan and that is the credit report.

A credit report is the key or the roadblock to many of the financial decisions we make today. Think about it, large life decisions such as buying a home, a new car, any large purchase on credit, or simply obtaining a credit card rely heavily on this one document and the score that is affiliated with it. Having an excellent credit report and score will allow you the freedom and flexibility to utilize credit most effectively.

There are a couple things you should be doing on a regular basis to make sure your credit report is accurate and your score remains at a peak level.

  • You are entitled to a free credit report every twelve months from each credit reporting company. This will not provide you with your credit score, but should be used as a tool to confirm the information on your report is accurate and current. There are many websites you can go to in order to obtain these reports and annualcreditreport.com is recommended from the Federal Trade Commission’s website.
  • You should check your credit scores annually as well to make sure they have not changed significantly since the last time you checked, especially if you have not had anything adverse happen to your credit. Unlike your credit report, you are not entitled to free access of your credit scores annually. There are a few ways to obtain your credit scores. Some credit card providers (you can check with your current card providers) will provide you with your score and inform you as changes take place with your score for free. In addition, you can always use myfico.com and obtain your score from each of the three bureaus. This option will cost you roughly twenty dollars per bureau, sixty dollars for all three. You can also obtain a free score at www.creditkarma.com, but keep in mind the score you receive here will not provide you with the exact score from the bureaus. It will give you a good sense as to what your credit score is and where you stand versus other people, plus there is no fee for their service.

The credit report and its associated score is the holy grail of lending. It could very well mean the difference between an okay rate, better rate, and the best rate provided to potential borrowers. Depending on the size of the purchase, this difference could mean a savings of tens of thousands of dollars over time. As an example, according to Bankrate’s mortgage calculator the rate currently for a thirty year mortgage with twenty percent down for someone with a 740 plus credit score would be around 4.75%. For someone with a score between 640 and 659, the rate would be 5.375%. At first glance, this may not seem like a huge difference in rate but it would mean a $45,000 increase in cost assuming you purchase a $400,000 home and finance $320,000. That is real money and having the best credit score will save you every time you borrow.

I simply provided you with one example of where a great credit report and score will save you money, but think of the other times we borrow money. Imagine if you compound the savings mentioned above (for purchasing the house) and you saw similar savings when buying a car, paying for a child’s education, utilizing home equity for renovations, credit card rates and other ways of borrowing too. Not having the best rate could mean the difference in reaching your goals.

Making sure your credit report is accurate and you are maintaining an excellent credit score is vital to your financial success. We would be more than happy to assist you with any questions that you may have on this topic, including discussing your credit report and score. 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.

 

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