A Step-by-Step Guide to Retirement Planning 

Many people fail to think about their retirement until their 40s or 50s. However, this is a mistake. Putting off retirement planning can force you to postpone your retirement, sell your home and downsize, or otherwise compromise your plans for your golden years.    

To make sure you’re fully prepared for your retirement, start planning today, if you haven’t already. Here’s a step-by-step guide to get your finances in the best shape possible for a comfortable retirement.   

Step One: Know When to Start Planning 

When it comes to retirement planning, there’s no better time to start than the present. Experts recommend that you start planning for retirement in your 20s, as soon as you land your first full-time job. The earlier, the better.  

The sooner you start saving and investing money for your retirement, the more time that money will have to grow. This will lead to a larger pile when you’re finally ready to retire decades later.  

However, even if you’re well past your 20s and are only just starting to plan, don’t panic! Retirement planning can be started at any time. You may have to save a greater portion of your income to catch up with those who started years earlier, but you can still take action to build up a nest egg.  

Step Two: Calculate How Much Money You Need to Retire 

The next step to retirement planning is to figure out how much money you will need in order to retire. Remember, the money that you save for retirement is what’s going to function as your income when you’re no longer working.   

That means you’ll need to think about your current expenses, as well as what new expenses might arise in retirement, such as higher and more frequent healthcare costs. You’ll need to calculate your retirement income based on that.  

One tip for retirement: estimate that you’ll need about 70% to 90% of your pre-retirement income to retire comfortably, with Social Security, your 401(k), individual retirement account (IRA), and other investment accounts and savings contributing to that figure.  

For example, if you make $50,000 a year before you retire, plan to need between $35,000 and $45,000 a year once you retire, in order to continue in your current lifestyle without significantly downsizing.  

Step Three: Prioritize Financial Goals 

People generally have more financial goals than just retirement. These goals might include paying off a mortgage, funding their children’s college education, or buying a vacation property. 

In general, it’s good to aim to save for retirement as well as for other financial goals, if possible. You can do so at the same time.  

Remember, a little goes a long way. When it comes to retirement planning, even putting aside a little bit each month can be a great way to steadily build up your savings. 

Step Four: Choose a Retirement Plan 

Choosing a retirement plan is a key part of saving for retirement. You generally have two options for starting a retirement plan: 

  • Employer-sponsored retirement plans 
  • Individual retirement plans 

If your employer doesn’t provide a retirement plan like a 401(k), Roth 401(k), or pension, you can open your own account. Even if you have access to an employer-sponsored plan, it’s often a good idea to open another account on your own.  

Retirement accounts that you can open on your own, without an employer, include the traditional IRA and the Roth IRA, both of which provide tax advantages. With a traditional IRA, contributions are tax-deductible in the year they are made, and withdrawals from the account when you’re in retirement are considered taxable income. In contrast, with a Roth IRA, you cannot deduct your contributions when you make them, but your withdrawals from the account when you’re retired are tax-fee. Both accounts come with a yearly maximum contribution limit of $6,000 in 2021 or $7,000 if you are 50 or older. Early withdrawals before retirement age can incur a penalty tax.  

If you’re an employer or self-employed, you have other options as well. You can consider a Simplified Employee Pension (SEP) IRA or SIMPLE IRA. Similarly, if you’re a business owner without any employees, you can open a solo 401(k). 

Step Five: Choose Your Retirement Investments 

When you open an investment account like a 401(k) or IRA, you’ll have to make decisions about where to allocate your money.  

In general, it’s a good idea to focus on investing more aggressively during your younger years: you can take bigger risks and potentially reap bigger gains, and you have decades to recover from losses. Usually, as you grow older and your retirement draws near, your investment strategy should become more conservative.   

In addition, it’s also important to revisit your investment strategy every year—saving for retirement isn’t a “one and done” job. You may need to adjust your strategy based on job and income changes, family growth, inheritances, and other major life events.   

Start Today 

With these tips, it’s easy to start planning for retirement. By following this process, you can get started saving for your golden years and position yourself for a comfortable retirement.  

12 Fascinating Facts about Bitcoin 

Ever since its launch in 2009, Bitcoin has been wildly popular. Anyone new to investing in cryptocurrencies, and Bitcoin, in particular, should first have a little background on it. That will make it easier to make informed investments that result in a big return on investment. Read on to learn 12 interesting facts about Bitcoin you may not know. 

  1. No One Knows Who Created Bitcoin 

Who created Bitcoin? No one knows. The digital currency appeared seemingly overnight out of the hands of someone named Satoshi Nakamoto. No one knows whether Satoshi Nakamoto is a person, a group of people, or an organization. What we do know, however, is that Satoshi holds roughly 1 million bitcoins. 

2. There’s a Limited Supply 

Another surprising fact about Bitcoin is that there is a limited supply. In other words, eventually, there will be no more bitcoins for investors to buy. 

There are a total of 21 million bitcoins available. Out of that number, miners have already harvested 19 million. With only 2 million remaining, it won’t be long before the supply runs out. 

3. Bitcoin Rules the Black Market 

When we think of Bitcoin, most of us think of investment portfolios and retirement funds. However, Bitcoin also has a strong presence on the black market. 

Because bitcoins can’t be traced like normal currency, they’re ideal for cybercriminals. Luckily, the government is on top of bitcoin transactions and has seized hundreds of thousands of bitcoins used in illegal sales. 

4. Bitcoin Can Be Traded on PayPal 

PayPal, a popular personal finance platform, recently announced that users will be able to trade bitcoin through their service, making it even more accessible to the amateur investor. What’s more, PayPal is planning to extend this service to its additional platforms. That means that pretty soon investors will be able to buy and sell bitcoin on Venmo. 

5. The First Bitcoins Were Used to Buy Pizza 

With the current value of bitcoin sitting at just over $41,000, it’s hard to believe that the first bitcoins were used to buy pizza.  

In 2010, an early bitcoin owner used 10,000 bitcoins to order two pizzas. Today, that purchase would be worth more than $417 million. 

6. A Man Once Threw Away Thousands of Bitcoins 

In 2013 a man named James Howells of Wales had an old hard drive that contained more than 7,500 bitcoins. However, he didn’t foresee a future for the currency. As such, he decided to throw the hard drive away, losing out on millions of dollars today. Now, he’s trying to get his city council to let him excavate local landfills in an attempt to find it. 

7. Bitcoin Projections Could Reach $500,000 

Bitcoin is a cryptocurrency that’s seen quite a bit of fluctuation since it was first invented. However, despite that fluctuation, it still seems to be growing. 

Experts predict that the currency could eventually reach a sale price of $500,000. Some analysts are projecting Bitcoin prices over $1,000,000! That would mean huge payouts for anyone who’s taken the time to invest in bitcoin, or starts buying today. 

8. Companies Are Investing in Bitcoin 

While bitcoin is mostly talked about among individual investors, they’re certainly not the only ones with their eyes on the currency. Many large corporations are starting to invest in bitcoin to earn extra cash for their business operations.  

One such company is MicroStrategy Inc., which bought more than $400 million in bitcoin to beat inflation. This money is now stored in the organization’s private treasury. 

