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Will You Pay More or Less? The Build Back Better Bill Tax Changes! 12.17.2021

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The Build Back Better Bill tax changes – do you stand to pay MORE, or less?

''Everybody has a plan until they get punched in the face.''

Will the Build Back Better bill tax changes translate to an unexpected de-facto holiday bonus, or instead, an unwelcome lump of coal? Read on to find out more!

While Build Back Better is a good marketing slogan, it is obviously important to unpack and better understand what this 2,135 page (click HERE to read the whole thing!), $1.75 trillion piece of spending and legislation might mean for YOU. What exactly are the key provisions of this signature bill, and importantly, will the proposed Build Back Better Bill tax changes cause you to pay MORE or LESS to Uncle Sam if the proposed legislation passes?

Days versus Decades. Decide which to focus on...

Let’s briefly “unpack” the Build Back Better Act, discuss which provisions are NOW being negotiated in the Senate, and importantly, evaluate the potential Build Back Better bill tax changes, and the tax consequences of what a final package might look like.

First, a brief background. The Build Back Better Act is the third and most economically significant part of President Biden’s Build Back Better Plan. Originally an immense $3.5 trillion social spending package, lawmakers in the House of Representatives have scrambled and negotiated over the past six months, finally ending up here – approving and sending to the Senate a “slimmed-down” (but hardly modest) $1.75 trillion (!) version of the plan. Now, the REAL debate and negotiations begin.

With two noteworthy holdouts…

Stick to your investment strategy - Do not turn temporary declines into permanent losses.

…Senate Democrats are mostly united in passing this major legislation, but haven’t yet been able to agree on what should be kept and what should be scrapped to obtain the two needed votes from the aforementioned holdouts. On the flip side, and unsurprisingly in today’s partisan political atmosphere, all 50 Senate Republicans are aligned against it.

Now, regardless of whether you are a Democrat or a Republican, and regardless of whether you agree or disagree with the need to pass this IMMENSE bill, at Towerpoint Wealth we believe that it is a when, and not an if, some version of this legislation ultimately DOES pass and become law, even if it isn’t until 2022. And while the final terms are obviously still unclear, the bill is proposing to make MAJOR changes to four main areas:

1. Social services and programs
2. Clean energy
3. Immigration
4. Build Back Better bill tax changes

And as Joe Manchin, Senator from West Virginia and one of the two Democratic holdouts who is squarely in the middle of this debate, said earlier about the bill, “We should be very careful what we do. We get any of these wrong, we’re in trouble.”

If you are interested in a deeper breakdown of the first three areas (as well as Build Back Better tax changes highlighted below), we encourage you to click the thumbnail below and watch our newly-produced educational video:

Today’s Trending Today is specifically focused on the proposed Build Back Better bill tax changes, which would raise a SIGNIFICANT amount of tax revenue from the very wealthy and corporations, and also offer a proposed tax cut for those who live in high income and mostly blue tax states.

The Congressional Budget Office (CBO) estimates the bill will cost a total of almost $1.7 trillion, and add $367 billion to the federal deficit over 10 years. Adding in $207 billion of revenue that is estimated to result from increased tax enforcement in the bill, and the net total increase to the deficit is projected to be $160 billion.

Originally, President Biden’s initial Build Back Better plan was to raise taxes on families earning more than $400,000/year, which would have overturned the Tax Cuts and Jobs Act passed in 2017. However, this provision was dropped in the final version of the bill passed by the House of Representatives on November 19, as holdout Democratic Senator Kyrsten Sinema of Arizonabalked at it, saying she wouldn’t accept any additional higher tax rates: not for individuals, not for capital gains, and not for corporations.

Instead, a significant and updated House-passed Build Back Better bill tax change imposes surtaxes on taxpayers with extremely high incomes. When would this surtax kick in? When adjusted gross income eclipses $10 million, a 5% surtax on income would be applied. Additionally, taxpayers would be subject to an additional 3% surtax on any income over $25 million. Clearly these proposed Build Back Better bill tax changes would only be punitive to very high income earners.

Something else to keep in mind – the new surtaxes applicable to the $10 million and $25 million adjusted gross income thresholds INCLUDES capital gains taxes. So, if you have owned highly appreciated securities (think Apple or Tesla or Amazon stock) for a long time, and then sell your shares and realize a large capital gain, that income is also included when calculating whether or not you would be subject to them.

