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Payment Apps, Should I Use Them?

Payment Apps Should I Use Them

 

Technology has provided us with many tools that make our lives easier on a daily basis. The question is, does easier mean better? The answer to this question will depend largely upon how you use the technology. I am going to focus here on the technology of payment apps.

The days of carrying around cash and even credit cards are starting to wane. It used to be a must to make sure you had both with you at all times. Now with technology like Apple Pay, Venmo and Paypal, it is less necessary. At times, when I was a kid, it used to take time to get reimbursed from friends or family if you needed to help them out and pay an expense for them if they forgot their cash or credit cards. With the apps mentioned above, you can literally pay people back in seconds, assuming you have the money in your bank account or credit available on a credit card.

Convenience like this certainly can make our lives better, but there are unintended consequences that come along with these technologies. They allow you to spend money that you may not have necessarily budgeted for that month. When you used to have to go to the bank to take out money for expenditures and actually hand the money to someone else for an expense it gave you a true sense that this money was being spent. Now, with a few clicks, the money is transported from your account to your friend or a vendor. This does not provide you with the same feeling of incurring the expense.

I am not saying that you should not use these modern-day payment options, as I use them all the time, but for your financial wellbeing, it is important that you understand and do not lose sight of what you are spending when using these tools. They are designed for convenience and for those looking to capture your dollars more easily. Whether you write a check, pay cash, use a credit card or use a payment app it is important that you have a clear understanding that this is an expense and must be considered as part of your monthly budget.

Do not allow these modern day conveniences to derail your financial plan or budget. There are tools out there that can help you monitor your budget and will take these types of payments into account. Technology is excellent, as long as it is used as a tool to help us in our everyday lives. Be aware that they can also have a detrimental effect too.

Budgeting is an important part of any financial plan. We would be more than happy to discuss with you tools that may help you track, maintain and stay on course to build your financial future. Please feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 and be sure to share this article. Let friends, family and business acquaintances that we are here to help them too. We look forward to helping you, and them, work on getting financially fit.

 

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

2020 IRS Limits Affecting Qualified Plans and IRA’s

IRS Limit Changes

Do you have a retirement or pension plan established for your company? Are you part of your employer’s retirement plan? Do you contribute to an IRA? Do you pay into the social security system? Chances are unless you are retired, you answered yes to at least one of these questions and you will want to know about changes taking place in 2020.

On an annual basis the IRS will review changes in the Consumer Price Index and make adjustments to the amount that can be contributed to qualified plans, individual retirement accounts, the income limitations for contributing, as well as social security taxable wage base.

On November 6, 2019, the Internal Revenue Service announced cost-of-living adjustments, based on changes to the Consumer Price Index (CPI), affecting dollar limitations for pension plans and other retirement-related items for the 2020 tax year. Many of the pension plan limits are increasing for the 2020 plan year due to Consumer Price Index (CPI) increases.

We are providing you with an overview of the updates to the 2020 IRS limits and how they will change from 2019. You can find a complete overview of the changes by visiting the IRS Notice 2019-59.

 2020 IRS Limits Affecting Qualified Plans & IRA's

PLAN LIMITS

2020

2019

Traditional/Roth IRA Limit

$6000

$6,000

Traditional/Roth IRA Catch-Up Contribution Limit

$1,000

$1,000

SIMPLE Maximum Annual Elective Deferral Limit

$13,500

$13,000

SIMPLE 401(k) or SIMPLE IRA Catch-Up Contribution Limit

$3,000

$3,000

401(k)/403(b) Elective Deferral Limit

$19,500

$19,000

401(k)/403(b)/Catch-up Limit

$6,500

$6,000

Defined Benefit Plan Dollar Limit

$230,000

$225,000

Defined Contribution Plan Limit

$57,000

$56,000

Annual Compensation Limit

$285,000

$280,000

Highly-Compensated Employee Limit

 

$130,000

 

 

$125,000

 

Key Employee Officer Limit

$185,000

$180,000

Social Security Taxable Wage Base

$137,700

$132,900

 

We have some key takeaways that should be reviewed. You may benefit by increasing your contributions for 2020.