9. Not All Companies Allow Bitcoin 

The cryptocurrency market is thriving in the United States, but the same can’t be said for every country in the world. In fact, several nations have banned the purchase and sale of bitcoin, including Bolivia, Qatar, Vietnam, and Afghanistan. It looks like some other countries might be following suit shortly due to the currency’s decentralized nature. However, in June of 2021, El Salvador adopted Bitcoin as an officially accepted second national currency. Other nations are expected to follow their lead.  

10. Bitcoin Mining Requires Tons of Energy 

One of the few disadvantages of bitcoin is the amount of energy required to mine it. Bitcoin mining takes up as much energy as a medium-sized country. Machines that run the software used to mine bitcoin are big energy consumers. That is one reason why so few people spend their time mining bitcoin. However, studies show that global video gamers eat up 40-50% more electricity than global Bitcoin miners, and no one complains about them. Also, upwards of 30-40% of the electricity used to mine Bitcoins is from renewable sources, while almost none of the electricity used for gaming is from renewable sources. 

11. Some Bitcoin Is Lost 

Aside from the bitcoins that have yet to be mined, some haven’t been touched. Roughly 20 percent of the total supply of bitcoin has been lost or is otherwise inaccessible. It’s unknown if the world will ever have access to it. So the supple of available Bitcoins is even smaller than most people think. 

12. Cybercriminals Steal Bitcoin 

While Bitcoin is certainly a safe way to keep track of money, it’s not entirely protected from cybercriminals. Back in 2020, several cybercriminals were able to break into celebrity bank accounts and steal roughly 400 bitcoin payments. 

Invest in Cryptocurrency Today 

Investing in cryptocurrency is a great way to set aside a nest egg for the future. With so many cryptocurrencies on the rise, it’s a great way to make some extra cash and keep up with an increasingly digital world.  Also, more importantly, cryptocurrencies such as Bitcoin can act as an inflation hedge against the printing of too many dollars, euros, yen, and all other fiat currencies.  

Is Crypto Innovative or Insidious? How and Why Countries Are Banning Cryptocurrency 

Cryptocurrency has been experiencing surges of usage and popularity in mainstream digital media in the United States. However, the digital currency exchange is being curbed by the negative reactions of national banks across the globe.  

Part of the appeal of cryptocurrency usage is its independence from traditional finance infrastructure. As Bitcoin is decentralized (ie. no one nation of bank controls it, or can even influence it), it represents a threat to both governments and central banks.   

   It is perceived as a more secure method of transferring funds and is much faster and cheaper then using the traditonal financial institutions and the government.  

However, not everyone sees that appeal: there are a few countries that aren’t quite so on board with cryptocurrency for a variety of reasons. To understand why, it is important to consider the pros and cons of using this type of currency, from the perspective of both investors and governments.  

The Pros and Cons of Using Cryptocurrency Depend on Perspective 

Cryptocurrency is—and was intended to be—a fully anonymous system, meaning that there is no equivalent to a receipt for transactions made. 

Using cryptocurrency means that data about people’s purchases are not collected, stored, or reused by third parties—including banks and the government. As a result, consumers can engage in a variety of financial activities while maintaining their privacy. For consumers, this is good. For companies that make their money by buying, selling, and trading money or data, it is a significant threat to their business model. 

The biggest downside for consumers is that cryptocurrencies are not insured by the FDIC. This means that investments in cryptocurrency through an exchange or intermediary, may be significantly less secure. Market conditions can change at the drop of a hat, and the exchanges and intermediaries that trade and offer digital currencies do not have the same protections as traditional banks. Unexpected changes could lead to sudden halts on transfers or withdrawals, and the consumer would have no recourse.  This is why almost all holders of Bitcoin, or other cryptocurrencies, do NOT hold or store their tokens on the exchange. They transfer them right away to a secure “digital wallet’, which only they (and perhaps a family member or two) have access to.  Once this is done, the crypto currencies are actually safer and less prone to theft or interruption than a traditional bank account, or credit card, or brokerage account, which can be, and are, hacked regularly.     

Additionally, the lack of surveillance and protection is the same reason for the proliferation of cryptocurrency usage in illegal online marketplaces and fraud. Without the restrictions and regulations of cash-and-coin banking systems, large amounts of money can be traded much more easily without being flagged or seized.  Indeed, many governmental or global financial entities, such as the IMF, World Bank, and central banks claim that Bitcoin and other altcoins are used for “black market” activities, such as gun and human trafficking and illicit drug trading-and indeed they are. However, the “authorities” claims ring quite hollow, as the US dollar remains the leading tool around the world for drugs, guns, human trafficking, and all other nefarious activities.       

The Reaction to Cryptocurrency 

With these more problematic aspects of cryptocurrency in mind, nine countries currently have an absolute ban on the use and ownership of cryptocurrency, and an additional 42 countries currently have implicit bans in place, a statistic that has doubled since 2018. Now, with talk of Russia adding their name to that list, consumers want to know how these bans are being enforced, and what that means for crypto users on a global scale. 

Absolute vs. Implicit Bans 

An absolute ban, as adopted by Algeria, Bangladesh, China, Egypt, Iraq, Morocco, Nepal, Qatar, and Tunisia, prevents all individuals and financial institutions from owning or dealing in cryptocurrencies in any way. Any operation that involves the transfer or holding of a digital currency is considered a criminal activity and could result in a person’s imprisonment. 

An implicit ban, on the other hand, means that governments restrict financial institutions from acquiring cryptocurrency users or owners as their clients. Additionally, these institutions may not offer their services to someone known to have any dealings in cryptocurrencies. 

The Effect of Crypto Bans 

The hope of legislation like this is to create restrictions around the usage of cryptocurrency. That would reduce its usage in criminal activities such as money laundering or drug trafficking. Ultimately, the goal is to reduce the overall usage of cryptocurrency, leading to a decrease in crypto mining. 

This effect was seen immediately after China’s ban on cryptocurrency, which led to an 8 percent fall for Bitcoin on the same day as the legislature was passed. However, within a few weeks of the ban, Bitcoin bounced back to numbers even greater than it had been previously—despite the fact that China had been one of the largest markets for cryptocurrencies prior to that point. 

Nations embracing Bitcoin and cryptos 

At the same time, several nations have embraced Bitcoin and are looking to expand its use.  The small nation of El Salvador officially adopted Bitcoin as an accepted currency and legal tender alongside the US dollar as of September 7, 2021.  Other nations that have expressed interest in adding or adopting Bitcoin or other cryptos are Switzerland, Cuba, Panama, Paraguay, Uruguay, Brazil, Ukraine, and Germany. Additionally, four US states have granted commercial status to Bitcoin-Wyoming, Nebraska, Rhode Island, and Texas.  Bitcoin entrepreneurs are flocking to Texas and El Salvador (who is building a Bitcoin City shortly).    

Crypto Mining and Potential Future Bans 

The environmental impact of crypto mining has received negative attention from the media recently. Notable innovators such as Elon Musk spoke out about the state of our climate, and the impact of crypto mining. The process of crypto mining utilizes an extremely large amount of energy. Unfortunately, it is also the most popular method for large companies like Bitcoin and Ethereum for create new crypto coins. 

