Twin Rivers Wealth Management

Cash Flow Based Financial Planning

Thu, 30 Sep 2021 21:57:37 GMT

When it comes to financial planning, few things are as important as understanding your cash flows. Whether you are retired, or in the growth stage, it is crucial to know what income is entering and exiting your account. At Twin Rivers, we understand the importance of cash flow and offer financial planning to help you account for every dollar flowing in and out of your financial life, so you have accurate projections depicting your lifestyle.

It is crucial to understand the difference between liabilities and living expenses. Liabilities are debts that eventually fall off the balance sheet, allowing people to own assets without buying them with savings. Like a mortgage, once you pay it off the mortgage payments disappear from your cash outflows. Living expenses, like property taxes, are continuous. So even after paying off your mortgage, your property taxes continue.

Another significant difference between liabilities and living expenses is their growth rate. Most mortgages are fixed–meaning payments are always the same amount. The regular flat amount applies to many liabilities like car payments or business loans. Living expenses, on the other hand, fluctuate–typically rising with inflation. Financial planners should use reasonable growth rates for both adjustable-rate liabilities and living expenses in a financial plan. It takes time, but once all liabilities are properly built into the financial plan, financial planners should establish a living expenses figure.

We at Twin Rivers have tools to simplify establishing a living expenses figure. Your client website allows you to connect with most 3rd party financial institutions to gather information on your cash flows. There are no transaction capabilities through the website, and it is only used to scrape data from 3rd parties and organize it using our software. You can also limit what your advisor can see through privacy settings.

Once the 3rd party accounts are connected to your client website, the spending tool has many capabilities. First, we teach our clients how to organize, categorize, and set rules that simplify the process of establishing a living expenses figure and help distinguish between one-off cash outflows and ongoing living expenses.

Then, we look at our client’s spending history to determine a living expenses figure suitable for your financial plan. The process is often shocking to most people because they don’t realize just how much casual, everyday purchases add up over time. Some clients use the spending tool to understand more sensitive topics, like correcting poor spending habits.

Our job as financial planners is not to tell you how to spend your money. For some, however, knowing spending habits can help people reorganize their priorities. You can even set up a budget and create custom categories to understand how much you spend on different things. The categorization and budget tool is an essential feature for many people because it helps them follow the one golden rule in finance–spend less than you earn.

Whether you want to know how much cash flows out of your life or how you spend your money, this knowledge is helpful. The most valuable financial plans are cash flow-based because they accurately reflect the cash coming in and out and can be used for accurate projections in the future. If you would like to review your cash flows, learn how to use the spending tool, or discuss any other financial matters, please do not hesitate to contact your advisor.

SDBA – Actively Manage Your Retirement Plan

Thu, 30 Sep 2021 21:57:35 GMT

Have you ever seen the acronym SDBA in your retirement plan? It stands for “self-directed brokerage account,” which, if utilized, opens your retirement account up to a more extensive range of investment options. If you have a 401k, 403b, or a 457 plan, you may want to sign in to your retirement plan to check for the SDBA link; if you find this, contact your advisor right away.

The SDBA allows an employee to open up a brokerage window in their retirement plan and invest the money outside of the core retirement plan’s investment options. Typically, an employer’s core plan has a limited investment line-up: several target-date funds, a few markets mutual funds and ETFs, and a couple of bond funds.

A fiduciary is obligated to provide investment options for the plan that offers acceptable performance and limits the employee from making their plan too risky. Those who want minimal involvement once they set up their retirement plan, limited investment options and target-date funds provide a simple way to invest for the future. The SDBA, however, allows employees to be more proactive in managing their retirement accounts.

An experienced investor or financial professional should only use the SDBA. It allows the employee to control their retirement plan and access assets typically not found in retirement plans. At Twin Rivers, we can help our clients manage their employer-sponsored retirement accounts using the SDBA in numerous ways. One method is a hands-on approach, which requires spending some time each quarter with an advisor, where clients will screen share and make changes together in real-time. Another method involves the use of a 3rd-party investment advisor. This option is excellent for clients who would rather not be involved with making changes to the account. The 3rd party option can be more expensive. However, it still provides access to a broader range of investment options and limits some risks associated with clients co-managing their retirement plan with an advisor.

The most significant risk of co-managing a retirement plan with an advisor using the SBDA is the time it takes to trade investments in the account. The client must sign in to their account before their advisor can direct investments on the client’s computer via remote control. If a quick adjustment is needed, but an advisor cannot contact the client, they will not be able to change the account’s investments. This is a risk unique to the SDBA, which is why it is not for everyone.

If you are interested in being more proactive in managing your employer-sponsored retirement plan, you should utilize the SDBA feature. Your investment strategy should not be limited to a few mutual funds and age-based target-date funds. If you have an SDBA in your retirement plan and want assistance in managing your retirement accounts, please contact one of our advisors.

HSA – Health Savings Account

Thu, 30 Sep 2021 21:57:35 GMT

There Many people have high-deductible health insurance plans and are missing out on an opportunity to save for healthcare costs, defer taxes, and lower their tax liability. A Health Savings Account, or HSA, is an investment account designed for high-deductible health insurance plan owners. They are a lot like a traditional IRA because they also affect your taxes and defer income for retirement. Except, with the HSA, there is a twist; if you spend the money on qualified medical expenses, you pay no taxes on the distribution. Just like a traditional IRA, to qualify for the tax deductions, a person must be eligible to open an HSA.

