A Look at the Evolution of Cryptocurrency

Recently, cryptocurrency has moved into the spotlight. Nearly everyone has heard of cryptocurrency at this point, and many have developed an understanding of some of the aspects of how it works. Most have heard of Bitcoin, and even more have heard of other alternative cryptocurrencies that exist today, such as Litecoin, Ethereum, and Ripple. While many people have become familiar with cryptocurrency, it often seems as though these virtual currencies came out of thin air and suddenly burst on the scene. The truth is that these digital coins had a colorful history prior to becoming more widely known.

The Potential to Transform the Financial World

While the innovations used to produce cryptocurrency are still relatively new, this technology has significant potential to change the financial world as we know it. Often, it has been viewed as a positive development that could become a significant part of our future. The earliest ideas for a digital currency emerged in the 1980s, with many developers and other innovators proposing concepts for a form of currency that would exist strictly in the digital sphere. While none of these ideas ever came to fruition, they did inspire continued investigation into making such a currency happen.

By the 1990s, several potential digital currencies were developed, coinciding with the general tech boom at the time. Systems that were developed included DigiCash, Beenz, and Flooz. It is important to note that all of these early cryptocurrency systems chose to use a Trusted Third Party system. What this means is that the companies behind these various cryptocurrency systems were used to verify and facilitate transactions.

The Emergence of Bitcoin


Many years later, in 2008, a white paper was published under the alias of Satoshi Nakamoto. While the true identity of Satoshi Nakamoto is not known—and it is possible that it could be a single programmer—most believe that a group of programmers operates under this alias. A white paper is a type of technical document that is created to explain a scientific project of some kind. In this case, the white paper was titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” Around the same time that this paper was published, the domain name bitcoin.org was purchased, and the software used to mine Bitcoin was also released for the first time. By the following year, 2009, Satoshi Nakamoto sent some Bitcoin to another person, effectively launching the first digital currency.

What Makes Bitcoin So Unique?

The primary difference between the way that Bitcoin worked and the attempts at earlier versions of cryptocurrency was demonstrated in its use of a decentralized network to verify transactions, bypassing banks and other third parties. The decentralized network made for a more secure process and a true person-to-person payment method. The updated level of security solves a problem that has been present ever since the first digital currencies were developed. In order to prevent the possibility of duplicating transactions, a new type of transaction ledger emerged: a distributed network.

While the modern-day distributed networks were created in the 1960s and 1970s, using them for verification purposes in a transaction ledger is what makes the blockchain technology that forms the core of Bitcoin so unique. Unlike traditional methods of processing credit card payments—in which one computer on a distributed network is responsible for the verification of financial transactions—with Bitcoin, the blockchain technology distributes the responsibility for verification across the entire network.

For security purposes, this makes it nearly impossible to duplicate or change transactions, as the information is contained and verified across the entire network in multiple locations. Every block on the hypothetical chain contains information about financial transactions, along with a unique identifier, as well as the information contained on every other block on the chain before that one. It is this method of distributing information and verification among the distributed network that helps to make Bitcoin secure.

Other Coins

After Bitcoin burst on to the scene, other types of cryptocurrency soon followed, giving us currencies such as Litecoin; Ethereum; Ripple, Dash, and even Theta, which is a potential game-changer in the market of skyrocketing data and video demand. Today, there are more than 2,000 different types of altcoins on the market that people can buy and sell in various marketplaces, as well as use as an investment or to make purchases. As for the future of digital cryptocurrencies? While it’s difficult to say what the future will hold exactly, it certainly seems as though these digital forms of payment may indeed be around for the long haul.  For the speculative or aggressive growth portion of someone’s portfolio, a smattering of cryptocurrencies could yield great results over time.

What You Need to Know about the First Meeting with Your Financial Planner

When it comes to your finances, there is a significant amount of planning involved if you want to meet long-term financial goals. It is for this and other reasons that many people choose to work with a financial planner to help them establish and achieve their goals.

Financial planning isn’t just for those who are already wealthy, either. In fact, you’d be missing out if you dismissed the idea of a financial planner simply because your net worth isn’t extremely high. Planning your finances is part of what can help you achieve that wealth, so getting started with a financial planner could be the best thing you ever did for your own personal finances.

If you’re meeting with a financial planner for the first time, there are a few things you should know, and a few things you should remember to bring with you. Here’s what you need to know:

Set Goals before You Go

Finance planning

Even before you decide to hire a financial planner, your first move should be to establish goals for yourself. You could create goals for different categories, including short and long-term goals. This can help you with deciding exactly how to divide up your finances. Long-term goals might include buying your first home or saving for retirement, while short-term goals could be as simple as paying off some excess credit card debt.

Another approach is to think about what you would like your finances to look like in one year, five years, and then ten years from now. Whichever method you choose, the important thing is to be clear with yourself about what you want to achieve, that way you can give your financial planner an idea of how to get started.

Bring These Financial Documents

Probably the most important document you can bring along to your first appointment with your financial planner is your tax return. Tax returns are a good source for your financial planner to see the full picture of your finances, including income, deductions, medical issues, mortgages, etc.  Most planners will also want to talk with you about your future tax outlook, especially if you are close to, or in retirement, as there are several strategies and steps that can be taken to improve your future tax situation, and potentially insulate you from any future tax increases.  

You will also want to bring any recent statements for your accounts. This includes any retirement accounts (401(k)s, IRAs, etc.), bank accounts, life insurance policies, mortgage accounts, and any debt statements. It’s important that your financial planner is able to get an accurate picture of your finances, both with your income and your expenses.  Also, recent Social Security benefit statements and pension estimates, if applicable, are important items for any projected retirement income planning.