The energy usage of these processes is staggering, with numbers sometimes exceeding that of the usage of entire countries. Renewable energy sources are used by some companies such as Bitcoin. However, green sources of power only make up around 39 percent of the total energy used for crypto mining as a whole. 

Critics of cryptocurrencies’ use of electricity, however, usually fail to point out that video gamers use even more electricity globally, and that almost none of that power is from renewables, so that argument is also increasingly specious. We must remember what a threat Bitcoin is to the establishment as we read negative articles about it, or cryptos in general.   

While places like China are implementing laws to remove these mining centers from their country, it is not eradicating the process entirely, especially since the United States currently makes up 35 percent of all Bitcoin mining worldwide. While reducing numbers for individual countries, it seems that the bans countries are implementing are not making a dramatic difference on a global scale.   

The Outlook on Cryptocurrency 

Whether inspired by the move towards eradication of cryptocurrencies by other governments, or as a call to reduce the harmful environmental impacts of crypto mining, more and more countries are creating legislature to put restrictions around crypto usage. 

With some countries even creating their own digital currencies produced and monitored by their central banks, statisticians are expecting more countries to move toward the banning of cryptocurrencies in some fashion in 2022. 

Again, at the same time, some analysts and economists expect the number of countries using and/or embracing digital currencies to grow this year and in the near future. It is a fascinating situation, and makes it hard to predict what money and daily financial dealings will look like in just a few years.  

The Top Cryptocurrencies to Keep an Eye on in 2022

Each month, new cryptocurrencies are released to the digital world for potential buyers to invest in. Cryptocurrencies offer incredible money-making opportunities and are a way for investors to generate additional income.

However, for anyone planning to invest in cryptocurrency, it’s important to know which cryptocurrencies are on the rise and which will most likely die out fairly quickly. That way, they can try to maximize their return on investment, and/or mitigate their losses.

Here are a few of the top cryptocurrencies that are expected to succeed in 2022.

Arcane

Investors getting started with cryptocurrency in 2022 should have Arcane on their radar.

Arcane is a cryptocurrency that was released in November 2021. Despite its relative newness to the scene, it was able to rise to a market cap of more than $1.3 million in just one month.

What’s interesting about Arcane is that most cryptocurrencies tend to peak upon release and then fizzle out. Arcane, like other digital currencies, peaked during its initial release but has managed to maintain its own as the hype wore down.

On top of that, this platform focuses on DeFi projects and is applying for equity on the OTCQB, a mid-tier market. If Arcane’s efforts are successful, it could see huge increases in its value in 2022, making it a potentially great speculative investment opportunity.

Chiliz

Chiliz coin, which is traded as CHZ, is another relatively young cryptocurrency. CHZ launched in October 2018 and made gains of 170 percent in October 2021 after launching live in-game NFTs.

Currently, CHZ has a market cap of $2.6 billion and is traded at a volume of roughly $317 million in a 24-hour period. Its current position of 67 out of all cryptocurrencies currently trading puts it in a solid spot for continued growth.

On top of that, CHZ is the first tokenized sports exchange. That means it’s become extremely popular with sports fans around the world, offering a novel idea with a future that could go beyond expectations.

Ethereum

No list of trending cryptocurrencies would be complete without Ethereum. Ethereum is both the second most popular and most valuable cryptocurrency on the market.

Ethereum, traded as ETH, saw drastic increases in 2021, when its value increased by nearly 800 percent. Trading at almost $30 billion in 24 hours, Ethereum has a market cap of $562 billion that is continually on the rise.

Outside of the incredible financial figures, ETH is currently in the process of updating its original blockchain to provide more environmentally friendly and efficient transactions, thus making it a potentially solid investment option for anyone wanting to make socially responsible investments.  Investors and speculators should note that ETH has risen from a low of $125 and a $12.5 billion market cap in March of 2020, to the $3750 and $443 billion market cap level only 21 months later, so a lot of good news and expectations are already built into ETHs price, and various competitors are gunning for ETH at this time.

Theta 

Theta is an exciting token that started trading in 2019. Theta (THETA) is a blockchain powered network purpose-built for video streaming. The Theta mainnet operates as a decentralized network in which users share bandwidth and computing resources on a peer-to-peer (P2P) basis. The project is advised by Steve Chen, co-founder of YouTube and Justin Kan, co-founder of Twitch.

Theta features its own native cryptocurrency token, THETA, which performs various governance tasks within the network, and counts Google, Binance, Blockchain ventures, Gumi, Sony Europe and Samsung as Enterprise validators, along with a Guardian network of thousands of community-run guardian nodes.

With demand for streaming growing rapidly around the world, developers say that the project aims to shake up the video streaming industry in its current form — which includes centralization, poor infrastructure and high costs that mean that end users often end up with a poor experience. Content creators likewise earn less revenue due to the barriers between them and end users. Theta is currently valued at approximately $4.75 billion, and is now in the top 40 in terms of market cap. If Theta even partially solves the “loading…loading…loading…” problems that everyone who uses any video platform has experienced frequently, it could see explosive upside from current levels.

Elrond

Elrond first entered the crypto scene back in September 2020 and has experienced fluctuations ever since. However, 2021 was a positive year for the currency. It reached an all-time high in November 2021, trading at $492.

While its value has dropped slightly in the following weeks, Elrond is still holding its own in the market. It currently has a 24-hour trading volume that sits at close to $300 million and a market cap of about $7.7 billion. 

Experts predict that Elrond will continue to grow and could even rise above its current position in crypto rankings. Several crypto wallets and investment apps are also offering rewards in the form of Elrond, helping to boost its value and keep the currency on the rise.

Solana

SOL, or Solana, is a cryptocurrency that’s giving Bitcoin and Ethereum a run for their money. This currency has a 24-hour trading volume of $1.9 billion and its market cap is over $54 billion.

Those numbers don’t seem like they’ll be being capped anytime soon, either. After its sudden drop in November 2021, SOL rebounded and is expected to climb high into 2022.

The currency’s long time on the market also helps it maintain a steady value, making it a strong competitor for other hot cryptocurrencies.

Terra

Terra is a cryptocurrency whose coin is better known as LUNA. Released in early 2019. LUNA is currently trading at $23.5 billion in a 24-hour volume and has a market cap of more than $52 billion.

LUNA has seen some pretty incredible jumps, once nearly doubling its value in a week. While there’s no telling whether that trend will continue, the outlook is good for 2022. On top of that, several crypto exchanges have chosen to adopt LUNA. This type of expansion and diversification means that it could see some promising growth and provide great investment opportunities in 2022

Tips to Help You Prepare for Retirement

When you are in the prime of your life, retirement may seem like a long way off in the future. Maybe this perception is the reason why 60 percent of Americans haven’t determined how much they’ll need for retirement. However, if you want to enjoy a financially secure retirement, now is the best time to start.

How Much Money Will You Need?