  • The Traditional and Roth IRA deferral limits will remain the same at $6,000. 
  • There were no changes to the catch-up contributions for IRA’s, it remains at $1,000.
  • The 401(k) elective deferral limit was raised to $19,500. Be sure, if your intention is to max out, that you have the correct deferral percentage elected.
  • Keep in mind that catch-up contribution limits for employees 50 and over who participate in 401(k), 403(b), most 457 plans and the federal governments Thrift Savings Plan has also changed to $6500
  • The SIMPLE maximum has been increased from $13,000 to $13,500.
  • Catch-up contribution limits for employees 50 and over who participate in a SIMPLE 401(k) or SIMPLE IRA remains unchanged at $3,000.
  • Those that maintain or participate in a Defined Contribution or Defined Benefit plan will want to be familiar with the new dollar, plan, annual compensation, highly compensated employee and key employee limits.
  • The social security wage base has been increased from $132,900 to $137,700. People who earn more than $132,900 will be contributing more to social security than they have in the past. Those beneath that threshold will not see any change in the coming year.

Be sure to discuss these changes with your financial professional and CPA. You may need to make some adjustments to your deferral strategy based upon the new limits released for 2020. It is important to make sure, especially if your intentions are to maximize your contributions, that you are contributing what you need to on an ongoing basis in order to max out your allowable contributions.

We would be happy to answer any questions you may have regarding these changes and how they may impact you. In addition, we would be happy to discuss the benefits of implementing a retirement plan for your business or a retirement account for you personally. 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.

Tax Benefits of Retirement Plans

Tax Benefits of Retirement Plans

Retirement plans and/or accounts can be a benefit in many ways, especially if there is a need for you to reduce your tax liability. Are you one of the taxpayers that has seen your tax liability increase when filing your 2018 tax return? If this is you, you may want to start using or review how you are using your retirement accounts. There are ways you may be able to reduce your tax liability for the current year and if you are not taking advantage of a corporate retirement plan being offered at work or an individual retirement account (IRA) this may be the time to start or increase your contributions.

Typically there are two ways you can put money away for retirement, on a pre-tax basis and post-tax basis. We will simply discuss the pre-tax basis in this article and address the post-tax basis in the future. Those of you that are taking part in your corporate retirement plan, but not maxing out may be missing significant benefits. These pre-tax contributions go into your retirement account, many times along with an employer match, and will grow tax deferred until you remove the funds sometime in the future. The tax liability you had last year may be reduced this year by starting or raising the contributions you make to your retirement plans. The monies that are placed in the retirement plan directly come off of your taxable income for the year, providing you with tax relief.

As an example, in 2019 employees under the age of 50 can defer a maximum of $19,000 into their company’s 401(k). Taxpayers that are in the thirty-percent tax bracket could save close to $5,700 in taxes by maxing out their 401(k). Not only is this providing you with a tax savings, but the true cost of putting away the $19,000 for retirement was only $13,300, giving you a significant benefit. The idea here is that this will lower your tax liability, allow you to put funds away for your retirement and also provide you with years of tax deferred growth.

You will want to make sure that you are taking advantage of all the benefits provided by your company with regard to retirement accounts, tax benefits, match, and deferring as much as you can afford. Those of you who work at companies that do not provide retirement plans may want to look at establishing an IRA. This works very similarly to what we have described with the 401(k) but the maximum that can be contributed is $6,000, if you are under 50 years of age. Business owners may also want to look at the benefits and disadvantages of establishing a retirement plan for their company. This would allow them to help their employees become retirement ready while helping themselves as well.