This full picture, including all debt and spending habits, will help your planner see where your money is going now, and help you to find other places you can put your money to help you achieve your goals. Knowing your debt and income will help them make appropriate recommendations for your situation.

Bring a Budget or Be Prepared to Create One

If you have a budget already, make sure you bring it. However, if you don’t yet have a budget in place, bring your credit card and debit card statements and your bank statements. That way, your financial planner can get a sense of how your money is being spent now.

By looking through these documents, they can help you create a budget that will work for you in your current financial position and that will help you reach your financial goals. A good budget will include your fixed and variable expenses and take into account savings goals for the future. But in order for it to work for you, it needs to be practical and realistic.

For example, deciding to cut back on your amount of takeout for the month is more realistic than cutting it from your budget completely. You will be more capable of sticking to your budget if it realistically reflects your current situation and values.

Interview the Planner

Choosing a financial planner is an important decision. You should interview two or three financial planners before choosing one. Your financial planner should make you feel comfortable enough to share information about your life and finances, and you should feel confident in their credentials and decision-making.

It is probably best if your financial planner has a similar investment strategy as you. It can also be helpful if they often work with clients in your position. A planner specializing in retirees might not be the best choice if you are in your early twenties and just starting to establish your finances and goals. Likewise, someone working mostly with young couples working to buy their first home might not be a good fit for a couple ready for retirement.

Meeting with a financial planner is your opportunity to ask questions. Find someone who is sympathetic to your financial situation and who has practical ideas for helping you achieve your future goals. This will become an important relationship for you, so you will want someone you trust and have confidence in to help you in your financial journey.

A Look at Cryptocurrency as an Investment

Cryptocurrency is swiftly becoming a well-known aspect of our daily lives. Many people expect that it will only become more ubiquitous in the future, potentially evolving into a viable “digital money” alternative to physical currency.

As it grows in popularity, people are looking at new ways to incorporate cryptocurrency into their finances. For many people, cryptocurrency presents a new opportunity to add diversity to their investment portfolios, even including it in their retirement savings.

Perhaps you have been considering adding cryptocurrency to your own retirement portfolio. Here is a bit more information about what you need to know before getting started with cryptocurrency investments.

There Are Many Different Types of Crypto Currency

There are a number of different types of cryptocurrencies available, with more being developed every day. Some of the most well-known varieties of cryptocurrency today are Bitcoin, Litecoin, and Ethereum, but there are hundreds more available as well.

Though blockchain technology and Bitcoin are very closely related, not every cryptocurrency on the market uses a blockchain. However, most of them do use some form of a decentralized ledger and cryptography to prevent against fraud.

Before choosing a cryptocurrency to invest in, be sure you do your research so that you understand just how your chosen cryptocurrency works and what it was created to do. Different cryptocurrencies have different purposes, and it is always wise to stay as informed as possible about your potential investments.

Why Invest in Cryptocurrency?


So, why would you choose to invest in a cryptocurrency anyway? Most financial advisors would encourage you to diversify your portfolio in order to get the most out of your investments. That is because putting all of your finances in one asset class can be a recipe for disaster if that particular opportunity goes south.

Suppose all your money is invested in just one stock on the stock market. What happens if the market takes a downward turn and your stock begins to lose value? You could end up losing everything, and many do if they have not diversified their portfolios. Similarly, what if you invest exclusively in stocks and there is a stock market crash?  Different asset classes can fall asleep and underperform for extended periods of time. For example, stocks regularly go through a “lost decade” or more.

Financial advisors typically suggest a mixture of stocks, bonds, mutual funds, ETFs, and other types of investments, such as precious metals, for the most well-rounded approach to investing. When you use this diversification strategy, you likely won’t lose as much money in the event of a market downturn.

Cryptocurrencies are yet another strategy you can use to diversify your investments. If you’re looking for a new type of investment, then purchasing some cryptocurrencies might be worthwhile.

Remember though, that just like any other type of investment, it’s important to approach cryptocurrencies with caution. Never invest more money than you can afford to lose, as it’s nearly impossible to predict how any one investment might perform.

It can be tempting to put a lot of money into cryptocurrencies, especially in light of the memories of overnight millionaires that invested in Bitcoin early. Though you might be hoping for a repeat of that scenario, it’s not likely. Keep your investments to an amount you can handle losing if it goes badly.

Getting Started

Once you’ve decided to invest in cryptocurrencies, you may be wondering how to go about purchasing them. There are a few options that can allow you to buy different cryptocurrencies. The most popular way to purchase cryptocurrencies is through a cryptocurrency exchange.

Many different exchanges exist, and most do charge fees for purchases or withdrawals, often a percentage of the purchase price. Check around to different cryptocurrency exchanges to find the options that work best for you.

If you are looking for a specific cryptocurrency, know that not all exchanges carry all types. Be sure to double check that the cryptocurrency you are hoping to purchase is offered before joining an exchange.

You can also go through a traditional broker to purchase cryptocurrencies, though those are not as common yet as cryptocurrency exchanges. The first investment broker in the mainstream that allowed for the buying and selling of cryptocurrencies was Robinhood, though more now offer that service today.

Robinhood charges no fees for trades in cryptocurrencies, just like in its stock-trading platform. Tradestation and eToro are two other options. Many other traditional brokers have announced plans to start offering cryptocurrency trades in the future.

If you want to buy and hold cryptocurrencies in an IRA or ROTH IRA, you will need to find a custodian who will allow or offer that as a choice.  At this time, the larger IRA custodians, such as Fidelity, Vanguard, Schwab, and TD Ameritrade do not offer cryptos as an investment choice. There are a number of so-called “Self-Directed IRA” custodians who do, however.