Everyone has different needs and expectations. Nevertheless, considering the average spends 20 years in retirement, the Department of Labor calculates that you will need between 70 to 90 percent of your pre-retirement income to continue your standard of living through your retirement years.

For example, if you earn $5,000 a month, you’ll need a little over $1.2 million to maintain your living standard for 20 years. Social Security benefits will cover about $370,000 of the $1.2 million. So you’ll need to save about $830,000 to maintain your living standard at that income level.

Saving over $800,000 may seem like an impossible task, but it is more achievable than you may think. For example, if you start saving $500 a month at age 25 in a Roth IRA account with a 7% return, you’ll have $898,358 by age 65. If you’re 35 years old, you would need to double your monthly contribution or work 10 years longer to reach that amount.

How to Get Started With Your Retirement Plan

When you make up your mind to start the process, you can begin by setting goals. Primarily, decide how much money you can realistically save in a month and how much money you want to save by retirement. Once you have set some concrete goals, you can use the following tips to prepare for a financially comfortable retirement.

Assess Your Net Worth

To assess your financial condition, you need to calculate your net worth. You can do this by tallying up all of your assets, such as your house, car, investments, and cash. Then, deduct all of your outstanding debt, including your mortgage, car payments, and student loans. Knowing your net worth is important because it is the focal point of your financial profile.

Even if you can only save $60 a month, you should start saving that amount until you begin contributing more. Before paying your bills, groceries, and other expenses, deduct your monthly savings from your paycheck and place it in a separate account until you find a retirement account with the best return.

Grow Your Savings with a 401(k) Plan

Check with your employer to see whether they offer a 403B or a 401(k) plan. Over the past five years, the average 401(k) account has had a healthy 9.5% return rate. Obviously, it is important that you continue to commit funds from your paycheck even when the markets are negative, or in a prolonged slump. In fact, it is even more important then! If you continue to add funds in negative market environments, you will be buying more shares of the depressed funds that performed so well in previous years. Then, you will have a lot more shares when there is a recovery, and over time this will give you better results. This concept is referred to as “dollar cost averaging” and it works well over longer periods of time. Also, you can make it easier to save by allowing your employer to direct deposit funds from your paycheck to the 401(k) account automatically, every pay period.

Some companies will match a certain percentage of your contribution to the 401(k) plan. Typically, most companies match 50 cents to the dollar up to 6% of your pay. Also, your employer may offer an automatic escalation feature that will automatically boost your contribution by 1% each year.

Contribute to An IRA

You can open an Individual Retirement Account (IRA) or Roth IRA through your bank or brokerage. The yearly contribution limit is $6,000 for customers under 50 years old and $7,000 for people over 50.

In a Roth IRA, your after-tax contribution appreciates tax-free, and your withdrawals are penalty and tax-free after you reach 59½ years old. On the other hand, you must pay taxes on your traditional IRA balance after age 59½ at whatever the current tax rates are then.

Take a Part-Time Job

Working a side job would help you earn extra money to increase your monthly contribution. Within the gig economy, businesses offer many job opportunities with very flexible work hours. Try searching online on sites like ZipRecruiter.com, FlexJobs.com, and Career Cloud.

Select a Debt to Pay Off

You can add to your retirement savings by paying off one of your debts ahead of schedule. Then, along with saving on interest expenses, you can assign the money you’ve already designated for the loan payments to your retirement account. For example, you can accomplish this task by adding $100 a month to your debt installment until you ultimately pay off the debt.

Use a Finance App

Free downloadable finance apps can help you track your spending, manage your debt, and organize your budget in a streamlined manner. Additionally, they can enhance your financial knowledge through the tutorials as you use them. Overall, the best apps for this purpose are: You Need a Budget (YNAB), Mint, Simplifi by Quicken, PocketGuard, Goodbudget, and Stash.

Open a Social Security Account

Suppose you want to determine how much in Social Security you will get at retirement. In that case, the Social Security Administration allows you to set up a My Social Security Online Account, at www.ssa.gov . It is a valuable tool for learning about your Social Security benefits and keeping tabs on your future benefit amount.

If you want to make the best of your retirement years, there is no time like the present to get started. So many options and resources are available to you that prior generations didn’t have. Once you begin, you will discover that managing your retirement plan is not as complicated as you thought and that reaching your retirement goals is possible. Patience and even being stubborn in rough periods are key!

How Do Cryptocurrencies Work, and What is the Impact of the China Ban?

On September 24, 2021, China’s central bank issued a statement explaining that all virtual currency-related business activities were illegal from that moment on in the country, effectively placing a nationwide ban on cryptocurrency transactions. The announcement came amid a largescale crackdown on the trillion-dollar cryptocurrency industry by the Chinese government.

According to the statement, which was published on the People’s Bank of China website, all financial institutions, Internet platforms, and payment companies in China will be banned from enabling cryptocurrency trading. The People’s Bank of China also seeks to target foreign exchanges, banning foreign entities from providing virtual currency exchanges for Chinese residents via the Internet.

What is cryptocurrency?

Cryptocurrencies are virtual assets that are bought, spent, sold, and traded via digital exchanges. Also known as crypto assets, they are cryptographically secured representations of value capable of being traded or used to pay for things.

Cryptocurrency does not represent a physical asset, so it has no intrinsic value, just as paper, or fiat currencies have no intrinsic value. The user of the $20 or $100 bill has to have faith (along with lots and lots of other people) that that $20 or $100 will indeed buy him a certain amount of good or services. Supply and demand dictate its value. Similarly, and put simply, cryptocurrency is only worth what a buyer is willing to pay for it, making it a somewhat speculative, unpredictable asset, like paper currencies, which have historically lost all or most of their value over time.

What are the benefits of cryptocurrency?

In traditional business transactions, agents, brokers, and legal representatives can complicate and generate additional expenses to even straightforward transactions, with things like paperwork, commissions, brokerage fees, and a variety of other expenses hampering the process.

One of the main benefits of cryptocurrency is that this peer-to-peer platform enables users to effectively cut out the middle man, creating accountability and reducing the possibility for confusion. With cryptocurrency blockchain essentially serving as a large property rights database, the medium minimizes the time and expense involved in making asset transfers. It also eliminates bank transaction fees.

Cryptocurrency transactions offer enhanced confidentiality compared with traditional cash/credit systems, where an individual’s entire credit history can be viewed by banks or credit agencies. Users are shielded against the threat of identity theft, account tampering, fraud, and invasion of privacy thanks to the strong encryption techniques utilized throughout the transaction process.

Digital currencies enable anyone with a viable data connection to complete cryptocurrency transactions, increasing access to credit. Though unrecognized as legal tender in many countries worldwide, cryptocurrency does facilitate cross-border transfers without complications, eliminating costly currency exchange fluctuations, transaction charges, interest, and other levies.

Most countries operate stringent rules regulating the banking industry, protecting the rights of consumers. Nevertheless, when we deposit funds in the traditional banking system, we are effectively signing over control of our assets to a third party. If an account holder impinges the bank’s terms of service, the bank could make them jump through hoops to access their money. One of the greatest advantages of cryptocurrency is that investors are the sole owner of private and public encryption keys, effectively ensuring that they retain full control of their money.