Keep in mind that this is a pay now or pay later system. By taking the tax deduction now and receiving the benefit of tax deferral, you will need to pay taxes on these monies when they are withdrawn in the future. The idea is that you put these monies away while you are earning income and in a high(er) tax bracket and remove the monies in retirement when you are in a low(er) tax bracket. This strategy, like many other financial planning principles, contains many variables and assumptions that may not remain constant. As an example, if tax rates go up significantly in the future, you could be paying more in taxes when you remove the funds than you would have when you put them into the account. This is why you need to have an overall retirement strategy that will provide you will both taxable, tax-free and tax advantaged income in retirement.

Now that the first tax season with the recent changes are complete, you will have a better idea as to how your tax situation is being affected.   If you experienced a higher liability or tax surprise in 2018 and would like to review strategies that may allow you to reduce your tax liability going forward, please feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12. Feel free to let friends, family and business acquaintances who are experiencing the same concerns that we are here to help too. We look forward to helping you, and them, make the decision that is best for all.

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

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 in JP 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.

Mid-Year Financial Check

Mid Year Financial Check

 

Almost three quarters of the year is now behind us and before you know it the holidays and New Year will be here. I am not trying to rush things, but at the same time, we want to make sure that you are prepared for what the year will bring in terms of your tax situation. It is important to take a look at your financial situation for the year thus far and make sure you are positioned properly for your 2019 tax filing. You do not want to wait until the last week of 2019 or even April to learn of potential issues you may encounter.

It would be a great idea to reach out to your financial team to discuss any financial events so far this year that were out of the norm. The financial events that have taken place may, or may not, have an impact on your tax standing, but it is easier to review, guide, plan, and protect if they are discussed well before the end of the year. Once your team is aware, of what has happened, they can advise you on your options and propose the best course of action. You are much better off planning for this on October 15th than March 15th when some of your available planning options may no longer exist

As a firm, Mitlin Financial makes it a habit to ask our clients on a regular basis, at least two times a year, if there has been anything in their financial life that would warrant us to make any changes or adjustments to their plan. You would be amazed at some of the things we have been informed of at these meetings. Everything from, “I lost my job three months ago” to “I sold my house and we are moving across the country” have come out of this simple question. You would think these would be things they would be calling us right away to discuss and review the impact on their financial standing; but, unfortunately, life gets in the way sometimes. This simple question has allowed us to review, correct, and advise our clients to the best course of action knowing this new information.

Asking this simple question during our review meeting with clients has had a positive impact on our practice and our ability to help our clients. In many cases, it has allowed us to address potential issues that may have been unintended, but life just got in the way. This will also provide you with peace of mind knowing you have addressed the issues and will not need to wait until the last minute to come up with a solution. This would also be a good time to review year-to-date capital gains and interest income from your portfolio to make sure it is in line with previous years. Should there be a significant discrepancy from the prior year, this is something that should be addressed so you are not surprised with a larger than normal tax bill. This will save you significant time when it comes to the end of the year because you will be able to have a good idea of your current standing and then plan accordingly.

The last thing I want to leave you with, as we enter the end of the year, is to be careful purchasing mutual funds in non-qualified accounts. This has been something that has really caused many clients, and their accounting professionals, a lot of grief. As mutual funds begin to announce capital gains distributions for the year-end it is important to know what the distribution is and when it will be taking place. We have seen clients purchase mutual funds in late October, November, and December and receive huge capital gains distributions, which are taxable because they purchased a fund just prior to the distribution. Imagine owning a fund for a couple of weeks and getting a $10,000 capital gains distribution. This is not a surprise that you want to have, so just be cognizant of any mutual fund purchases before the end of the year that you are making in a non-qualified account. It may be ideal for you to hold off on investing new funds or use an ETF until the distribution has been completed.

The importance of having a review with your financial team is to make sure that you both are on the same page and no surprises will come at tax time. The year-end is crazy enough for most, you might as well make things as easy and problem-free as you can. It goes back to the old adage, an ounce of prevention is worth a pound of cure. 

I would highly suggest that you hold a mid-year check-in with your financial team. This could save you hours of grief towards the end of the year or at tax time next year. Be sure to contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time if you are not having these reviews with your current financial team. 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.

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