First, you must own a high-deductible health insurance plan. The easiest way to find out if your plan is HSA eligible is to call your insurance provider. You also need to have no other health coverage–besides your high-deductible health insurance plan–and can not be enrolled in Medicare or be a dependent on someone else’s tax return. If all of these standards are met, the next step will be to open an HSA with your financial advisor’s help.

After your HSA is open, you need to establish your contribution limits. An individual can contribute up to $3,600 in 2021. If your entire family is covered under the same high-deductible health insurance plan, the account owner can contribute up to $7,200 for 2021. For those reaching age 55 or older by the end of 2021, an additional $1,000 can be contributed. Once the account is funded, it saves the account owner in more ways than one.

An HSA contribution is an above-the-line deduction on your tax return, meaning a contribution to an HSA lowers a taxpayer’s income dollar-for-dollar. For example, if a person makes an eligible HSA contribution of $5,000 and is in the 22% federal tax bracket, they will lower their income by $5,000 and tax liability by $1,100. Like a traditional IRA, if you have our team prepare your taxes, we can tell you how much of an HSA contribution is required to lower your tax liability. You can contribute to the HSA in 2021 to lower 2020’s tax liability as long as it is done by May 17th, 2021, although the normal cut-off date is April 15th.

The similarities between the HSA and the traditional IRA do not stop there. The account owner can contribute to the HSA on an annual basis and with the help of an advisor invest the funds in the stock market. If the funds are held until age 59 ½, they can be withdrawn penalty-free. If the owner distributes the funds before reaching age 59 ½, then taxes and penalties could be applied–which is where the HSA and traditional IRA differ.

If funds from an HSA pay qualified medical expenses, then the income is considered non-taxable, regardless of the HSA owner’s age. Qualified medical expenses include deductibles, dental services, vision care, prescription drugs, copays, psychiatric treatments, and other qualified medical expenses that are not covered by a health insurance plan. The CARES act even expanded the HSA qualified expenses to include some over-the-counter medicines.

The HSA is an excellent health savings and retirement savings account if used correctly. It will lower a taxpayer’s current tax liability. It can be used as a vehicle to defer income taxes until retirement, and if distributed to cover qualified expenses, will avoid taxation altogether.

While these are all great features, those considering an HSA should plan carefully before deciding to open one. You want to ensure funds can be saved for the long-term or are used to cover qualified medical expenses. Otherwise, taxes and penalties can eat away at the benefits that come with owning an HSA. If you have a high-deductible insurance plan and think you qualify to open an HSA, pl ease contact one of our advisors to discuss whether or not an HSA works with your financial plan.

SEP-IRA: Simple Employee Pension Plan

Thu, 30 Sep 2021 21:57:34 GMT

There Saving for retirement as a business owner can be complicated and expensive, but it doesn’t always have to be. If you are a business owner, there are a few different retirement accounts available that can be simple to establish–especially for those who do not have employees. For those who own a small business without any employees, a SEP IRA is the easiest way to lower your tax liability for the current year and defer your future income.

A SEP IRA, or simple employee pension plan, is a traditional IRA designed for simple businesses with higher contribution limits. Like a traditional IRA, every dollar you contribute to the account is an above-the-line deduction for AGI. Meaning, whatever you contribute to the account lowers your income dollar-for-dollar. Also, the same distribution rules apply to the SEP IRA that apply to the traditional IRA. The SEP IRA has some advantages over the traditional IRA.

The SEP IRA’s contribution limits are the lesser of $57,000 (2020) or 25% of the net earnings after considering the deductible portion of a person’s self-employment tax and the deduction for contributions on behalf of the owner’s plan. These higher contribution limits give the SEP IRA owner the ability to eliminate more significant tax liabilities than the traditional IRA, saving more towards retirement.

Another benefit to the SEP IRA is the ability to delay contributing to the account until the business owner files their tax return. A business owner can postpone filing their return until the October filing deadline to make the SEP IRA contribution for the previous tax year. For example, if a business owner does their taxes in March and finds out they owe money to the feds and state, their preparer can calculate how much of a SEP IRA contribution they need to make to eliminate some or all of their tax liability.

The business owner can file an extension in April and pay what they owe. Then, they can save until the October filing deadline to make their SEP IRA contribution for the previous year and complete their return. This extension means that a business owner can use their current year’s income to lower the previous year’s tax liability. By making the SEP IRA contribution, the business owner has lowered their income and tax liability. If payment were made when the tax extension was filed in April, some or all of the payment would be refunded.

The SEP IRA is a simple and easy way for business owners to save for retirement and significantly lower their tax liability. It has larger contribution limits than the traditional IRA and offers more flexibility when contributions are made. If you own a business and are interested in simultaneously lowering your tax liability and savings for retirement, please contact one of our advisors.

Traditional IRA – Save Taxes Now and Save for Retirement

Thu, 30 Sep 2021 21:57:33 GMT

There are many different accounts available today that can help people save for retirement. Most of them come with tax savings incentives. Last week we talked about the Roth IRA , which provides flexibility to the investor and tax-free savings during retirement. This week, we’ll focus on the traditional IRA, which can save taxpayers immediately and defer taxes on their income until retirement.