What risks are associated with cryptocurrency?

Virtual currencies have gained significant traction in recent years, but investing in Bitcoin and other cryptocurrencies is not without risk, with some seasoned investors warning that the phenomenon is a “mirage” and a “soap bubble”, while other big name billionaire investors and hedge fund managers have embraced it, and continue to add to their holdings.

One of the main dangers of investing in cryptocurrency is price variability. As with most types of investment, values fall as well as rise. With digital currency, these fluctuations can be dramatic.

As with any popular technology, competition is a big problem. An influx of new cryptocurrency competitors have entered the market recently, an issue any Bitcoin owner is acutely aware of. Unless investors keep their eye on the ball, they could lose a lot if the cryptocurrency they invested in suddenly loses value due to the emergence of a stronger rival, as we have seen over the years with countless tech stocks and companies.

Fraud is a risk that is inherent to owning any financial asset. In terms of buying and selling, crypto investors should keep in mind that if it sounds too good to be true, it almost certainly is. Also, because cryptocurrency details are stored on computers, if that hard drive breaks down or the key file is accidentally deleted, the investor could lose access to their digital currency. Similarly, if a hacker gains access, they could steal the contents of your digital wallet, as they can with your brokerage or bank accounts.

A significant problem with cryptocurrency is the lack of regulation. Unlike conventional bank accounts, cryptocurrencies do not benefit from FDIC insurance. Plus, the US government regards cryptocurrencies as securities, applying existing laws to digital assets and obliging investors to report realized gains. In other countries, like China, crypto investments are banned.

What is the impact of China’s cryptocurrency ban on the market?

In the wake of China’s latest cryptocurrency crackdown, many major cryptocurrencies took a massive tumble in value. Bitcoin fell 8 percent to around $41,000 by 9 a.m. on the day of China’s announcement.  However, less than two weeks later, Bitcoin had recovered to over $50,000, as the concerns about China’s efforts faded.

Although cryptocurrency continues to provide the opportunity for massive gains, equally, there remains potential for huge losses, making it a high-risk, high reward strategy for speculative investors. Therefore, cryptocurrencies or “digital assets” should only comprise a small percentage of the average investor’s portfolio.

5 Financial Tasks to Take Care of the Year before You Retire

As you enter the last year before your retirement, it’s tempting to assume that all the retirement planning work you need to do is already done. After all, you’ve hopefully been able to spend decades preparing for this moment, so what could possibly be left to take care of?

The truth, however, is that the year just before you retire is not simply the kickoff to a life of leisure, but rather a crucial transition point between your working life and your post-work future. As such, you’ll need to take care of a few last critical tasks during this time to help set you up financially for your life as a retiree and ensure that the years ahead will be comfortable and worry-free.

The most important financial steps to take in the year before you retire include:

1. Updating (or creating) your retirement budget.

You’ve probably created retirement budgets before—this is usually a key step in retirement planning as it helps you figure out your savings goals. But now that you’ve reached the year before retirement, you’ll be able to create a budget that is much more accurate than previous ones.

At this point, you’ll have a clearer idea about what your expenses during the first year or two of your retirement are likely to be. For example, by now you’ll probably know whether you intend to take a big trip or make a major purchase such as a vacation home shortly after you retire. Similarly, you’ll know more about your liabilities, such as precisely how much money, if any, you’ll still owe on a home or vehicle when you stop working.

Having this level of detail about your personal finances will help this version of your retirement budget reflect reality as closely as possible. This, in turn, will help you correctly calculate your retirement withdrawals.

2. Adjusting your portfolio for income.

Speaking of withdrawals, the year before you retire is an excellent time to plan how and when you’re going to withdraw money from your various retirement accounts. You’ll need to find the right balance between ensuring that you have enough income to support yourself and avoiding running out of money during your retirement years.

Some key things to think about here include what withdrawal rate you’ll use (many experts recommend 4 percent as the magic figure, but in the current very low interest rate environment, that may be too high to be sustained), which investments you’ll plan to sell each year in order to achieve that withdrawal rate, and how you’ll manage your asset allocation so that you won’t end up having to sell investments at a loss if the market takes a turn. Hopefully, you have already established one or more income annuities or other more formalized income generation vehicles and plans before this last year of work, so that the bulk of your income in retirement will NOT involve annual sales of securities.

Note that these can be complex considerations. You may find it worthwhile to get some expert advice from a financial planner, especially one who specializes in retirement income planning, if you haven’t consulted any financial professionals prior to this.

3. Educating yourself about Medicare.

Unless you are able to set up a private alternative, you’ll likely be relying on Medicare once you’re retired and no longer covered by employer-provided health insurance. In the year before your retirement, take the time to research the ins and outs of Medicare.

Be sure you understand key details such as the four parts of Medicare and what is covered by each one, when you need to sign up, what your premiums will be, and what coverage gaps you might encounter. It’s essential to learn about your new insurance well before you have to use it.

This not only helps protect you from unpleasant surprises down the road, it also gives you the option to make strategic purchases or decisions while you’re still working, such as buying new glasses or having an elective procedure.

4. Refinancing your mortgage as needed.

If you still owe money on your home and you’re thinking about refinancing your mortgage, it’s a good idea to do this the year before you retire rather than waiting until after you stop working. Even if you have ample retirement assets, getting approved can still be easier when you’re employed.

And if you’re nervous about carrying a mortgage into your retirement, don’t be. While conventional wisdom used to hold that your mortgage should be paid off prior to retirement, continuing to make mortgage payments after you stop working is not an issue if you can do it without sacrificing your standard of living.

Furthermore, if you rush to pay off a mortgage before you retire, this could leave you without accessible funds to cover unforeseen costs or emergencies such as medical expenses.

5. Making decisions about Social Security.

Depending on how old you are when you retire, you may have a choice between claiming Social Security benefits right away and waiting to claim them later. The year before your retirement is a great time to think about which of these options would best suit your lifestyle and retirement plans.

Don’t forget to think about your health and your family history when making this decision. Waiting to claim your Social Security benefits will get you a bigger monthly check, but it won’t necessarily having you coming out ahead overall.

Many retirement planners offer a free “Social Security Maximization Study” that shows you all of the possibilities, year by year, up to age 70.

What You Need to Know about the 4 Financial Stages of Retirement

Most of the general information you’ll find on retirement planning treats retirement as if it were a single, unchanging phase that begins when you stop working and lasts for the rest of your life. However, if you take a closer look, you’ll find that retirement consists of several distinct stages, each of which involves different expenses and consequently requires a different approach to budgeting.

What this means for prospective retirees is that you shouldn’t expect a one-size-fits-all retirement plan to adequately meet your changing needs throughout the whole of your retirement. Instead, to ensure you’re making the most of your retirement savings, it’s a smart idea to review your finances as you enter each new stage of retirement, understand what to expect from the upcoming stage, and adjust your budget accordingly.

Read on to learn more about the four financial stages of retirement (as defined by Investopedia), and to find out what financial steps you should be taking at each stage.