After purchasing your cryptocurrency, you will need to decide how you’re going to store it. Typically, people store cryptocurrency either in hot or cold wallets. Hot wallets are much easier to access but are generally considered to be less secure than cold wallets. Many exchanges that host hot wallets have been vulnerable to hackers in the past.

A hot wallet stores cryptocurrency with an exchange or third-party provider, accessible easily through the internet or through a mobile app. Cold wallets, on the other hand, are small portable devices that are encrypted, allowing you to download, store, and carry your cryptocurrency with you.

Cryptocurrency could be a great addition to your investment portfolio but consider carefully before making your purchase.

Steps in the Financial Planning Process: What You Need to Know

We spend a lot of our lives planning, from trips and vacations to how to decorate the living room. But there’s one area you should be focusing on if you haven’t already, especially if you want a secure financial future: financial planning.

You may be thinking that financial planning is only for the very wealthy, but you’d be wrong. A financial plan can help anyone achieve their financial goals, both for now and for the future. If you’re interested in creating a financial plan, you should know a little about the process.

Certified financial planners (CFPs) practice according to guidelines set up by the Certified Financial Planner Board of Standards, following a code of ethics and standard practices. For most certified financial planners, getting a financial plan started for a client involves these main steps:

1. Identify Your Goals

The first step of any effective financial plan is to establish goals for yourself. Are you saving for retirement? Trying to pay down debt? Purchasing your first home? All of these can contribute to how you see your future finances and help you or your professional financial planner create a workable plan for you.

Goals Target

If you do decide to work with a professional, this is also the stage at which you will establish your relationship. You will talk with your financial planner about your goals, financial views, and anything else that might be relevant to helping you achieve financial success.  It is important to have the eventual plan in writing, so that you have “a track to run on” so to speak, and so that changes can be made to the base plan over time, as your personal circumstances change.

2. Gather Data

Once you’ve established some goals, it’s time to gather data. This can include several aspects of both your personal and financial information. You’ll need to tally your income, expenditures, and any assets or liabilities so you or your financial advisor can get a good picture of the current state of your finances.

Additionally, this is a chance for you to better understand your feelings about investments and money management. What is your personal risk tolerance? What’s your policy on investments? All of this information will help you to rank your priorities appropriately, making it easier for you to decide where to allocate your funds.

3. Analyze the Data

After collecting all that data, it’s now time to analyze it and figure out what it means for your finances. For example, if you are planning on purchasing your first home, you can take a look at your current financial situation and the amount you are saving right now.

With a timeframe in mind, you can calculate the end amount you will have for your down payment. Is it enough? If your projections don’t show that you will meet your goals, you can make adjustments!

4. Develop the Plan

Now that all of these introductory steps are completed, it’s time to create an actual plan for your finances. If you are working with a professional financial planner, they will help devise solutions that can work best for achieving your own specific financial goals. The key point in this phase is the word ‘develop,’ since there will be adjustments required throughout this process.

You will need to be able to adapt your plan depending on your individual situation. There are many options and numerous variables that must be considered, and not every strategy will work for every person. Make sure you leave room to keep your plan flexible as your needs change; that way, if your goals shift, you can adjust your plan accordingly.

5. Implement and Monitor the Plan

Once your plan is all set and ready to go, it’s time to implement! For many people, putting a new financial plan into practice can be the most challenging aspect of the process. Like any new endeavor, it will take dedication and discipline, but the efforts will be well worth it as you get closer to your goals.

Additionally, it is important to remember that as you move through life, your situation (and therefore your goals) may change. Financial planning must include the monitoring of your finances and personal situations. Otherwise, you might not be getting the most out of your plan.

When working with most professional financial planners, monitoring and adjusting of your plan will be considered a standard part of their practice. But if you are working on your own, then you need to ensure that you make any necessary adjustments.

Whether you work on your own or with a professional, you can use these steps to help you create a financial plan that can work for you both right now and in your future. If you haven’t started planning for your financial future yet, get started today.

Self Employed? You Need to Know about Your Retirement Advantage

When it comes to retirement, most Americans today have some form of defined-contribution plan for their retirement, typically through their employer. The most popular retirement plan today is probably a traditional 401(k) plan.

Self-employed Americans, on the other hand, don’t have an employer to sponsor a retirement plan for them. In some cases, they may work as independent contractors, or they may be the sole proprietor of their own business. In both of these situations, there’s no built-in retirement plan for them to take advantage of.

Though this might seem like a disadvantage at the outset, the truth is that self-employed people may have an unrecognized advantage when it comes to saving for their retirement. Here are a few of the options self-employed individuals have for retirement savings. You may find that they offer some extra benefits you can’t find in an employer-sponsored plan.

Options for Self-Employed Individuals

When you work for a company, you typically have just a few choices for retirement accounts—usually an employer-sponsored 401(k) or Roth 401(k). You can also open an individual retirement account (IRA) or Roth IRA on your own.

401(k) plans are generally a great deal, especially when your employer matches your contributions. However, both traditional and Roth IRAs come with income and contribution limits. This is especially true if you or your spouse also have an employer-sponsored 401(k) plan.

However, when you are self-employed or running a sole proprietorship as your own boss, you may have more retirement plan options. These are a few of the most common options for self-employed Americans.

home business

Solo 401(k)

If a 401(k) is what you are most interested in, no need to worry: there is a solo 401(k) option that is ideal for someone operating a sole proprietorship. Remember that employer matching contribution option with a traditional 401(k) plan? It still applies to the solo 401(k).

As sole proprietor, you can contribute to your solo 401(k) in a dual capacity, as both employer and employee. In your capacity as employee, you are allowed to contribute the same amount that you would be able to contribute under a traditional 401(k): up to $19,500 or $26,000 if you’re older than 50.

