Month: August 2021

You’ve probably heard quite a bit about cryptocurrencies over the past year, and you may be wondering if you’re missing out on an investment opportunity. While that’s a valid question, there’s a lot to consider before investing in these very risky assets.

A cryptocurrency is a digital currency: a form of payment that can be exchanged online for many goods and services. The cryptocurrency “lives” in something called a “digital wallet,” which is basically a series of complicated passwords. Transactions are verified using a decentralized technology called blockchain.

Cryptocurrencies have proliferated in recent years. According to CoinMarketCap.com, thousands of different cryptocurrencies are publicly traded, and the total value of all cryptocurrencies was more than $2.2 trillion as of April 2021. But Bitcoin is the most popular, with a $1.2 trillion market cap as of April.

So why do people buy cryptocurrencies? Some like the fact that central banks can’t manage the money supply, since central banks tend to reduce the value of money via inflation over time. Others like the fact that because the blockchain is a decentralized processing and recording system, it can be more secure than traditional payment systems.

But cryptocurrencies have plenty of risks. First, if you lose your “digital wallet,” there is no way to recover your Bitcoin. Second, cryptocurrencies are considered speculative: like other currencies, they generate no cash flow, so in order for you to make money, another investor must pay more for your cryptocurrency than you did. Third, cryptocurrencies can be volatile: it’s not unusual to see them fluctuate by as much as 40% in a single day.

If cryptocurrencies intrigue you, we can provide additional input, helping you choose the right investments to balance growth potential and risk. Please call or email us today. We’re always here to help.

Most people plan to leave their retirement savings, including their Individual Retirement Account (IRA) assets, alone until they can withdraw them at age 59 1/2 penalty-free. But emergencies occur, and people need to make exceptions. If you find yourself in this situation, how can you avoid the tax implications?

Typically, any early withdrawal from a traditional IRA is considered taxable income. What’s worse, if you make a withdrawal before age 59 1/2, you may get hit with a 10% penalty tax. While it is likely impossible to avoid the income tax, you may be able to avoid the penalty. How? There are several exceptions to the rule that may apply to you.

There are four key categories: (1) withdrawals to cover medical expenses that exceed 7.5% of your adjusted gross income (AGI) for any tax year; (2) withdrawals to cover health insurance premiums when used to pay the premiums for you or your family members while you are unemployed; (3) withdrawals to cover higher education expenses for you or your family; and (4) withdrawals taken as substantially equal periodic payments (SEPPs), which are regularly scheduled withdrawals taken, at minimum, annually.

Many of these techniques are complicated, however. For example, there are varying definitions of “family.” And to take advantage of the health insurance premiums category, you must also be receiving unemployment compensation under some fairly strict parameters.

The more information you have, the more prepared you can be should you need to withdraw money early from your IRA. Call or email us so you can get the information you need to make a decision that’s best for you.