Stage 1: Pre-retirement (approximate age: 50-62)

What you need to know—The decade or so before you stop working is known as pre-retirement or, sometimes, peri-retirement. In this stage, retirement gradually shifts from a far-off, theoretical event to a reality that is going to happen sooner rather than later. For many workers, this stage is all about clarity—i.e., getting a picture of how much you will have in savings, what your retirement income and expenses will be, and what you plan to do with your days when you’re no longer working. Note that although 62 is designated as the end of this period (62 being the earliest age at which you can qualify for Social Security payments), you might choose to retire earlier or later, depending on your circumstances.

What you need to do—The most important thing you need to do during pre-retirement is take stock of all your assets and liabilities and see if and where there are gaps that need to be bridged. Make sure you understand the details of your pension and Social Security benefits, review the balance of retirement plans such as a 401(k) or an IRA, and ensure you have a plan for paying off any money you still owe on a home or car. If things seem tighter than you’d like, take another look at your monthly expenses and see if any costs could be trimmed before they start cutting into your retirement budget.

Stage 2: Early retirement (approximate age: 62-70)

What you need to know—This is the retirement stage in which you’ll see the biggest changes to your budget as you transition from earning a regular paycheck to receiving Social Security benefits and payments from pension and other retirement plans. Many retirees also find that their expenses can be quite high during this stage as they pursue long-cherished (and costly) dreams such as taking extended vacations, purchasing a holiday home, or even going back to school.

What you need to do—As you adjust to this new stage of retirement, the most important thing to do is stick to the budget you made during the pre-retirement phase. Try not to go overboard when it comes to expenses you haven’t planned for. Remember: if all goes well, at this point you still have many more years of retirement left to finance. You’ll also need to make some decisions about health insurance, such as replacing any employer-sponsored health plans, and when you want to start claiming your Social Security benefits.

Stage 3: Middle retirement (approximate age: 70-80)

What you need to know—At age 70, there is no longer a financial incentive for delaying Social Security claims; likewise, certain types of retirement accounts will require you to start taking minimum distributions at age 72. If you’ve held off on claiming these benefits until now, therefore, you may find that your income grows during middle retirement. Many retirees also find that their discretionary expenses decrease during this stage; for example, you may find you’re not wanting to travel quite as much as you did during early retirement.

What you need to do—Now that you’re receiving Social Security and retirement plan payments, it’s a good time to revisit your asset allocation to make sure that your savings are still working hard for you. Another important financial step to take during this stage is reviewing and updating your will or estate plan. It’s not always easy to plan for the end of your life, but it’s better to take care of this sooner rather than later.

Stage 4: Late retirement (approximate age: 80 and up)

What you need to know—For most retirees, the No. 1 expense during this stage will be health care. Depending on your situation, you could find your costs increasing (for example, if you need to hire a home health aide or move to an assisted living facility) or you could find them remaining more or less the same as in middle retirement.

What you need to do—With at least several years, possibly even decades, of retirement under your belt, now is the time to reassess your nest egg and make sure you’re withdrawing money at a rate that’s appropriate for your ongoing situation. Be sure to consider not only the expenses you’re anticipating during your lifetime but also what you might want to leave to others.

6 Big Myths about Cryptocurrencies You Shouldn’t Believe

In the world of cryptocurrencies, it can be difficult to separate fact from fiction. As Bitcoin and other digital currencies have grown exponentially over the past decade, so too have the myths about Bitcoin and the cryptocurrency industry in general. This is a frustrating situation for prospective investors trying to do their homework thoroughly, as all these misconceptions can make it very difficult to find accurate, impartial information on the benefits and risks of cryptocurrencies.

If you’re thinking about investing in cryptocurrencies, or even if you’re simply a curious observer interested in learning more about this new financial sector, read on for a look at the facts behind some of the most persistent cryptocurrency myths.

MYTH: Digital currencies are mainly used for illicit purposes.

One of the most pervasive myths about Bitcoin and other digital currencies is that they are mainly used for illicit—even criminal—activities rather than legitimate purposes. Certainly, it’s easy enough to assume that the anonymity and decentralization that cryptocurrencies offer (and, indeed, that are two of their most important elements) are primarily intended to appeal to people with questionable goals in mind. However, this is to overlook the fact that anonymous, decentralized financial transactions are valued and used just as much by law-abiding individuals, to say nothing of the fact that fiat currencies are also used for illicit purposes without having doubts cast on the integrity of the currency itself. In fact, it is the US dollar that is used the most around the world for money laundering purposes-not Bitcoin!

MYTH: Cryptocurrencies are a scam.

The possibility of fraud is always a risk, however slight, with just about any investment opportunity, and cryptocurrencies are no exception. However, this doesn’t mean that all digital cryptocurrencies are nothing more than a potential scam; it simply means that prospective investors should do their due diligence carefully and cautiously to sift out dubious investment opportunities from genuine ones. Again, the fact that fraud may be a risk with cryptocurrencies—just as it is in the traditional financial landscape—doesn’t render the entire industry fraudulent.

MYTH: Digital currencies are not environmentally friendly.

Many critics of digital currencies are quick to point out that cryptocurrencies (specifically, the mining operations that produce them) are bad for the environment. But the critical follow-up question to ask here is: relative to what?

It’s certainly true that the many, many mining rigs around the world require huge amounts of computing power, which, in turn, needs significant electricity input. However, the environmental impact differs depending on how the electricity in question is generated. Recent studies have shown that at least 39 percent of Bitcoin mining activities are powered by renewable energy. Perhaps it’s more accurate to say that the carbon footprint of cryptocurrencies is a challenge in need of a solution, just as it is for all kinds of entities, from FedEx to TikTok. Also, Bitcoin’s energy usage also makes it more secure, and energy consumption is not equivalent to carbon emissions. For example, one unit of hydro energy will have much less environmental impact than the same unit of coal powered energy. 

MYTH: Bitcoin is losing its power.

As the original cryptocurrency in an industry that seems to be all about the next new thing, Bitcoin has faced rumors that it’s losing its dominance of the cryptocurrency sector for almost as long as it’s been around. However, this myth can be easily debunked by pointing out a few simple facts: Bitcoin still accounts for nearly half the total value of all cryptocurrencies in existence, and the thousands of digital currencies that emerged after Bitcoin did so with no obvious impact on Bitcoin’s price. Additionally, in just the past 6-12 months, various big-name entities have embraced and accepted Bitcoin, including large banks and brokerages, and notable hedge fund and other asset managers, and even famous CEOs (Elon Mush of Tesla) and sovereign governments (El Salvador). Other nations are expected to follow El Salvador’s lead.   

MYTH: Cryptocurrencies will displace the dollar.

Many sources, from the Financial Times to the chief global strategist at Morgan Stanley, have suggested that Bitcoin could pose a significant threat to the supremacy of the US dollar. To understand why this is a misconception, even one held by experts, it’s helpful to look at what backs these two different currency types. Cryptocurrencies, on the one hand, are backed only by the faith people have in their value. The US dollar, on the other hand, is backed by the US government. Given that investors still trust the dollar, even when times are difficult, it seems truly unlikely that cryptocurrencies will seriously challenge the primacy of the US dollar as a store of value.  It is more likely that a few leading cryptos will become stores of value themselves, or hedges against inflation akin to the more traditional dollar hedges such as gold and silver. In fact, many analysts expect Bitcoin prices to rise over time, due to a flow of money out the dollar and into Bitcoin, which has a strictly limited number of units, unlike the dollar, which is printed at increasingly alarming rates, with no real backing either.  