In addition to your contributions as an employee, you can contribute additionally as an employer. The limits for employer contributions depend on a somewhat complex formula; it’s advisable to work with an accountant or financial planner to help you  come up with the best contribution plan for your situation.  

The great part about a solo 401(k) is the flexibility. If you have a particularly good year, then you have the opportunity to put quite a bit away for your retirement. Conversely, in a bad year, you can hold back on your contributions.


Another option for self-employed people is the Simplified Employee Pension IRA (SEP IRA). SEP IRAs are quite simple to set up and continue operating, so they can be a good option for self-employed individuals or sole proprietors with a few employees.

With a SEP IRA, only an employer can make contributions, so you don’t have the dual capacity of the solo 401(k) allowing you to contribute in both capacities. With no annual funding requirement, you can skip a year if you need to, or contribute all at once at the end of the year. Your contribution limit is $57,000 or up to 25% of your net self-employed earnings.

Be aware that if you have employees and you contribute to your own SEP IRA, you will also have to contribute an equal percentage to each of your eligible employee’s plans that year as well. If your sole proprietorship starts adding employees and growing, that might end up costing you quite a bit extra.

Health Savings Accounts (HSA)

Though HSAs are intended as means of saving for medical expenses, they can also act as a retirement account if you choose. Contributions to HSAs are pre-tax and the money in them grows tax-deferred, like a 401(k) or an IRA. Though HSA funds are meant to be withdrawn for medical expenses, you are not required to use them for that purpose. Rather, you can let the money accrue year after year and eventually use it during your retirement if you so choose.

Withdrawals made in retirement for medical reasons are tax-free, but you’ll owe income taxes on withdrawals for non-medical purposes. In order to qualify to open an HSA, you must first be covered by a high-deductible health insurance plan. If you qualify, you can contribute up to a maximum of $7,100 per year for a family plan or $3,550 per year for an individual plan.

Remember: as a self-employed individual, you may have more flexibility for retirement savings than you think! Use these options as a starting point, and consult with a financial planner to find the best fit for you and your retirement needs.

What You Need to Know about Retirement Planning Options

Even if you are young and not currently thinking about retirement planning, know that you should be. Research shows that the earlier you can start saving for your retirement, the better off you will be and the more likely it is that you will meet or exceed your retirement savings goals.

There are several different types of retirement savings accounts, some sponsored by employers and some you can open on your own. Your best chance to meet your savings goals is to take advantage of these accounts.

If you haven’t yet started to think about retirement, here is a brief look at some of the common types of retirement accounts:

401(k)s: The Most Popular Option

401(k) plans and their equivalents, 403(b)s and 457(b)s, are some of the most popular retirement options out there. Most commonly, 401(k)s are offered through an employer. These types of accounts allow you to contribute a portion of your paycheck pre-tax in order to save for your retirement.

The pre-tax contributions may also enable you to lower your taxable income during your working years. You won’t pay taxes on those contributions until you begin taking withdrawals in retirement. But be careful: if you take any withdrawals on your 401(k) before you reach age 59 1/2, you may be subject to a 10 percent penalty along with federal and state income taxes.

Another common benefit of 401(k) plans is employer matching of contributions. Employers often offer employees a matching contribution, sometimes as high as 6 percent. That means any employee taking part in a 401(k) option that allows employer contributions should try to at least contribute up to the match. The matching employer contributions essentially amount to free money added to your retirement savings, a true advantage.

However, some employer contributions require ‘vesting’ for a certain number of years. What this means is that any contributions added to your retirement account by your employer through a matching contribution program can’t be taken with you if you leave the company prior to the stipulated time period. Your own contributions are always yours, however.

There are many different types of 401(k) accounts, including 403(b)s offered to nonprofit workers and educators and 457(b) plans offered to government employees. Self-employed individuals can also contribute to a 401(k) with the Solo 401(k), providing them with the benefits of this type of retirement savings account without needing it offered through an employer.

IRAs: An Additional Retirement Option


An IRA, or individual retirement account, is another common option. It is popular among those who do not have access to an employer-sponsored 401(k) plan or those who have maxed out 401(k) contributions and are looking for an additional option. There are two primary types of IRAs: traditional and Roth. A traditional IRA allows you to contribute funds pre-tax, helping you lower your taxable income during the year (as long as you don’t also have a 401(k) account).

Roth IRAs allow you to make contributions with after-tax income, but in retirement, any distributions you take are not taxed. This can be beneficial if you expect to make more money (and therefore end up in a higher tax bracket) during retirement. The Roth IRA can serve as a steady non-taxed source of income during retirement. You can also take early withdrawals from your Roth IRA without a penalty, instead of needing to wait until you reach the appropriate age.

It is possible to have both a traditional and Roth IRA at the same time, so long as you don’t exceed the contribution limits of $6,000 dollars annually between the two. Either IRA plan, traditional or Roth, allows you the opportunity to invest in a variety of different options, like bonds, stocks, mutual funds, and ETFs. You can manage these investments yourself or hire a financial planner to help you manage those investment options.

Start Saving Today

Whichever type of plan you decide to use, success in saving for your retirement depends on getting started as soon as possible. If you aren’t already saving for your retirement, you should start as soon as possible. Check with your employer to see if there are retirement savings benefits offered through your company and look into other options (like IRAs) if your employer does not offer any type of retirement plan.

Self-employed individuals also have options for retirement savings, like Solo 401(k) or SIMPLE IRA plans. So, don’t feel you can’t start saving for your later years just because you don’t have a traditional 9 to 5 job.

