Of All Things Cryptocurrency… and Not

Of All Things Cryptocurrency… and Not

Unless you have been hiding in a cave (or quarantining to the most extreme levels), you have heard about some form of cryptocurrency. Bitcoin would be the largest and most popular name you might have heard. And you might be surprised to learn that there are currently over 6,000 forms of cryptocurrency!

That said, what are we to do, if anything? We have compiled some items to consider regarding this popular topic.

1. Understand exactly what cryptocurrency is. Cryptocurrency is a form of digital payment that can be exchanged online for goods or services (nerdwallet.com). Basically, it is a digital currency which is different from our paper currency. This digital currency is not backed by a central bank or the good faith of a country such as the U.S.A.

2. Cryptocurrency is a speculative investment. What does “speculative” mean? Per marketbusinessnews.com, a speculative investment is “one with a high degree of risk where the focus of the purchaser is on price fluctuations. The investor buys the tradable good (financial instrument) in an attempt to profit from market value changes.”

“Speculative investments are long-term investments rooted in a thesis that’s not currently provable – but could become provable in the future.” (investmentu.com)

In short, there is a high risk of opportunity and loss.

3. Understand your risk tolerance. Are you an investor who likes to take risks? Your past investment behavior is a strong indicator of your risk tolerance. How did you feel/react during the dot.com bubble in the late 90’s and early 2000’s? Or the Great Recession in the late 2000’s? Or more recently, the first quarter of 2020 during the coronavirus pandemic?

These recessions greatly affected large, stable companies across the world. We experienced extreme market volatility across most every asset class. With speculative investing, you are subject to even more volatility on a regular basis. Can you handle this type of investing?

4.Understand your goals and financial plan. In our combined decades of financial planning experience, we have found having a personalized financial plan as the most effective way to address concerns of market volatility. Does your personalized plan require the need for speculative investing to meet your goals? If not, consider why you would want to take on market risk that your plan does not require.

To use a baseball analogy: If your financial plan requires bunts, singles and an occasional double to meet your needed investment rate of return, we are not going to set up your portfolio to swing for the fences!

In summary, this article is not a recommendation to buy or not buy cryptocurrency. Our goal is to help you better understand what cryptocurrency is and whether or not it fits into your financial plan. (In full disclosure, our compliance department does not allow us to recommend cryptocurrency as an investment as it is currently in the speculative category.)

We will leave you with a quote from a highly successful investor when asked about how to get rich quickly: “As to how to get rich quickly, I do not know. But I do know how to get poor quickly – try to get rich quickly.”

*For financial planning clients of Rivertree Financial Planning: Please contact us as soon as possible if you have had any changes in circumstances, objectives, goals or risk tolerance.

Of Presidential Elections

Of Presidential Elections

We hope you are well and getting back into some sort of normalcy. Some of you have kids or grandkids back in school. Others have begun virtual learning. Regardless of your circumstances, we hope you are remaining connected to friends and family as we all need each other during this time.

We are approximately two months away now from casting our Presidential ballots. And like all election years, fear can reign regardless of which candidate you support. Emotions run high. Feelings can be hurt. And you are forced as an investor to make decisions in regards to your portfolio.

We thought it would be helpful to bring in some facts and data in regards to investing to help counterbalance the emotions. You might be surprised as to what you see.

We Have Been Here Before

I know, I know: “This time it’s different.” Well true – It’s always a little different. But I’d like to share what is not different:

Bantering

Exaggerating

Manipulating

Attacking

Rhetoric

Yes, I could go on. But I think you’d agree that these actions typically are represented in election years. So how do you block out the noise and see the truth as investors? You find the true data.

Facts

Please click on this link from Capital Group, one of our investment partners. Check out the first graph which shows the rate of return of the S&P 500 Index going back to March 4, 1933. The colors represent a Democratic or Republican Presidency.

Do you see the trend? “Markets have tended to power through presidential elections – with some volatility along the way – regardless of whether a Democrat or Republican won the White House.”

Please hear me clearly: Your vote matters. What I’m pointing out though is that for long-term investors, they have generally fared well regardless of the political party in charge.

Have a Plan. Revisit the Plan. Update the Plan.

Those who have a plan do far better than those who don’t. Even more, those who revisit their plan and make any necessary changes do even better! This has certainly been our experience as financial planners working alongside our clients. This process helps us see the big picture and reminds us of why we invest for the long-term.

“By design, elections have winners and losers, but the real winners have been investors who stayed the course and avoided the temptation to time the market.” – Capital Group article

We are here to listen and help should you like to discuss your specific situation. We understand these times can produce uncertainty and fear. We are ready to engage in these conversations with you.

*For financial planning clients of Rivertree Financial Planning: Please contact us as soon as possible if you have had any changes in circumstances, objectives, goals or risk tolerance.

How the SECURE Act 2020 Affects You

How the SECURE Act 2020 Affects You

I hope 2020 has started off well for you. In Mississippi, we have recently been having to choose between wearing rain gear or shorts (or both). It has been an interesting time of weather!

On the business front, did you happen to see what law was signed just before Christmas? The SECURE Act (The Setting Every Community Up for Retirement Enhancement) was signed by the President on December 20th with a January 1, 2020 effective date. This Act was part of the Spending Bill and significantly affects IRA planning.

We have summarized a few of the major changes that might affect you and your accounts. It’s worth a quick read to see if any of these apply to your current situation. Of course, contact us directly should you have any questions specific to your accounts or overall financial plan.

Required Minimum Distributions

Starting in 2020, the required minimum distribution (RMD) age changes from 70 ½ to 72. So those of you who are turning age 70 ½ in 2020 have another year and a half before you have to start distributions! If you turned 70 ½ in 2019, the old rules still apply and you must take your first distribution by April 1, 2020.