Additionally, another major Build Back Better bill tax change would be to INCREASE the state and local income tax deduction, commonly known as the SALT deduction.

The SALT deduction is a tax deduction that allows taxpayers of high-tax states to deduct local tax payments on their federal tax returns. Before 2017, there was no limitation on the SALT deduction. However, under the Trump administration’s Tax Cuts and Jobs Act, the SALT deduction was CAPPED at $10,000. The Build Back Better bill tax change to SALT proposes a new INCREASED deduction limit of $80,000, benefitting wealthier residents of high-tax blue states like California, New Jersey, and New York.

This change would cost the government $229 billion in revenue, and was not part of Biden’s original BBB plan – it was added later in the House negotiations.

Backdoor Roth IRA conversions, a popular technique oftentimes used to fund a tax-free Roth IRA without being subject to the Roth IRA income limitations, would also be eliminated as another Build Back Better bill tax change.

And lastly, income recognized on cryptocurrency transactions would be subject to 1099 reporting by crypto brokers and custodians.

Here is a visual summary of the Build Back Better bill tax changes:

Head spinning yet? Obviously the myriad of proposed Build Back Better bill tax changes is a lot to keep track of. However, at Towerpoint Wealth, that is exactly what we continue to do on a regular basis.

Considered by some to be the most consequential economic legislation in the past 50 years, negotiations on the Build Back Better bill are far from over. And any tweaks to this massive legislation will then require another vote in the House. However, regardless of how and when this situation plays itself out, we feel it is safe to say that YOU WILL feel the effects of at least one component of the proposed Build Back Better bill tax changes, and encourage you to contact us (click HERE to do so) to have an objective conversation about how you will be positively or negatively affected by the tax changes you will personally see from this bill.

What’s Happening at TPW?

A huge thank you to Ascent Builders for the AMAZING holiday wreath, and perhaps an even better gift, the personal delivery from their esteemed controller, Patty McElwain (holding the wreath and standing next to our phenomenal Client Service Specialist, Michelle Venezia)!

Spreading cheer is an Ascent Builders specialty, and they are a firm we feel very fortunate to have such a long and productive partnership with.

Our President, Joseph Eschleman, spent some time earlier this month celebrating Christmas (yes, that is a Griswold Family Christmas t-shirt he is wearing!) with close Towerpoint Wealth friend and business partner, Niki Dawson. Niki is the President of TaylorMade Web Creations, and she is absolutely amazing if you have any web design and/or digital marketing needs!

Graph of the Week

Tesla’s market value is now more than General Motors, Ford, Volkswagen, and Mercedes-Benz, COMBINED!

The below chart indicates that electric vehicle sales will exceed gas-powered vehicles by 2040 – do you agree? Disagree? Click HERE and message us – let us know your opinion!

Cartoon of the Week

We came across this gem that provides a different and unique “take” capturing the essence of what perseverance means, and felt compelled to share!

Illustration of the Week

Surprisingly, in the wealth management industry, there are two different standards of care for clients:

  1. The fiduciary standard – a legal obligation requiring a financial advisor to act solely in a client’s best interest, 100% of the time, when offering personalized financial advice, counsel, and planning
  2. The suitability standard – a much lower legal hurdle to clear than fiduciary, not obligating a financial advisor to put their client’s best interests first, and instead only requires a reasonable belief that a recommendation is “suitable” for a client

While we believe that consumers and clients are harmed with the absence of a uniform fiduciary standard that applies to ALL financial professionals, this is the world we live in. A non-fiduciary is legally allowed to sell you a product or investment that pays the highest commission, as long as it is considered suitable.

Click HERE for a full list of the major Wall Street firms and banks. If you have an advisor who works for any of these firms, he or she is NOT a fiduciary to you. Conversely, if you are working with an advisor at a fully-independent, SEC-regulated investment advisory firm (such asTowerpoint Wealth), he or she IS a fiduciary to you!

Put differently…

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

We love social media, and are always actively growing our social media community!

Follow us on any of these platforms you use, and then message us with your favorite charity, and we will happily donate $10 to it!