MYTH: Cryptocurrencies are a temporary trend.

Interestingly, claims that cryptocurrencies will displace the US dollar exist alongside parallel claims that cryptocurrencies are nothing more than a fad that will fade away. As always, the truth lies somewhere in between these two opposing myths.

At the moment, it’s not yet clear whether specific cryptocurrencies will prove to be permanent investment vehicles, but there’s no doubt that digital currencies have brought transformative and irreversible changes to the financial landscape. As the technology matures and central banks and governments around the world conduct experiments with their own forms of official digital money, it seems clear enough that the underlying principles of cryptocurrencies are not going away any time soon. The blockchain technology that underpins cryptos is powerful and secure. Even if nations begin to issue their own digital currencies, there may be plenty of room for non-governmental cryptocurrencies to exist and prosper right alongside.

Get Answers to 6 of Your Most Important 401(k) Questions

401(k) plans are hailed by many financial experts as one of the easiest and most convenient ways to save for retirement. However, according to data from the US Census Bureau, although an estimated 79 percent of American workers have access to a 401(k) plan through their employer, only 41 percent of those choose to take advantage of this retirement savings option.

Given the many benefits they can offer, why is 401(k) uptake so low? One possible reason could be the fact that many people, even those who do participate in a 401(k), find the rules and details of this type of plan confusing. When you’re not sure what the advantages of a 401(k) really are, or when and how you’ll get back the money you put in, it’s understandable that you might feel hesitant about funding such a plan.

If you share this confusion, and have avoided pursuing a 401(k) opportunity for that reason, read on for answers to some of the most commonly asked questions about 401(k)s.

What exactly is a 401(k)?

Simply put, a 401(k) is an employer-sponsored retirement plan that is funded, at least in part, by contributions deducted directly from your earnings. Your employer invests this money on your behalf in a retirement fund, where it will grow on a tax-deferred basis until you withdraw from it.

Why would I choose to participate in my employer’s 401(k) plan?

There are a number of reasons why investing in a 401(k) through your employer makes good financial sense. The first is the opportunity for a tax break. The money that you contribute to a 401(k) comes directly off your salary before taxes, which in turn lowers your taxable income and results in a smaller tax bill.

Another important reason to participate is to take advantage of employer contributions. As part of their 401(k) plans, many employers will offer to match whatever money you put in up to a certain percentage. This essentially amounts to free money from your employer, and is one of the biggest benefits that a 401(k) can offer over other retirement savings options.  For example, it is fairly common for an employer to contribute or “match” 50% of what you put into the 401k up to a certain percentage of your salary-such as 3% from the employer if you contribute 6%.  This is essentially a 505 return on your money, even if you leave it in cash in a money market choice! We urge all people to contribute up to the maximum match offered by the employer for this reason. 

Finally, investing in your employer’s 401(k) plan can be worth it simply because it’s so convenient. Once you’ve enrolled in the plan and set your desired contribution level, that money will be set aside each month without you having to make any effort or even think about it at all.

How much money should I invest in my 401(k)?

The amount you choose to contribute to your 401(k) will depend on a number of factors, such as your anticipated expenses during retirement, your current assets and debts, and the tax advantages you can gain from different contribution levels. As a general rule of thumb, however, most experts recommend that you put a minimum of 5-10 percent of your paycheck toward your 401(k).

Finally, do be aware that 401(k)s have contribution limits attached. For 2021, employees can put up to $19,500 towards a 401(k).

How is the money in my 401(k) invested?

While your employer does make certain investment decisions on your behalf with a 401(k), it’s important to understand that you do have some choices when it comes to how your 401(k) contributions are invested. Most plans offer some combination of actively managed domestic and international stock funds, domestic bond funds, and money-market funds, as well as low-cost index funds.

Depending on your investment goals and risk tolerance, you can choose how you want your money allocated, and you can also make changes to your investments over time. If you don’t know where you want your contributions to go, the default option will typically be a money-market fund or a target-date fund. Unfortunately, most 401k plans do not offer a truly broad menu of investment choices. For example, there are often no choices in the following asset categories, which can mean lots of lost opportunities for growth and returns over time:  precious metals; natural resources; emerging markets; real estate; foreign bonds; etc. It is therefore important for you to try to gain a presence in these other asset categories with non-401k funds, if possible, in order to be truly diversified in your pursuit of long-term growth for retirement.

What do I have to do if I want to join my employer’s 401(k) plan?

Some companies offer automatic 401(k) enrollment, which means that you’re automatically included in your employer’s 401(k) as soon as you start working. Other companies take an “opt-in” approach. This means that you’ll need to fill out a form and submit it to HR to set up your 401(k) and start having contributions deducted from your pay.

In either case, you can talk to someone from HR or payroll if you have questions at any time about your 401(k), or if you want to change details such as your contribution amount.

What happens to my 401(k) if I move to a new job?

Because 401(k) plans are employer-sponsored, employees are often confused about what will happen to their 401(k) if they leave their current job. The good news is that you do have several choices in this situation.

You can simply leave the money in your employer’s plan, where it will continue to be invested; you can roll the money into a 401(k) at your new employer, if they offer one; or you can roll the money into an individual retirement account (IRA). You also have the option to simply cash out your 401(k) when you leave an employer, although this is not usually recommended as it increases your tax burden significantly and wipes out future financial gains.  If you “roll over” the funds in your 401k to an IRA when you leave that job, there are no tax consequences. In other words, the entire amount of the 401k being rolled over into the IRA account will not be taxed-those funds will continue to grow tax deferred in the IRA, and now, in that IRA, you will have many more investment choices available to you. 

A Helpful Cryptocurrency Glossary That’s Great for Beginners

I recently did a webinar with a colleague on the subject of learning about Bitcoin and cryptos.

An Introduction to Crypto-Currencies

Hosted by Robert Ryerson, Dr. Jose Cao Alvira, Nikki Shank

Thursday, March 25 2021

6:00 PM Eastern Time (US and Canada) GMT -4

We have recorded the webinar event for you!

In case you missed the live webinar, or in case you would like to watch it again, here is the link to the replay video:

Enjoy the content!

A Helpful Cryptocurrency Glossary That’s Great for Beginners

If you’re thinking about investing in cryptocurrencies, familiarizing yourself with the industry’s most common terms is a helpful first step to take. The world of digital currencies is full of highly specialized terms, acronyms, and phrases that can be confusing to a prospective investor encountering them for the first time. Taking the time to learn the basic vocabulary helps give you a better understanding of what cryptocurrencies are and, therefore, a more secure foothold as you enter this exciting and fast-moving market.