Anyone with earned income from wages can contribute to a traditional IRA, limited to the lesser of their income or $6,000. There is an additional $1,000 catch-up for those that are at least 50 years old.

Whether your account’s contribution is deductible is determined by two factors: whether or not you are an active participant in an employer-sponsored retirement plan and your income. Suppose you do not actively participate in your employer’s retirement plan, and the box on your W2 states you are not a participant in the plan. In that case, there is no income phase-out, and you can invest up the limit into a traditional IRA. If you are an active participant in an employer’s retirement plan, you must earn less than $65,000 if you are single or $104,000 if you are married and filing jointly to achieve the full tax deduction. You can still contribute to a traditional IRA if you do not meet these requirements, but they will be considered non-deductible contributions in the current year.

If a person is eligible, contributions to a traditional IRA will reduce the taxpayer’s income dollar-for-dollar invested into the account. A qualified contribution to a traditional IRA is an above-the-line deduction for adjusted gross income (AGI). Meaning, every dollar you contribute to the account lowers your income by a dollar. For example, if your highest income level is the 24% federal tax bracket, every dollar you earn in that bracket is taxed 24%.

Taxpayer’s Federal Tax Rate 24%

Taxpayers Income $1,000

$1,000 x 24% = $240 in taxes

If that same person from our example contributed $1,000 to a traditional IRA, the income would avoid taxation until the money was pulled out after reaching age 59 1/2. That $240 in taxes that would have been paid can be invested and grow over time tax-deferred until it is needed later in life. Contributing $1,000 avoided the money from being taxed right now and allowed it to grow tax-deferred until retirement.

Let’s take the example one step further. Another benefit to the traditional IRA is that you can use this year’s money to pay last year’s tax liability. For example, let’s say you have your taxes done by our team at Twin Rivers, and your preparer tells you that you owe $1,200 to the IRS and are in the middle of the 24% tax bracket after completing your return. If you are eligible, you could contribute $5,000 to a traditional IRA and eliminate the $1,200 owed in taxes ($5,000 x 24% = $1,200). Our team at Twin Rivers can help you open a traditional IRA, and you can contribute the money before completing your return.

Still, there are a lot of things to consider before investing in a traditional IRA. For example, if you access your money in the traditional IRA before retirement, there are very few ways to avoid a 10% penalty in addition to the taxes you’ll pay. There is also no flexibility of only pulling out your contributions like the Roth IRA.

You should do careful financial planning before investing money in any account, especially those with retirement plans and income restrictions. If you are interested in saving for retirement, saving taxes, or learning more about investing for your future, please contact one of our advisors. We have the tools and experience to show you how accounts like traditional IRAs may fit in your financial plan.

Roth IRA

Thu, 30 Sep 2021 21:57:32 GMT

A Roth IRA allows owners to establish tax-free savings for retirement with access to their contributions earlier should they need it. The terms used when describing Roth IRAs are very specific. It is essential to understand which dollars are tax-free and which dollars are taxable if you access the money before age 59 ½. If you accidentally take out more than your contributions into your Roth IRA, it could hinder years of tax-free growth.

Who can contribute to a Roth IRA? The general rule is that anyone with earnings from wages can contribute to a Roth IRA. To contribute to a Roth IRA, you must make less than $124,000 if you are single or $196,000 if you are married and are filing jointly. The contribution limit for 2020 is $6,000, or $7,000 if you are 50 years or older. However, if you made less than $6,000 of earned income, that amount becomes your contribution limit.

For example, suppose a young person only earned $3,500 working a part-time job for the year but was given an additional $5,000 from a grandparent. Despite having received $8,500, this person’s contribution limit would still be limited to $3,500 because they can only contribute up to the amount of their earned income from wages. Grandparents can even contribute their own money to the grandchild’s Roth IRA, but the limit would be $3,500.

Assuming you are eligible to make a Roth contribution, what happens if you need to access the money you’ve invested before you reach age 59 ½? First, it is important to remember that you can always access your contributions to a Roth IRA. However, this ability does not include the money accrued from growth in the account.

For example, if you contributed the $6,000 maximum for five years, you would be able to access that $30,000 without any taxes or penalties. However, If your account gained $12,000 off that $30,000 contribution, you are still only able to take out what you contributed. So even though your account sits at $42,000, you will need to keep that $12,000 in the account until age 59 ½ to avoid paying taxes and penalties .

What if you need to access those earnings early? The general rule is that you must wait five years, or your earnings will be taxed. However, there are nine special circumstances in which you can pull out the gains in your Roth IRA before the five-year wait period and be taxed but avoid the 10% penalty. If you wait five years before accessing your account’s earnings, you can avoid paying either income taxes and the 10% early withdrawal penalty, or both depending on the circumstances.