Click HERE to follow TPW on LinkedIn

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Is it Enough? 5 Steps to Retiring with 2 Million Dollars! 12.08.2021

Having a million very well may not cut it.

''Everybody has a plan until they get punched in the face.''

The stack above represents 100 packets, each containing 100 $100 bills.

This begs the question – Is retiring with 2 million dollars a reasonable goal? A 2020 survey from Schwab Retirement Plan Services found that the average worker expects to need roughly $1.9 million to retire comfortably.

Days versus Decades. Decide which to focus on...

So is $2 million the magic number?

There certainly are a myriad of moving parts involved in answering the question of whether retiring with 2 million dollars is enough, and a number of subjective and objective variables that need unpacking. The recent text thread between our President, Joseph Eschleman, and his wife, Megan, sums this concept up in a simple but perfect way:

Stick to your investment strategy - Do not turn temporary declines into permanent losses.

How pragmatic is it to consider retiring with 2 million dollars tucked away in your nest egg? Is retiring with two million dollars even enough money to truly be comfortable, especially considering today’s rampant inflation? Does retiring with 2 million dollars require that you work until you are 75 or 80 years old? And what do the nebulous and subjective concepts of “comfortable” and “retirement” even mean?

While they are tremendously important ideas (or perhaps abstractions) to define when answering the question of whether retiring with 2 million dollars is “doable” (and is enough money), we will reserve opining on what “comfortable” and “retirement” means to the intimate conversations we have with each of our current and prospective clients. Needless to say, different people define these two terms very differently. Instead, let us explore five specific steps that will put accumulating 2 million dollars within reach for you, while leaving yourself enough time in retirement to actually enjoy and spend some of it! And no, playing and winning the lottery is not one of the steps…

Step 1 – Don’t Wait, Start Investing NOW!

The fastest path to retiring with 2 million dollars, in our opinion? Drop everything, stop reading this newsletter (!), establish a plan to begin investing, and immediately begin to pay yourself first. Right now! As you can see below, the sooner you start, the more time your assets have to compound and grow:

And if you already are proactively saving and investing, stop reading this newsletter (!), drop everything, and make an incremental increase to the dollar amount, or percentage, or both, that you consistently add to your nest egg. When it comes to retiring with 2 million dollars, time is money, and the sooner you start to invest, and the more consistently you do so, the easier it will be to hit this very achievable goal.

Step 2 – Properly Diversify Your Investment Portfolio, and Be Wary of Individual Stocks!

The idea of diversification is basic yet essential to most investors. Unless you are truly willing to lose everything, do not put all of your eggs into only one or two baskets. Protecting against the risk of “significant shrinkage” of your retirement nest egg is critical; it is important (we argue essential) to allocate your resources and investments over a broad spectrum of asset classes and sectors:

Being diversified does not assure a profit nor guarantee against a loss, but it does help to insulate your retirement nest egg against major market declines. Retiring with 2 million dollars is a lofty goal, and the importance of managing your downside should be as much of a priority as consistently growing your portfolio. Adding additional types of assets to a portfolio will help it last longer, and help you avoid major pitfalls in your journey towards a financially-independent retirement.

Additionally, we believe it is important to exercise extreme caution when considering investing in individual stocks. While it can be fun and “sexy” to own specific companies, investing is not meant to be fun nor sexy. Do not confuse speculation with investing.

Chase individual stocks at your own risk. Individual equity ownership oftentimes becomes a short-term bet – even an outright gamble – which is the antitheses to a longer-term strategy geared to helping you retire with $2 million. While all investing involves risk, this risk materially increases when focusing on or owning just a few stocks. The statistics bear this out:

Source: Morningstar, 12/31/2020

History is replete with examples of blue-chip companies that have crumbled miserably, and correctly picking a long-lasting, top-performing stock is usually a product of blind luck rather than skill. Don’t be overconfident in either your acumen to evaluate the investment merits of a single company or stock, your ability to consistently predict the future, nor your ability to consistently guess correctly which individual equities might outperform.

A little boring? Perhaps. But being boring and disciplined in how you grow, protect, and diversify your nest egg, is an excellent way to improve your odds of successfully retiring with 2 million dollars.