The following are some of most useful cryptocurrency terms with which to start:

Address – An address is a specific code, represented as a string of numbers and letters, that identifies the location of every cryptocurrency coin on the blockchain. When cryptocurrency transactions take place, digital assets are sent to and from different addresses.

All Time High (ATH) – As the expression suggests, all time high (ATH) is the term for the highest price a particular cryptocurrency has ever reached on the market. If you’re interested in tracking the performance of different cryptocurrencies, comparing the ATH against the current price can give you a sense of whether a digital asset is a good buy at any given moment.

Altcoin – Also known as alternative coins, or simply alts, altcoin refers to any type of cryptocurrency other than Bitcoin. According to some estimates, there are currently close to 9,000 different altcoins in existence, and altcoins accounted for more than 40 percent of the total cryptocurrency market in March 2021.

Bag – In the cryptocurrency world, the term “bag” is essentially the equivalent of “portfolio” in that it refers to the full collection of digital assets that you hold.

Bitcoin – Launched in 2009, Bitcoin is the original cryptocurrency and still the most popular digital currency in the world.

Blockchain – The driving force that powers virtually every type of cryptocurrency, blockchain is a trail of verified digital transactions that have been linked together. Functionally, blockchain acts as a kind of virtual accounting ledger in which publicly viewable transactions are stored in multiple secure places.

Cryptocurrency – Money that exists in the form of encrypted, digital information. The most important thing to understand about cryptocurrency is that it is completely independent of banks or other traditional financial institutions and uses sophisticated mathematics to process and regulate how funds are created and exchanged.

Cryptography – The process of encoding and decoding information to keep it private and secure.

Distributed – This refers to the practice of spreading something out in different places or among different devices rather than keeping it in a single location. One term you’ll hear frequently in a cryptocurrency context is “distributed ledger,” which refers to the fact that the blockchain is essentially a shared database where transactions and related details are recorded in multiple places at the same time. The idea behind distributed-ledger technology is that, because there are many identical copies of the ledger in existence, the information it stores is far more secure and virtually impossible to counterfeit.

Exchange – One of the more easily identifiable terms found in the cryptocurrency world, an exchange is a marketplace where traders can buy, sell, and trade digital assets. Many different exchanges exist, each with its own rules around trading fees, exchange rates, and other key features. Note that it’s not usually possible to trade any type of cryptocurrency on any exchange; some exchanges only trade in a selection of cryptocurrencies.

Fiat Currency – Fiat currencies are what most people think of as “real money.” In other words, a fiat currency is any type of government-issued currency that a specific nation or region uses as legal tender, such as the U.S. dollar or the euro.

Mining – The term mining refers to the process of creating new units of a digital currency by verifying digital transactions and adding them to the blockchain. Another way to describe mining is the act of running software that solves cryptographic puzzles in order to obtain rewards in the form of digital currency.

Node – Any computer that hosts the blockchain is known as a node. Having many nodes running the blockchain is an essential part of its distributed-ledger technology.

Satoshis (Sats) – A satoshi is the term for the smallest fraction of a Bitcoin: one-hundred-millionths. The name comes from Satoshi Nakamoto, the pseudonym by which the person or group that created Bitcoin is widely known.

Token – Tokens are digital units issued on a blockchain. They are the primary means of transferring and storing value on the blockchain network.

Wallet – In the world of cryptocurrency, a wallet is the software that interacts with the blockchain and allows you to send or receive digital assets. Wallets can be either hot, which means they are connected to the Internet, or cold, in which case they are not connected (cold wallets are usually considered to be the most secure way to store cryptocurrency assets).

6 Signs That Can Tell You if You’re Financially Ready to Retire

Do you find yourself thinking about retirement with just as much fear as excitement? If so, it’s not at all surprising; workplaces seem to be full of stories about people who stop working too soon and find themselves in dire financial straits during their retirement years. In fact, according to the 2020 Transamerica Retirement Survey of Workers (an annual study now in its 20th iteration), the possibility of outliving savings and investments is the most common retirement fear, with 40 percent of American workers citing this as their top concern.

Fortunately, there are plenty of signs that can help you determine whether you are financially ready to retire. As you think about the timeline for your retirement, note how many of the following points apply to you to give you a more accurate idea of just how prepared you are to stop working.

1. You’ve reached full retirement age.

Even if you’ve done very little retirement planning, you’re probably aware that the age at which you retire is directly connected to the amount of Social Security benefits you’ll be entitled to. Although you can begin receiving Social Security benefits as early as age 62, you aren’t eligible to receive your full Social Security benefit until you’ve reached what is known as full retirement age (this is age 66 for workers born between 1943 and 1954 and 67 for US workers born in 1960 and later). If you do choose to claim your benefits early, the monthly benefit you’ll receive will be up to 30 percent lower than the amount you’d be eligible for at full retirement age—a significant reduction that can have big implications for your retirement finances.

2. Your debts are paid off.

One of the most important things you can do to set yourself up for a financially secure retirement is to pay off most or all of your debt before you stop working. Things like mortgage payments, car payments, and credit card interest can eat into a fixed income fairly quickly, not to mention the fact that these debts reduce the buffer you have available to deal with any unexpected financial emergencies.

3. You’re not financially supporting a dependent.

If you’re providing financial support to your children, parents, or both (15 percent of middle-aged adults fall into this last category, according to Pew Research Center), it may not be financially feasible for you to stop working just yet. A financially secure retirement assumes that, to a certain extent at least, you’ll be able to downsize and reduce some of your costs. However, this is extremely difficult to do if you’re responsible for expenses like college tuition for one or more kids or health-related costs for elderly parents. Furthermore, retirement plans tend to focus on individuals or couples only, and they don’t typically take into account the need to provide financially for other parties.

4. Your current income is (more than) enough for your needs.

Unless you’re extremely well prepared for retirement, your income is likely to take a hit as soon as you stop working (as suggested by many retirement planners and financial advisors, a good rule of thumb is to expect your retirement income to be about 75 percent of your working income). The assumption here is that this reduced income will be offset by the corresponding loss of other costs, such as retirement plan contributions, saving for a child’s education, or commuting. However, if you find that your current income is only just adequate for your needs, you may not be able to make ends meet effectively when that income is reduced by 25 percent, even if some or all of those previously mentioned costs are eliminated.

5. You don’t foresee any major expenses in the near future.

Retirement planning is all about thinking ahead, so it only makes sense to hold off on retirement until you’ve addressed any major anticipated expenses. For example, does your home need a new roof? Are you thinking about purchasing a vacation home or a new car? It’s best to deal with these kinds of expenses before, rather than after, you stop working. Larger expenses can add up quickly, and if you’re withdrawing funds from taxable accounts to pay for them, it can have a significant impact on your portfolio that can, in turn, affect your retirement income.

You and your spouse are on the same page.

If you have a spouse or partner, your retirement will have just as big an impact on them as it will on you. It’s therefore essential to share your plans with your spouse and have an open conversation about what your retirement will mean for you both, particularly in financial terms. Points that are helpful to discuss together include how your spouse will be affected by a reduced income, whether your spouse will need to work longer to cover household expenses, and what your spouse’s own plans are for retirement.