For example, if you have had the earnings in your account for more than five years, you can access the money without paying income taxes or the 10% early withdrawal penalty if the funds are spent on or after:

Attainment of age 59 ½
Death
Disability
First home purchase (up to $10,000)

If you have held the earnings in your account for more than five years, you can access the funds without paying a 10% early withdrawal penalty but will need to pay income taxes if the funds are for:

Medical expenses greater than 7.5% of AGI
Medical insurance premiums while unemployed
Substantially equal periodic payments
Qualified higher-education expenses
Up to $5,000 for birth or adoption expenses

The information above is just a fraction of what you should consider before opening a Roth IRA. The Roth IRA is a fantastic individual retirement account for many, but it is not for everyone. Other investment vehicles out there provide even more flexibility, different tax benefits, and are more specialized. If you have been saving and want to invest your money to get you closer to your financial goals or have questions about saving for retirement, please contact one of our advisors.

Saving for College

Thu, 30 Sep 2021 21:57:31 GMT

529 Tuition Savings Plans

Putting money aside for a child’s future college expenses is one of the most rewarding investments a person can make. When talking with clients about saving for college, one of the more common accounts discussed is state-sponsored 529 tuition savings programs. There are two types of programs: 529 prepaid tuition plans and 529 education savings plans; both have benefits and limitations as vehicles to save for education.

529 prepaid tuition plans allow parents to purchase units at participating universities or colleges (typically public & in-state) through state-sponsored programs long before their children go to college. Years later, when students attend a participating college or university, their tuition and mandatory fees are covered. Generally, these plans do not include room and board. Attending an out-of-state college or private university dramatically reduces the number of credits covered by the program. The 529 prepaid tuition plan is excellent for those that have a generational history at the chosen school. But what about those seeking flexibility when planning for college?

529 education savings plans are still state-sponsored programs, but rather than prepaying for college, the student’s parent or grandparent can establish an investment account for the student’s benefit. One unique feature of this 529 plan is it allows the front-loading of 5 years of contributions into the account without filing a gift tax return. A person can contribute more to the account, but they would have to file a gift tax return. Some states even provide a tax deduction for those contributing to these state-sponsored programs.

Funds from a 529 education savings plan can pay for a broader range of college expenses than the 529 prepaid tuition programs. They can even cover up to $10,000 in private elementary and secondary school tuition. If distributions cover qualified education expenses, no taxable income will be realized from the account distribution. The 529 education savings plan is one of the few investments that the government does not tax if used correctly.

Unfortunately, the FASFA form used to qualify for federal financial aid includes distributions from 529 education savings plans and can reduce financial aid eligibility. So the timing of distributions is key to using the account most efficiently. Also, careful consideration should occur when naming the account owner because whoever owns the account will further affect financial aid eligibility. These are just some of the features and limitations of the 529 educations savings plan, and we strongly recommend you speak to a financial planner before opening an account.

When it comes to saving for college, there is an abundance of different programs available. 529s are the most common and are by no means the right fit for everyone. If you take the time to assess your financial priorities, the options become fewer, making planning much more manageable. If you would like to discuss saving for college or have any other financial planning ideas, please do not hesitate to contact any Twin Rivers team member.

Avoiding the GameStop Risks: Diversification is Key

Thu, 30 Sep 2021 21:57:30 GMT

You work hard for your money and work even harder to save it. We believe that a tweet by a CEO or an article on Reddit should not wholly alter your investment account’s direction. But that is the risk you run when you have individual company stocks in your portfolio. The value of GameStop and AMC stock has fluctuated in value over the past couple of weeks. If you owned GameStop or AMC stock before the rise in price dominated headlines across the nation, you are probably feeling pretty lucky. If you invested because you heard about the GameStop and AMC trading frenzy, there is a chance you have taken some significant losses.

To think that Reddit articles and tweets were highly responsible for the change in the value of these underlying stocks is unprecedented. It also presents an opportunity to witness how quickly an individual company’s stock price can change without any underlying change in value to the company .

At Twin Rivers, we believe that you do not need to own individual stocks to create your ideal future. There are investment vehicles available to provide you exposure to respective companies for a fee while limiting any particular company’s effect on your portfolio’s performance.

One example of this kind of investment vehicle is what’s known as Exchange-Traded Funds (ETF). ETFs are available for purchase daily on stock exchanges and are owned by the world’s largest asset managers. These asset managers invest in a bundle of stocks and sell shares of their investment vehicle, the ETF, to the public. One benefit of owning an ETF is an investor’s ability to gain exposure to a company that might be too expensive for their portfolio if they were to purchase the stock individually.

For example, if you were looking to invest in Amazon and cannot afford $3000 for a share, you may instead buy Fidelity’s MSCI Consumer Discretionary Index ETF. At the time this article was written, this ETF sat at $75.93 per share. Shares of Amazon make up 21.84% of the bundle of stocks represented by that particular ETF, meaning that ETF could go up in value if Amazon has a great day.

But what if Amazon has a terrible day? Another benefit to owning an ETF is the built-in diversification. In this same example, if Amazon plummeted in value, only 21.84% of that investment would be directly affected. And, if the companies that make up the remaining 78.16% of that ETF hold or go up in value on that same day, the drop in Amazon’s value would affect your investment even less.

There are, of course, risks to owning ETFs; similar to stocks, ETFs are only liquid if there are both sellers and buyers in the market. For many ETFs, the number of buyers and sellers can be much less than those trading individual company stock at any given time. So if you own an ETF that is thinly traded, and its value is dropping, it may be hard to find someone to buy it quickly .