There are also a number of options available outside the 401(k)s and IRAs if these don’t work for you. Some of those other options include cash balance pension plans (which allow you to save large amounts of money for retirement, upwards of $100,000 a year), non-qualified annuities, and even health savings accounts. Choose a plan that works for your needs and get started saving for retirement today!

Questions You Need to Ask Your Financial Planner

Though many people view a financial planner as a luxury only necessary for the extremely wealthy, the truth is that a financial planner can help almost anyone achieve their financial goals and grow their finances. If you’ve been considering working with a professional financial planner to improve your financial situation, you might be wondering how to go about choosing the right planner for you.

You’ll want to speak with a few different professionals to find the right person that can help you achieve your financial goals now and help you prepare for life shifts like retirement later. There are some things you will need to know about their background and approach to financial advising, so read on for a few questions you can ask a potential financial planner to help you find the right fit.

Ask about Fiduciary Duty

This is a very important question to ask your potential financial planner. Financial professionals that must abide by the fiduciary rule are considered fiduciaries, and they are required by law to act in the best interests of their client.

Nonfiduciaries, by contrast, are simply told to abide by a suitability obligation. This means any financial advice they give must be suitable, but they are not required to put a client’s best interests above their own. Financial advice that you get from a nonfiduciary may be influenced by commissions or other factors.

To get the best advice for you that is not influenced by any outside obligations or conflicts of interest, it is best to look for a true fiduciary when hiring a financial planner.

How Does Your Financial Planner Get Paid?

You must understand how your financial planner is paid. Ask about their payment structure and try to stick with fee-only planners if possible. Fee-only planners can charge a percentage of the assets they are managing (1 percent is common), an hourly rate, or a flat fee. Advisors and planners who work on a fee-only basis do not receive any commissions for recommending products, so it is easier to avoid conflicts of interest this way.

Don’t confuse fee-only with fee-based advisors; fee-based advisors still receive a commission for selling certain financial products.

Who Is Their Ideal Client?

Financial planners and advisors can have several specialties in different areas. When working with a planner, it is in your best interest to find a professional who has experience in an area that is important to you. For example, a young couple looking to pay down student loan debt and save for their first home may not want to seek out financial planners who mainly work with clients nearing retirement. Ask any potential planners to describe what an ideal client would look like for them to help you determine if their expertise aligns well with your goals.

Ask Them to Explain a Financial Concept

planning goals

A financial planner is someone you will likely work with for a long time. One good way to see if you will be comfortable working with them for the long-term is to ask them to explain something to you. If the explanation they give you is too complex or difficult for you to understand, then that is a good indication you should be looking for someone else. The person you work with to help you make financial decisions should be able to explain these concepts to you easily and in a way that you can clearly understand.

Do They Have Any Disclosures on Their Record?

Financial planners are there to help you make important decisions about your financial future. If they or their firm have faced any criminal, regulatory, or disciplinary actions of any kind, then that is something you definitely need to know about. To double-check, you can look over the firm’s Form ADV, which will contain these types of disclosures.

You can access that information through the SEC’s Investment Advisor Search tool (on the website for the US Securities and Exchange Commission) in an online format, or you can also request copies of the written paperwork through an SEC branch.

Ask about Their Investment Strategy

The general investment philosophy of the firm is something you will also want to ask about early on. It’s important that they can explain their investment philosophy in terms you can easily understand.

You’ll want to have an advisor that has a philosophy that aligns with your own; this will make it much easier to stick with the plan when the market isn’t going well. Some important points would be types of investments they recommend, diversification, growth versus value, and trying to time the markets. Market timing is when financial advisors try to predict what’s going to happen and recommend shifts in your portfolio based on simple hunches. This could cost you significantly, since timing the market incorrectly can have big consequences.

Important Points You Should Know about Roth IRAs

Nowadays, most people cannot count on Social Security to provide enough income during their retirement years. They will need to think strategically about the types of accounts they will need once they retire and make sure they set themselves up for financial security.

The tax-advantaged retirement accounts generally come in two different setups. The traditional account, such as an individual retirement account (IRA), involves pre-tax income that grows without any tax implications. However, once the money is withdrawn from the account in retirement, you will pay income tax on it. The other primary option is a Roth account, such as a Roth IRA, which involves post-tax money with no tax implications for withdrawals.

The Roth IRA, named after William Roth, was created in 1997. The main advantage of this account is that it allows deposits to grow without any sort of taxation. Also, Roth IRAs have many advantages over traditional accounts. For example, contributions can be made at any age as long as you have earned income, and account holders face no required minimum distributions, which means the IRA can be held indefinitely.

Roth IRAs can be funded via regular or spouse contributions, conversions, rollovers, and transfers. Contributions must be in cash rather than existing securities or assets. The limits to contributions are the same for Roth IRAs as traditional accounts.

Some of the Key Benefits of Opening a Roth IRA

One of the truly unique features of a Roth IRA is access to funds. Account holders have easy access to the contributions they make to a Roth IRA, which is not the case with traditional accounts.

If you put $5,000 in a Roth IRA and the account later grows to a value of $10,000, you can withdraw the initial investment of $5,000 at any time without paying any sort of income tax or penalties. With Roth IRAs, you can always access contributions before tapping into investment gains, which is not possible with a traditional IRA or a 401(k). With these two accounts, withdrawals always trigger income taxes and further penalties depending on age. For this reason, a Roth IRA can provide you with easy access to money and liquidity that is not possible with other retirement accounts.

Many people use Roth IRAs for tax savings while in retirement. Once retired, you can withdraw from both contributions and investment gains without paying any sort of income tax. A Roth IRA does not increase the tax liability or tax rate for retirees, and withdrawals have no impact on Medicare premiums or Social Security taxes. The tax-free nature of the account can help you save money in retirement. For example, if you wanted to purchase a new car in retirement through a traditional account, it would involve paying taxes on the withdrawal on top of sales tax and other fees. If you have the money for the purchase through a Roth IRA, you could save a great deal on tax liability.