Qualified Charitable Distributions (QCDs)

Some good news from the law is that the opportunity to donate your RMD is still available, even at age 70 ½. Therefore, even though you are not required to take any distributions at age 70 ½, it could still make sense to donate from your IRA using the qualified charitable distribution up to a maximum of $100,000 per person. Utilizing this strategy allows you to give pre-tax dollars to charities rather than after-tax.

Non-Spouse Beneficiary/Inherited IRAs

Unfortunately, a quite common planning strategy called the “Stretch IRA” does not stretch as far. For spousal beneficiaries, the rules are unchanged. But for non-spouse beneficiaries, the inherited IRA must be depleted after 10 years if the IRA account holder died on or after January 1, 2020. Inherited IRAs previously set up are “grandfathered” to the old rules if the IRA owner died on or prior to December 31, 2019.

There are a few exceptions in the new rules applying to minor children, disabled and chronically ill individuals, and individuals not more than 10 years younger than the IRA account owner. Therefore, work closely with your financial planner and tax professional ensure your calculations are accurate.

Contributions into Traditional IRAs after age 70 ½

Lastly, a significant change occurred regarding contributions to Traditional IRAs after age 70 ½. Starting in 2020, every IRA account holder may make contributions to his or her Traditional IRA after the age of 70 ½ if they have earned income (W-2 or self-employment income).

We understand that changes in retirement and tax laws can be confusing, so please contact us with any questions. We are glad to help.

Here’s to a great 2020! Blessings to you in the New Year.

Important: Specific tax guidelines exists for each of these items mentioned, so be sure to talk with your tax professional before implementing any of these strategies.

*For financial planning clients of Rivertree Financial Planning: Please contact us as soon as possible if you have had any changes in circumstances, objectives, goals or risk tolerance.

Rivertree Celebrates 10 Years!

Rivertree Celebrates 10 Years!

We often hear of celebrating milestones: victories, championships, new beginnings, births, etc. But I generally don’t associate milestones with defeats, losses, deaths, and other unfortunate events. Listen to what Tim Fortner says:

“A ‘milestone’ comes from the use in olden times of having stones which told the traveler how many miles it was to the next city. They were a reference point which reassured the traveler they were on the right path.  Milestones have also been used to describe significant events in one’s lives.  In the Bible, especially, the Old Testament, we see a heap of stones to commemorate a significant event in the life of an individual or of the nation or people.

Joshua and the nation of Israel were experiencing some milestone events. Milestone events can be wonderful or they can appear as trouble, a loss, a setback. Certainly the defeat at Ai was especially troubling for Joshua and the nation of Israel.

With the Lord, a setback is a set up for a comeback. Now in order for this to be true, we must learn from our mistakes. We must learn the lesson the Lord would have us to learn, don’t we? Or else we are doomed to repeat them.  And when we learn something, we can begin again, more intelligently.   After what had happened at Ai, Joshua and the Israelites were discouraged.  Let’s face it- discouragement over the past failure and fear of the future are two common reactions which accompany failure.”

Your Milestones

In light of Fortner’s words, how would you describe and document your milestones? Could you do it in the form of a story? I was challenged some thirteen years ago to document the “fence posts” in my life – the significant people, places and events that have most shaped me. If you had to list your ten most significant “fence posts”, who or what has shaped your life, for better or for worse, what do you think that would look like?

For me, this exercise was fascinating, eye-opening and sobering all together. Then came the harder challenge: sharing these fence posts (i.e. “milestones”) with others. But not just any others – safe, loving people whose undivided attention was listening to my story. Whew! I’m having to take a deep breath even now as I remember!

Financial Milestones

What are your financial milestones? First job, first house, first credit card, last credit card (better!), debt payoff, mortgage payoff (party!), retirement account balance, extravagant giving, etc.? The list could go on, but again, what are yours? We’ve discussed many times the importance of setting goals. You are far more likely to celebrate some financial milestones if you have a plan in place. Behavioral finance research (which we believe in and practice with clients) continues to show that having a plan in place alongside your goals gives you far more probability of achieving them.

Our Milestones

In August, Rivertree set a milestone of its own. We were thrilled to celebrate the 10-year anniversary of the Company! Wow, how the time flies! As often said (particularly about parenting), the days are long but the years are short.

We have many milestones here at Rivertree:

-Opening an independent shop in 2009 on the tail-end of the Great Recession

Amy joining the team (and taking a leap of faith in a young Company) in 2010

Jonathan joining the team in 2013

Brent joining the team in 2015

Phillip joining the team in 2016 and continuing in a consulting role after leaving in 2017

Valerie joining the team in 2017

Fast forwarding to today, we oversee approximately $140 Million in client assets and service over 500 households. We’re amazed and humbled at these milestones. And, they would never have been possible without the trust and confidence of our clients. We are committed to continually earning our client’s business as we walk alongside them and celebrate their milestones. From the bottom of our hearts, Thank you!

Now What?

Do you have the courage to document your milestones – the good, the bad, the ugly – that shaped you? Or better said – your personal story? If you do, I challenge you to share your story with a good friend. The outcome of this process may surprise you!

*For financial planning clients of Rivertree Financial Planning: Please contact us as soon as possible if you have had any changes in circumstances, objectives, goals or risk tolerance.

Welcome Phillip Holmes to the Rivertree Team

Welcome Phillip Holmes to the Rivertree Team

We would like to introduce Phillip Holmes as the newest member of the Rivertree team. Phillip officially joined us as an Associate Advisor and Creative Director in August 2016. He will be handling all marketing and communication efforts as well as assisting those in need of debt and cash flow planning. As a recently licensed insurance agent, Phillip will also assist clients in getting the coverage that they need.

(more…)