There are also fees involved with these investments, but they are typically much less than their Mutual Fund counterparts. Although liquidity and fees are concepts that apply to all investments available on exchanges, you should be aware of them when deciding which ETFs are right for your portfolio .

At Twin Rivers, our job is to smooth out the ride for your investment accounts, so you can focus on living your life while reaching the milestones that are most important to you. We want you to invest your money with intention, which means developing an investment strategy that limits the risk in your portfolio. If you would like to learn more about ETFs and how they could be utilized in your portfolio, please do not hesitate to contact one of our advisors.

Retirement Stool – Is Three Legs Enough

Wed, 03 Feb 2021 23:38:51 GMT

The retirement stool is a metaphor that dates to the mid-1930s when Congress and President Franklin D Roosevelt was designing the Social Security Administration. Though the President never used this metaphor publicly when promoting the Social Security Act, he understood the need for multiple support systems during retirement. The retirement stool has three legs: social security, pensions, and savings and investments. Since the act was signed on August 14, 1935, a lot has changed.

Social security was considered to be the groundwork that is used to build your retirement security. Although inevitable changes will need to be made to the social security system in the future, this article will discuss the facts as they stand today. The only way you will receive social security during retirement is if you paid into the program. The contribution required to earn a credit fluctuates. In 2021, you will earn one social security or medicare credit for every $1,470 received in covered earnings and must earn $5,880 to receive the maximum of 4 credits for the year. 40 credits are needed to earn full social security benefits and free Medicare Part A, once eligible. This equates to 10 years of paying into social security. You can find out how many credits you have earned and your potential projected social security benefit by creating a myssa account at www.ssa.gov .

T he next leg of the retirement stool is private pensions. Many private pensions have been converted to cash balance plans or discontinued due to unavoidable insolvency. For those that still have a pension through a private employer, there are many factors to consider before collecting your pension. Is there a cost-of-living adjustment? Is there a social security offset? What about a lump-sum option? These are just a few examples of decisions someone might have to make when retiring. Pensions through private employers have many different payout options, which can be projected well before retirement.

I f you work at a government agency, you are likely to have one of the most secure pensions in the world. CalPERS, CalSTRS, SCERS are a few common pensions here in Sacramento, California. The pension earned is determined using the following information: a person’s age, salary, service credits earned, and a percentage multiplier. They generally have fewer payout options than private company pensions, and do not offer lump-sum payment, but careful planning should be done before choosing a payout option. Whether you receive a pension through a private company or a government agency, they are both a guaranteed source of income beyond the minimal amount the government provides and is an important leg of the retirement stool.

T he third leg of the original retirement stool is savings and investments which provides financial flexibility during retirement. From a tax standpoint, there are three different types of retirement savings a person might have that make up the “savings & investments” leg of the retirement stool: pre-tax accounts, post-tax accounts, and taxable brokerage accounts. Pre-tax accounts, also known as tax-deferred or tax advantaged accounts, are accounts that employees can flow their income into and not pay taxes until the funds are distributed during retirement. Examples of these accounts are 401k,403b, and Traditional IRA accounts, but other types are available depending on how someone is employed. These accounts are great for those saving for retirement and expecting less income during retirement, such as people without pensions. Contribution limits range depending on the type of plan, with catch up provisions for those at least 50 years old. However, the downfall to these accounts is the complicated process to avoid costly penalties associated with distributing this money before age 59 ½.

Post-tax investment accounts are designed for those expecting higher income during retirements, such as people with large pensions and social security–the most common being a Roth IRA, Roth 401k, and Roth 403b.These accounts are designed for people who can pay their taxes now, invest the money for the future, and pull it back out without paying any taxes on the growth in the account. Like pre-tax accounts, there are contribution limits that vary depending on the type of retirement plan. Also, to get tax free treatment on the gains in the account there are obstacles, such as a five-year rule and reaching the age of 59 ½. If you decide to pull funds out of these post-tax accounts, you should consult with a financial advisor to avoid costly penalties.

The third type of investment account is typically an individual or joint investment account. These accounts allow you to earn favorable tax treatment on your investments when buying an asset then selling it after owning it for at least a year. The tax treatment you receive, or capital gains rate, is dependent on your ordinary income tax rate. The beauty of this account is that there is no time consideration like the one you would receive in a retirement account. You can contribute and pull the money back out of this account and trade as often as you want with impunity (except for wash sales). Right now, however, capital gains tax treatment is under scrutiny. If capital gains tax rates go up significantly, it can dramatically reduce the return on an investment.

The retirement stool is a metaphor that oversimplifies the number of resources people have to plan for retirement. This article just covers a few of the legs someone might have on their retirement stool. If you would like to discuss how your finances fit together with your eventual retirement, please contact our team. At Twin Rivers, we have the experience and tools necessary to provide you projections and recommendations to ensure you have a solid stool for your retirement.

Bitcoin & Marijuana

Wed, 03 Feb 2021 23:38:50 GMT

What do cryptocurrencies and marijuana companies have in common? First, they are among the hottest topics discussed amongst retail traders. The media is fanning the fire, sending company stock prices like Aphria (NASDAQ: APHA) and digital currencies like Bitcoin (BTC – USD) soaring high these past couple of months. Second, they are entirely speculative when it comes to projecting their future value.