The unique tax situation of a Roth IRA can also allow you to save money on taxes in retirement. Think of opening a Roth IRA as diversifying your income options in retirement so you can be more strategic and reduce your tax liability. A Roth IRA can keep you from entering a higher tax bracket and owing more money to the government.

Imagine a year in which Social Security and distributions from tax accounts bring you very close to the line for a higher income tax bracket. For the rest of the year, you could take money only from your Roth IRA, which has no tax implications, and maintain a high quality of life without owing more than expected in taxes.

How to Open and Fund a Roth IRA

A major downside to the Roth IRA is that it is not an employer-sponsored account, so you will need to be proactive about creating an account. However, doing this due diligence is just a limited investment of time. The IRS has permitted brokerage companies, credit unions, loan associations, and banks to offer IRAs. Most people choose to open an IRA with a brokerage.

Also, you can open a Roth IRA at any time, but the contributions for a given tax year must be made before the deadline for filing taxes, which is usually April 15 of the following year. However, you can still contribute to the prior year up until that deadline. Importantly, extensions granted for filing taxes do not apply to Roth IRA contributions.

Choosing the right financial institution is key as not all IRA providers have the same investment options. And while some providers may have many different options, others may be much more restricted.

Furthermore, virtually every institution will have its own fee structure, so it is important to review this information. Fees can have a big impact on the overall returns if they are too high. Investors who like to manage their accounts actively should look for providers with low trading costs, while those who prefer a hands-off approach should make sure there is not an account inactivity fee. Another piece of information to look at is the minimum account balance, which can be high in some cases.

Getting Started with Financial Planning, No Matter How Much Money You Have

Though many people consider financial planning as something only necessary for those with a substantial amount of wealth, the truth is that anyone can benefit from a good financial plan. Financial plans are a way to secure your financial future, build wealth, and afford large purchases or emergencies without going into debt.

You don’t need to be wealthy right now to put a good financial plan into place; you only need to care about stabilizing your financial future. Here are a few tips to help you create and maintain your own personal financial plan today.


What Is a Financial Plan?

Simply put, a financial plan is a complete picture of your current financial situation, the goals you have for your financial future, and the plans you have to meet those goals. Your financial plan should include accurate figures for your savings, cash flow, investments, debts, mortgage, insurance, and any other components of your financial assets and liabilities.


Anyone can create a financial plan for themselves, and it’s never too early to start working to achieve financial independence. Many people assume that without substantial wealth to their name, a financial plan is expensive or simply not worth the time and energy, but that couldn’t be farther from the truth. A financial plan is certainly useful for managing wealth, but it can also help you build that wealth by helping you gain control over your money and set and achieve realistic financial goals.


Understanding Your Financial Plan

An important thing to remember when you are putting together your own financial plan is that this is not a “one and done” task. Good financial planning requires reassessments and readjustments of your goals as your financial situation changes over the years. You must be willing to sit down every few years to reassess your assets, liabilities and goals, making adjustments as needed.


Have an Accurate Picture

The first step on the road to creating your financial plan is to have a clear and accurate picture of all your finances right now. Start by assessing where your money really goes—track all your expenses for a month or two. What you find may surprise you! Be sure to also include quarterly, yearly, or other non-monthly expenses.

Once you have an accurate picture of your spending habits, you will be able to make decisions about where cuts can be made and how you can redirect your money toward your financial goals. Then, you can draw up a budget that reflects this.


Plan for Emergencies

The most important thing you can do to establish your financial plan is to start out with an emergency fund. Sudden expenses, like medical bills, car accidents, and other sudden costs, can wreak havoc on your finances if you don’t have an emergency fund set aside. It’s ok to start out small by contributing as little as $10 per week—anything is better than nothing.

Conventional advice says to save three to six months of expenses for your emergency fund. Where you fall on this spectrum depends on your risk of losing your income, your access to other sources of financial support (like a relative who could bail you out), and whether you’re in a single or double-income household. If you work in an industry with high turnover and you don’t have a partner or family member to fall back on, you may want to create a fund that will see you through six months.


Manage Any High Interest Debt

One of the most difficult aspects of personal finance for many people is high interest debt piling up. If you want to gain control over your finances, a good way to start is by focusing on paying down those high interest debts, like credit card debt, title loans, rent-to-own payments, or payday loans. If these high interest debts are holding you back, it might be worth your time to consider a debt consolidation loan or other debt repayment plan to get a handle on them. It’s easy for debt to spiral and eventually cost you more than two or three times what you originally owed as interest piles up.


Define Your Goals

Goals in financial planning generally fall into two main categories: short or medium-term goals (think purchasing a house, saving for college, or funding a wedding) and long-term goals (funding your retirement, primarily). As you start creating a financial plan for yourself, write down specific goals for you and your family. These may change over time, but having a concrete idea of what you’re aiming for is helpful.

Consider also setting up automatic savings transfers so that putting money aside is easier. Many financial advisors suggest paying yourself first in order to meet your goals; that means before you pay any bills, put a percentage of your paycheck aside in your savings account. You’ll be less tempted to decide you just don’t have enough to save this month if it goes into savings before you even see it.

Remember, it’s never too early to start putting money aside for retirement. If your employer currently offers matching contributions for a 401(k) plan, take advantage of this as much as possible. Those matches essentially constitute free money for your retirement, so it is definitely something you want to take advantage of now.

Financial planning is a great way to ensure your personal financial future, whether you’re wealthy or not. Start planning for you and your family today!

