401(k) Rollovers

When leaving a job, one might ask, what should I do with my 401(k)? Should I leave it with my previous employer, move the assets to my current employer’s plan or rollover the assets into an IRA? Generally speaking, it is more beneficial to rollover your 401(k) to an IRA.

One reason why an investor would want to rollover their assets from a 401(k) into an IRA are the limited investment options provided by their 401(k) plan. Rolling the assets into an IRA (which if done properly, is a tax free exchange) gives you much more flexibility when it comes to investment options and opens the door to new bonds, stocks, funds, or investments that may outperform current options. Many 401(k) owners do not manage their own accounts properly and may want to hand pick a wealth manager for their IRA who can provide investment advice and guidance, which would be nearly impossible if you kept your 401(k) with your previous employer.

Another advantage of rolling over your assets into an IRA is simplicity. Having multiple 401(k)’s may make it difficult to track all of your assets and determine which are performing properly. Maintaining the assets in one account or with one custodian can simplify one’s finances and make retirement planning much easier.

If you are overwhelmed because you are tracking multiple 401(k) accounts, contact Mitlin Financial in order to see if rolling over assets into an IRA can simplify your retirement planning and open your account up to new investment options that will benefit you in the long run.

Stay tuned for the upcoming blog “Net Unrealized Appreciation” which will explain the advantages and disadvantages of owning company stock in your 401(k).

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

Roth IRA Conversions

Roth IRA conversions refer to the transfer of assets from a Traditional IRA to a Roth IRA account. One of the main differences between a Roth and Traditional IRA is that qualified withdrawals from a Roth IRA will be tax free, while qualified withdrawals from a Traditional IRA are treated as ordinary income. Depending on your current financial situation, it may benefit to transfer assets from a Traditional IRA to a Roth IRA.

Traditional IRA’s benefit those who wish to save for retirement and lower their current tax liability. On the other hand, Roth IRA’s will benefit those who do not need a tax deduction today, but would like their assets to grow and not be taxed upon their withdrawal.

Transferring from a Traditional IRA to a Roth IRA will cause a tax liability, in the year of conversion, in which all assets transferred will be taxed as ordinary income. The benefit of this transfer lies in the future. An investor who does not plan to retire anytime soon and expects their tax liability to increase in retirement (whether due to significant savings or an increase in tax rates), may benefit by taking the tax hit now, accumulate their assets tax deferred and take their withdrawals on a tax free basis. The longer the time horizon until retirement, the more likely the investor could potentially recoup the taxes due on the transfer.

If you plan to retire sooner than later and believe that you will be in a lower tax bracket at retirement, a Roth IRA conversion can be very damaging to your financial well being. Not only could you experience a major tax liability, you would also lose the benefit of contributing on a pre-tax basis.

If you feel that you may benefit from converting assets from a Traditional IRA to a Roth IRA, contact Mitlin Financial Inc. for a free consultation.

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

First Quarter Market Review

The first quarter of 2013 provided very healthy returns in the stock market, similar to the first quarter of 2012. Many of the major equity indices saw gains upwards of 10% .

The Dow Jones Industrial Average went up 11.93%, while the S&P 500 also had a robust quarter with a return of 10.61%. The year started off strong with a 2% uptick on the first trading day after Republicans and Democrats reached a deal on the Fiscal Cliff. Stronger than expected economic data, such as the addition of 236,000 private sector jobs in February, and the Federal Reserve’s commitment to purchase $85 billion worth of bonds on a monthly basis fueled the market through March.

Unlike the equity indices, many fixed income holders may have seen a dip in their assets since the beginning of the year. The bond indices were hard pressed to show positive gains as is seen by the Barclays U.S. Aggregate Bond Index. The index dipped -.12% since the beginning of January. Treasury yields rose slightly in the first quarter increasing from 1.78% to 1.87% primarily due to an improving economy. Higher yields ultimately drove down the value of bonds at a modest rate.

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

Rule 72(t)

When speaking with most people about early withdrawals from an IRA before age 59.5, you will hear that your withdrawal will be subject to the 10% early withdrawal penalty and that it will also be counted as taxable income. This is true, however, the rule known as 72(t) can help the owner of a retirement account avoid the 10% withdrawal penalty.

Rule 72(t) states that investors can avoid the 10% penalty if they take “substantially equal periodic payments” over a period of five years or until the individual reaches age 59.5, whichever comes later. Once elected, this method is irrevocable and payments can be adjusted only once over the life of the distribution. Keep in mind that distributions must occur at least once per year. If you have exhausted all other avenues, utilizing rule 72(t) may help you.

Utilizing rule 72(t), with the assistance of a financial professional, will help you avoid the 10% penalty, however you will still have to pay income taxes on the distributions. Please note, that using rule 72(t) should be a last resort and that tapping into an IRA before retirement can severely impact your long term financial plan.

If you feel that rule 72(t) may be an option for you, please contact Mitlin Financial for a free consultation.

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


After the fiscal cliff and debt ceiling negotiations, one would think that the drama in Washington would be minimal for the next few months. Contrary to that, you have more than likely heard something about the so-called “Sequester”. The 2013 Sequester refers to the reduction of government spending by roughly $85 billion in 2013 (This is simply a reduction in spending. Federal outlays will still increase by more than $200 billion annually). The effects of these cuts are a hot topic of debate between Republicans and Democrats.

The Sequester has been planned for nearly two years. It was enacted by the Budget Control Act of 2011 after tense debt ceiling negotiations. They were initially supposed to begin on January 1st of this year; however the date was postponed two months after fiscal cliff negotiations were resolved. The goal of Sequestration is to help decrease the current federal budget deficit which has been around $1 trillion annually in recent years.

One may argue that a reduction in federal spending is needed in order to make sure that our national debt does not spiral out of control, however it appears the across the board cuts could have been allocated differently in order to prevent the economy from slowing down. The CBO (Congressional Budget Office) estimates that the Sequester may cause the loss of roughly 700,000 jobs as well as a reduction of GDP (Gross Domestic Product) growth by .6%.

Depending on which channel you tune into, you will hear that one party or the other is to blame for how negotiations turned out. One thing is for certain; both sides had nearly two years to come up with a plan to make spending cuts in areas that are expendable. Unfortunately, as has been the case in recent times, a compromise was not reached.

Disclaimer: 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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