T hese investments can not avoid the systematic risk factor they face, which is why Twin Rivers portfolios do not hold speculative investments. Systematic risks are factors that affect an entire market or industry. Typical systematic risk factors include changes in macroeconomics, the environment, and societal conditions. Things like high-inflation or changing interest rates, natural disasters, and changing consumer preferences can alter the course of entire industries, and their effects are not limited to just one company. Marijuana companies and cryptocurrencies both face the similar and unpredictable systematic risk factor of government regulation.

M arijuana stocks jumped when Joe Biden was announced as the winner of the presidential election. Also, with a democratic controlled congress, the possibility of legalizing or decriminalizing marijuana nationwide has investors buzzing about the industry’s potential. This notion in itself is the problem. Nobody knows which direction the government will go with marijuana. There is even a chance the government may not change its stance at all.

B itcoin faces a similar uncertainty. The attraction to investing in digital currency like Bitcoin is very high right now. Many people believe with the seemingly constant increase in the national debt ceiling, cryptocurrencies like Bitcoin will eventually eliminate fiat money. The idea that the government, or governments worldwide, will allow consumers complete privacy with their transactions is unlikely, which is at the core concept of Bitcoin as a currency. Still, no one truly knows in our rapidly changing society what might happen with these digital currencies, which is the very reason we consider investments in cryptocurrencies speculative. There are forces beyond anyone’s control that can quickly level these industries and markets at any given time.

At Twin Rivers, we will not buy speculative investments in your portfolio unless you instruct us to purchase the asset. There is an increase in financial transparency that comes with marijuana companies going public, and government regulators like the SEC are more closely monitoring digital currency exchanges. Yet, we still believe our clients can obtain financial security without investing in speculative markets like marijuana and digital currencies. Our team builds custom, diversified portfolios and only takes the risks required for our clients to create their ideal future.

Even though we believe that financial success can be achieved without investing in speculative markets, we understand the upsides that can come with taking on additional risk. If you would like to learn more about speculative investing and how it could affect your current portfolio, please do not hesitate to contact one of our advisors.

Proposition 19 – Reassessing Property Taxes

Mon, 11 Jan 2021 19:29:09 GMT

Californians voted for the approval of Proposition 19 this past election, which alters the assessment of property taxes. Before Proposition 19, there was a limit on annual increases on property taxes, which capped at 2 percent unless the property changes ownership or undergoes improvements. Surviving children were also allowed to inherit their parents’ properties and, in most cases, keep the low property tax base to avoid an increase in property taxes.

Before Proposition 19, moving into a home of equal or lesser value within your county would allow you to maintain the same property tax base. Proposition 19 extends this privilege to anyone moving within the state of California rather than only within their representative county. A new adjustment will include the difference between the previous home’s sale price and the new property’s taxable base if it has a higher tax base.

T hese rules are even more flexible for those 55 and older, who have severe disabilities, or those displaced by natural disasters. Under Proposition 19, people who fit into these demographics can move up to three times, maintain their tax base, and receive a favorable property tax adjustment if they move into a home with a higher tax base. This flexibility does not come without consequence, however. Proposition 19 will likely keep financial planners and estate planning attorneys busy through February 15th, 2021, when Proposition 19 goes into effect.

I nheriting property can be life-changing and often serves as the legacy item that parents leave their children. Previously, children could inherit their parent’s property and make it their primary residence and maintain their parent’s property tax base. Other properties received a $1 million gain exclusion when inherited from a parent before affecting the tax base. Straight forward property tax projections have allowed parents and their financial planners & estate planning attorneys to predict whether children moving into the home was affordable for their children. If the answer was yes, parents could comfortably spend their savings, knowing their children can afford to live in the house they inherit. In light of Proposition 19, it would be wise to take a closer look at your estate plan if you own properties and plan to pass them on to your heirs.

The new law establishes changes to the $1 million gain exclusion on all inherited properties. The first change is an inherited home passed from the parent to their child must serve as a primary residence to qualify for the $1 million gain exclusion. Previously, a child could inherit a home and maintain their parent’s property tax base regardless of the gain if it served as their primary residence. Second, there is no exclusion for all other properties, meaning all other inherited properties establish a new tax basis when ownership changes from a parent to a child. Before Proposition 19, a $1 million gain exclusion existed on properties not used as a primary residence before any tax base adjustment.

In all cases, to qualify for the gain exclusion, transferring ownership of a home from a parent to a child needs to be done in a reasonable amount of time to be eligible for the $1 million gain exclusion. Whether you plan to move into a new home or are considering how Proposition 19 will affect your inheritance or estate plan, you should contact your financial planner or estate planning attorney.

Stimulus Checks and Taxes

Mon, 11 Jan 2021 19:28:38 GMT

Many questions have arisen about the stimulus checks that were sent out to Americans this past year. Most of the stories we hear are of people not receiving a stimulus check or receiving less than the full amount, despite their income being negatively affected by Covid-19. The reason someone would get less than the full amount of their payment is because eligibility was based on 2019 income, not 2020 income. That said, it is essential to know that stimulus checks are an advanced tax credit from the government on your 2020 tax return.