This Is What You Need to Know about Investment Risk in Retirement

When investing for retirement, risk tolerance generally changes over time. Individuals who are decades away from retirement typically accept a larger amount of risk for the chance to achieve significant growth, which is one of the benefits of saving for retirement earlier rather than later.

As individuals get closer to retirement, they tend to get more conservative to protect their nest egg from market fluctuations. With decades to spare, individuals can wait out lows, but this is not always possible in retirement when people may need immediate access to money.

Prior to retiring, individuals should take the time to look at their investment risk and make sure they are not jeopardizing their ability to make ends meet in retirement.

The Issue of Investment Risk during Retirement

Balancing investment risk in retirement has become a more complicated issue in the past decade or so. People are living longer than ever before and cost of living continues to increase. Many individuals are asking themselves how they can make their nest egg last for 30 years without taking on at least some risk during their retirement years to help those investments continue to grow.

At the same time, being too aggressive during retirement can mean losing big and possibly running out of money. The risk is greatest during the first few years of retirement. Taking a big loss at this point in time can cause issues for the rest of retirement and may even make it impossible to recover.

retirement investing

Because of this issue, some people minimize their risk in the years before and after retirement. Then, these individuals slowly increase investment risk to get the best of both worlds.

At the same time, getting more aggressive with risk later in retirement comes with its own complications. This situation is most frequently encountered by people who have not saved enough money to retire comfortably and need to play catch-up.

Individuals in this situation are likely to take losses much harder than gains, according to recent research. When people are unable to deal with losses in an acceptable manner, they may end up panicking if the market has a downturn and selling their stocks.

This is a losing strategy since it does not allow for normal recovery. Realistically, people should only accept retirement risk in retirement if they have the mental capacity to handle losses strategically instead of panicking.

The Decision of How Much Investment Risk to Accept

The decision of how much risk to accept in retirement is ultimately a personal one. Individuals need to consider how much they have saved and their projected budget for retirement. These two data points can help people figure out how much wiggle room they have financially.

People should view the amount they need from their investment accounts to meet annual spending projections the minimum level of productivity for those accounts. The amount of their nest egg needed to produce this amount should be protected from risk as much as possible. Any money in retirement accounts beyond that could theoretically be invested aggressively provided that people can deal with market fluctuations, since individuals would still have the minimum amount that they need to make ends meet.

The general rule of thumb is that people should never take on more risk than they need to meet their financial goals during retirement. However, there are situations in which increasing risk could make sense provided that the minimum monthly income is still met.

For example, some individuals want to build wealth to leave a legacy for heirs. In this case, goals will change over time. At the beginning of retirement, people in this situation want to have enough to maintain their lifestyle, but later they will want to build their wealth as much as possible.

These individuals often take more risks as they get older since they have enough to maintain their lifestyle and want to get as much as possible out of their investments. In this situation, it is still important not to invest so much that a market downturn could hinder the ability to cover monthly expenses.

The Other Option to Consider with Retirement Investing

Adjusting allocations during retirement is risky, whether that means increasing or decreasing the percentage of a portfolio in equities. People may find themselves forced to buy stocks when they are high or sell when they are low. For this reason, many financial advisors recommend keeping allocations fairly constant throughout retirement, but the decision ultimately depends on someone’s unique situation.

A safer way to invest in retirement involves adjusting spending rather than allocations. With this strategy, individuals change their spending based on market performance. If the market goes down, individuals can dial back their discretionary spending as a means of protecting their nest egg rather than changing their portfolio allocations.

Bear markets are temporary, but the losses incurred with selling off stocks during them are permanent. Adjusting spending is a way to avoid the panic impulse of selling off stocks and helps bridge the gap until market recovery occurs, at which point the losses will no longer matter. The other thing to keep in mind is that recessions tend to follow a bear market, so people may actually save money by postponing discretionary spending, such as vacations, and taking them later when it is actually cheaper to do so.

6 Important Questions Your Financial Advisor Should Ask You

Despite recent reports that just under half of all American adults can handle an unexpected expense of $1,000 or more, the majority choose not to seek outside financial help. In fact, only 17 percent use a financial advisor, according to a 2019 CNBC and Acorns Invest in You savings survey.

Many people who choose to handle their finances on their own make costly mistakes, such as simply guessing how much they would need for retirement and not saving early enough. In 2018 the National Financial Educators Council found that self-directed financial management mistakes cost the average American $1,230.

Working with a Certified Financial Planner® (CFP) can lessen the likelihood of these potential losses and help individuals and families strengthen their long-term financial situation. In 2019 Certified Financial Planner Board of Standards, Inc. examined consumer confidence regarding financial security in the face of a potential recession and found that 73 percent of respondents who worked with a CFP® felt more prepared now than they did during the financial crisis of 2007-08.

Finding a CFP® is an important safeguard to protect your assets, but it’s even more critical to find one who understands your unique financial situation and aspirations. When you’re looking for a CFP®, find one who asks these six questions.


“Can You Tell Me about Yourself?”

Your advisor should want to get to know you and what’s important regarding your personal life and retirement savings plan. One of the most efficient ways they can do this is by asking the aforementioned, open-ended question. This allows you, the client, to direct the conversation and relay information that you might not have even thought was central to a savings plan. For instance, if you own a business, your advisor might ask you to consider tax minimization or legacy planning. Beyond that, this exercise allows the advisor to know you and your family better, which, in turn, can help improve trust and forge a deeper, meaningful connection.


“What Made You Seek Independent Advice?”

Once your advisor knows more about you, they should attempt to gauge why you sought out independent financial advice. In doing this, they can get a better idea of where you need support and direct their efforts to ensure they meet your demands in these areas. Some people might simply not have the time to focus on their finances and require comprehensive help, while others need guidance in a specific area. Other reasons people hire advisors include a change in financial goals or family dynamic or altered tax status as a result of a recent move.

business advising

“What Are Your Goals?”