A n advanced tax credit is when the government gives someone a tax credit in the form of cash during the current year instead of waiting until that individual’s tax return is complete. There are two types of tax credits–refundable and non-refundable. The issued stimulus checks are considered refundable tax credits, meaning it can eliminate your tax liability (if the sum is less than the tax credit) and the remaining value of the credit is paid in the form of a tax refund.

Suppose a single person has only received half of their first stimulus check ($600) because their 2019 income was too high. If that person’s income was low enough in 2020 to qualify for the full amount, they will receive the difference of what they were sent during the year and the full amount of the tax credit on their tax return. For example, suppose this same person owed $300 before applying the CARES tax credit. The remaining $600 credit would eliminate their $300 tax liability, and the $300 leftover of the credit will be sent to the taxpayer in the form of a tax refund.

I f you did not receive the stimulus check or received less than the full amount but qualify based on your 2020 income, you will receive the stimulus. It will just be in the form of a refundable tax credit.

W e understand this past year was frustrating for many. And unfortunately, many affected by the pandemic received little to no stimulus due to their income in 2019. As tax season approaches, please do not hesitate to contact us if you would like to discuss the advanced tax credit or want our team to prepare your 2020 tax return.

Mortgage Interest and Taxes – What You Need to Know

Mon, 11 Jan 2021 19:16:04 GMT

Purchasing a home is a life-changing moment and should not be taken lightly. Sacramento, California, has recently been predicted by some to be one of the hottest real estate markets in America come 2021. Although only time will tell if this is true, this is welcome news for both current and prospective Sacramento homeowners since those searc hing for a home may be inclined to act now. Real estate professionals make many points as to why buying a home can be financially beneficial. One of the most common points is the tax write-off received from mortgage interest paid on a home. Although this is true, how much of a write-off are you truly getting?

If you are single and can afford it, purchasing a home comes with a significant tax benefit. However, if you are a married couple, the tax benefit should be more closely examined. First, we will look at how write-offs work.

In 2020, a married couple will get $24,800 in deductions, known as the standard deduction. That means a couple’s itemized deductions need to add up to more than $24,800. In 2017, the TCJA limited state and local taxes to $10,000. If you own a home in California, this threshold is filled easily due to property and California-specific taxes. That leaves this couple with $14,000 in additional write-offs such as mortgage interest. But what if they have a $450,000 mortgage at 3% per year, equating to $13,500 in mortgage interest? In this case, they would still take a standard deduction because the $24,000 given in deductions is greater than the write-offs accumulated throughout the year.

S.A.L.T Limit: $10,000
Mortgage Interest: +$13,500
$23,500 < $24,800 standard deduction.

What if your write-offs are greater than the $24,800 standard deduction? Those in the 24% tax bracket who have $30,800 in write-offs, or an additional $6,000 in mortgage interest, would receive $1,440 in tax benefit from their mortgage.

Total Write-Offs: $30,800
Standard Deduction: -$24,800
Add’tl. Write Off: $6,000
Tax bracket (24%) x .24
Total Tax Savings: $1,440 (federal)

If you consider a 9% tax for the state, there at most is an additional $540 in write-offs. (not including the state’s standard deduction) What you are able to itemize on your federal taxes changed a lot in 2017, and the write-off for mortgage interest was altered in more ways than one.

Our job at Twin Rivers is to ensure our clients understand how their financial decisions will affect them in the future. If you are considering purchasing a new home or know someone about to buy a home, please do not hesitate to reach out to our team for an analysis. We want you to be sure you are making a commitment to being a homeowner for the right reasons.

Medicare

Fri, 04 Dec 2020 18:36:00 GMT

Medicare is a national health insurance program for people age 65 and older, and some younger people that have a disability. The program is funded through payroll taxes and premiums deducted by the government from social security payments. The premium amounts are income-based and assessed annually. There are four different parts to Medicare:

Medicare part A helps cover inpatient care at a hospital and skilled nursing facility, along with some at-home care and hospice care.
Medicare part B covers specific doctor’s services, outpatient care, medical supplies, and preventative services. You will likely need to pay a part B premium, which varies in cost based on income.
Medicare pa rt C, also known as Medicare Advantage, is a plan that includes parts A, B, and D and is offered by private insurance companies approved by Medicare. Part C allows for additional coverage, such as vision, dental, and hearing plans.
Medicare part D helps cover the cost of prescription drugs, including many recommended shots or vaccines.

Private insurance companies also provide insurance plans known as Medi-gap. These plans are meant to supplement costs not paid by Medicare, such as copayments and deductibles.

It can be challenging to know which plan to choose; however, there are some common mistakes you will want to avoid when choosing a plan. You must sign up for medicare part B unless you are qualified to delay benefits. An example of when you may delay benefits is if you or your spouse have an existing health insurance plan through an employer. If you are ineligible to delay part B benefits, you may be subject to a 10% fee for every 12-months you delay enrolling in part B. If you do not sign up for medicare part b when eligible, there is a general enrollment period every year between January 1st and March 31st.

As you approach Medicare eligibility, you should receive a notice in the mail stating an enrollment period in which you can enroll in Medicare. There is a seven-month enrollment period for those who recently became–or are about to be–qualified for Medicare. The enrollment period begins three months before your birthday and is active for three months after your birth month. The reason enrollment is seven-months is that the enrollment period includes your birth month.

If you sign up within the three months of your birth month, coverage can begin on the first day of your birth month. If you

sign up for Medicare during your birth month, your coverage begins one month after you sign up. If you wait until after your birth month, your coverage may be delayed two or even three months, depending on how long you wait.

I f you are nearing age 65 or are interested in learning how different Medicare plans will affect your finances during retirement, please do not hesitate to contact your financial advisor.

Incentive Stock Options

Fri, 20 Nov 2020 03:24:00 GMT

As employees continue returning to work, many are offered employee stock ownership as part of their compensation package. Our last post discussed one of the few types of employee stock ownership, restricted stock units. This post will be dedicated to another...

Employer Stock Ownership Plans: Restricted Stock Units

Fri, 06 Nov 2020 18:24:00 GMT

Employee stock options are a form of additional compensation offered by companies. One type of employee stock option is restricted stock units (RSU). This stock option is paid in addition to an employee’s salary and is earned over time. RSUs are often a part of an...

General Obligation Bonds

Mon, 12 Oct 2020 21:42:00 GMT

The propositions we vote on commonly refer to the issuance of general obligation bonds. This week we want to review “GO” bonds and how they affect your overall portfolio. General obligation bonds are a type of municipal bond, which pays interest rates to their...

Moving Retirement Accounts

Fri, 25 Sep 2020 16:34:00 GMT

One of the most common questions our advisors come across is, “What do I do with my retirement account?” Whether it be a 401k, 457, 403b, or another type of qualified retirement plan, you have a few options to consider before making a decision. You can, of course,...

Risk Profile

Fri, 18 Sep 2020 17:11:00 GMT

When we talk about risk with clients, we often end up discussing terms like “conservative” or “aggressive.” These are basic terms to use when talking about risk, but the definition of each change from person to person. At Twin Rivers, when we talk about risk, we are...

Twin Rivers Client Tools

Thu, 03 Sep 2020 23:57:00 GMT

Sliced Apple

Fri, 28 Aug 2020 00:24:00 GMT

Payroll Cuts and Capital Gains

Thu, 20 Aug 2020 23:57:00 GMT

Media vs. The Market

Wed, 05 Aug 2020 21:21:00 GMT

Social Security – When is the right time

Wed, 05 Aug 2020 21:04:00 GMT

Step-up in Basis Explained

Thu, 30 Jul 2020 22:33:00 GMT

Stimulus Checks

Thu, 30 Jul 2020 22:00:00 GMT

As July ends, so do some of the provisions provided by the CARES Act meant to protect Americans during these uncertain times. The $600 additional aid for those on unemployment ceases at the end of the month, with many states sending final payments the week of July...

Earnings Season

Fri, 24 Jul 2020 03:51:00 GMT

We are in the heart of earnings season, where analysts find out how well they read the pulse of different publicly traded companies during the financial crisis. But what is earnings season, and how does it affect us as investors? From a birds-eye view, earnings season...

What You Need to Know about Capital Gains Taxes

Fri, 17 Jul 2020 21:01:00 GMT

Wills vs. Trusts – Do I Need Both?

Fri, 17 Jul 2020 20:48:00 GMT

During the beginning of the coronavirus pandemic, estate planning attorneys saw a massive influx of interest in establishing wills. However, establishing control over what happens to your assets beyond the grave is something that shouldn’t only be considered during a public health crisis.

The Truth About Teacher Retirement Plans

Fri, 17 Jul 2020 20:42:00 GMT

Contrary to popular belief, school district-approved retirement planners are oftentimes not working on behalf of the best interests of educators. These “retirement planners” are typically not Certified Financial Planners, but rather insurance salespeople. They are working the booth at your district benefits meeting to sell you investments for their company, which typically include high hidden costs taken directly from employer contributions.

Benefits of Choosing a Fee-Only Financial Advisor

Fri, 17 Jul 2020 20:12:00 GMT

Since the 2008 financial crisis, there has been a push for more transparency in the financial services industry. Many argue this pressure on the industry to be more transparent is long overdue. There were, and arguably still are, far too many advisors selling products or offerings that do not align with their clients’ best interests. From insurance products to alternative investments, many advisors are still charging high commissions to purchase investment products on behalf of their clients.

The Right Kind Of Debt Free

Thu, 09 Jul 2020 22:31:00 GMT

Going back to work?

Thu, 09 Jul 2020 06:03:00 GMT

Recapture of Depreciation

Fri, 15 May 2020 17:51:00 GMT

Buy land, they ain’t making any more of it. is a statement that has been reused time and time again in the real estate industry since the infamous Mark Twain said it. Or, was it Will Rogers? Regardless of who said it, both men were successful in business and masters of their craft.

April 15th isn’t the only date you have to worry about…

Thu, 30 Jan 2020 19:37:00 GMT

This is the deadline for Individuals and C-Corporations that operate on a calendar year to file their tax return (or an extension) and pay their income tax liability. You might have the ability to file an extension and if you are self-employed pay last year’s tax liability with this year’s income (maybe even lower your tax liability by paying yourself).