Many people look to financial advisors for assistance with retirement savings plans, but there is an abundance of other goals you might have concerning financial planning. By asking about your financial goals and objectives, your advisor can not only help you determine specifically what it is you intend on saving for but also implement a unique plan designed to meet those expectations. Some of the most common goals outside of retirement savings include education funding, estate planning, asset allocation, and major purchases.


“What Are Your Most Pressing Financial Concerns?”

While your advisor will work with you on a comprehensive wealth management plan, they must know your most pressing financial concerns so that they can be addressed immediately. For instance, if you are getting divorced or remarried, your advisor will be able to help you navigate concerns regarding the division of assets and investments and determine whether you have enough income to support various lifestyle choices.


“Where Do You See Yourself in Five Years?”

Financial planning isn’t only about creating a long-term strategy with the end goal of saving for retirement. As mentioned, people have many different financial goals and aspirations, some of which they may want to achieve within the next few years. A good advisor will ask you where you see yourself in five years to help create a comprehensive plan that might include expenses related to marriage, having children, or buying a house. They can even take into account factors such as debt and inflation.

“With debt and living expenses on the rise in much of the country, the importance of setting financial goals—and sticking to them—has never been greater,” noted First National Bank of Omaha executive vice president of consumer banking Jerry O’Flanagan.


“What Do You Expect out of This Relationship?”

The simple answer to this question is the fulfillment of financial goals and aspirations, but it’s also important for both you and your advisor to think about considerations that will help ensure a successful relationship. Before meeting an advisor, you should have an idea about what you expect from them, and, in turn, be clear and concise in voicing your goals and concerns. If you’ve never worked with an advisor before, consider past service relationships and what you did or didn’t like.

5 Things You Should Know Before Retirement

Planning for retirement can prove extremely stressful, as individuals are forced to prediction how much they will need in retirement. Even when individuals save proactively and create a detailed plan for their retirement years, they are bound to run into some surprises. Retirement is designed to be a time of relaxation and exploration rather than a source of constant stress. Research has shown that the majority of people find retirement to be different than what they had expected. Becoming aware of issues that have caught other people off guard is a smart way to prevent them from happening to you. The following are some of the most common aspects that retirees wish they had known prior to retirement.

1. Emergency expenses can wipe out savings.


Some people are shocked by how much emergency expenses can drain their savings. Everything from unexpected home repairs to car trouble can put significant pressure on your retirement income. One study found that less than 20 percent of retirees are adequately prepared to handle the costs of home repairs. Issues like broken furnaces or air conditioning units can cost thousands of dollars to repair and become serious financial problems, particularly for retirees who are still paying off their mortgage. People should look closely at their home in the years leading up to retirement to figure out what issues could arise and how much money would be necessary to fix them. Of course, preparing for all of these emergency expenses is not always possible, so it pays to have a significant emergency fund already created upon retirement. Ideally, it should be several times larger than the one that they maintained while still working.

2. Medicare does not cover long-term care.

Another aspect that some people may not understand are the limitations of Medicare. This plan has a number of holes that people should be aware of, including long-term care. Someone who has just turned 65 has a 70 percent chance of requiring long-term care at some point. Unfortunately, this type of care can cost a significant amount of money. Retirees can quickly go bankrupt when they require this type of care. One way to prepare for long-term care costs is through insurance. Although many young and healthy people do not think about purchasing long-term care insurance, the premiums are considerably cheaper when they are further away from retirement. Also, a tax break exists for purchasing this type of coverage. At the same time, the premiums can be quite costly, so it is important to factor this expense into savings and ensure that the overall health coverage is adequate.

3. Inflation can severely cut into your retirement income.

Many people who retire do not understand how significantly inflation can impact their overall income. Retirement planning needs to take inflation into account to ensure that people continue to have the money they need to live decades down the line. In retirement, inflation can disproportionately affect expenses, such as Medicare premiums, out-of-pocket health care costs, and long-term care costs. Overall, the cost-of-living increase for Social Security benefits has not kept pace with the increase in average cost in these categories, which means that people may need to rely more heavily on their investments over time. Even without the excess price growth in these categories, inflation can cause prices to double approximately every 20 years, which means that a retiree’s expenses will look very different at 85 than they did at 65.

4. Dividend income is not always stable or even safe.


Historically, retirees have frequently relied heavily on bond interest payments and stock dividends to finance their lifestyle in retirement. However, this strategy is not without risks, as a reduction in share prices can cause payments to decrease or companies to simply choose to cut dividends. Unfortunately, retirees may be surprised by the loss of dividends and find themselves in a difficult place if they do not have an alternate plan. In recent years, many of the most significant stock dividends have decreased precipitously, which makes this strategy less appealing for people who are nearing retirement. In truth, stocks that pay dividends can provide a great source of retirement income, although they must be balanced with other types of investments so that individuals are not seriously affected when their income decreases.

5. Working longer is not always possible.

Surveys have found that people who are currently working plan to retire at a much older age than has been the historical average. This finding may be related to the fact that people in general need more time to save in order to meet their retirement goals. While working longer is an admirable goal that can prove very beneficial for a number of different reasons, it is not always something that people can count on being able to do. Some people get laid off from jobs that they have had for decades and find it difficult to find a new one, while others may have health problems that preclude them from working. Even an apparently voluntary retirement can be the result of getting pushed out of the company through an early retirement package or a change in the workplace culture. People in this position can find jobs that are part-time and that often pay less in order to help bridge the gap to full-time retirement, although this itself can prove difficult and stressful.