Step 3 – Take Advantage of FREE MONEY

We believe that there is no EASIER way to compound your wealth and improve your odds of retiring with 2 million dollars than by fully understanding, and then maximizing all employer matching program opportunities within your company sponsored retirement plan:

If your employer offers a match, be sure to find out the following:

  • Is there a waiting period until you are eligible for it? Common waiting periods are six months, twelve months, or sometimes no waiting period
  • What is the actual formula your employer uses to compute their match? Put differently, what percentage of your own contributions will your employer match? $0.50 on the dollar? Dollar for dollar? Up to what maximum of your contributions?
  • How much do you have to contribute to qualify for the match? Oftentimes, you have to contribute a minimum amount of your pay into your company-sponsored retirement plan in order to receive the maximum match, which hopefully is not a problem in your pursuit of retiring with 2 million dollars…!
  • When do the company matching contributions vest? Put differently, how long do you have to wait, or work for your employer, before the company’s matching contributions are 100% yours to keep?

Another form of FREE MONEY that employers may offer is a profit sharing plan, in which employers give workers a portion of the company’s profits in the form of pre-tax cash contributions to an employee retirement account.

Regardless of what the rules are, or in what form the FREE MONEY is packaged, if your employer makes available matching contributions and/or profit sharing, taking full advantage of it makes retiring with 2 million dollars that much easier.

Step 4 – Don’t Panic When the Market Declines

A market decline of 10% or more is also known as a correction. And they happen regularly. How regularly? On average, once a year!

If you are able to develop and cultivate a mindset that allows you to anticipate, perhaps even expect, a market correction (decline) to happen, you will be much less inclined to hurt yourself by getting scared, hitting the panic button and selling low to “stop the bleeding.” Don’t kid yourself, this happens, regularly, even to investors who posture as “disciplined,” “objective,” and “unemotional.”

Want to improve your probability of retiring with 2 million dollars? Be smarter than your neighbor, know that declines happen, and that there will be years when you have less money on December 31 than you did on January 1. It is never fun, and can even be be outright painful, to experience a year-over-year decline in the value of your overall net worth, but enduring these periods is absolutely necessary. Fortunately, history has continually proven and strongly suggests that the odds are in your favor, especially if you have a little bit of time to patiently wait for the recovery to occur:

Who summarized this concept best? We are torn. Please click HERE and vote for your favorite!

I.     The legendary investor Peter Lynch:

II.     The legendary investor Shelby Davis:

III.     The legendary investor Warren Buffett:

Step 5 – Trust in America, and Own Real Estate

Stocks, bonds, and mutual funds are wonderful investment vehicles, and are excellent tools to build wealth. However, like any investment vehicle, they have their drawbacks – namely, they can be volatile, tax inefficient, intangible, and expensive to leverage. Contemporaneously, real estate is a wonderful investment vehicle to build and accumulate wealth, for reasons similar to stock/bond/mutual fund ownership, and also for a number of reasons that are quite different.

Real estate values, like the stock market, predictably increase over time. This long-term growth is representative of the value continually created by the advancements in our standard of living and in our economic productivity, both here in America and globally.

The growth in the value of stocks, bonds, and real estate is directly correlated to the continued growth of our gross domestic product, or GDP.

Put differently, and we would argue much more eloquently, by Warren Buffett:

“The American miracle, the American magic has always prevailed, and

it will do so again. Nothing can basically stop America.

Don’t let the negativity of today’s 24/7 news cycle (in which bad news sells!), sway your opinion – we live in an amazing place, in an amazing point in time. Please click below for an excellent 1-minute video of Warren supporting his opinion, shot on May 2, 2020, just months after the coronavirus shock began:

Let’s look closer at two main reasons to own real estate:

1. Income tax benefits

When insidious income taxes are avoided or deferred, retiring with 2 million dollars becomes much easier, as compounding the growth of your overall investment portfolio occurs much more quickly when Uncle Sam is not taking a big bite out of your nest egg. Consider:

Income tax breaks and deductions. There are a myriad of tax breaks and deductions potentially available to real estate investors that are not available to those who invest in stocks, bonds, and mutual funds. Deductions of the expenses associated with owning real estate (property taxes, property insurance, mortgage interest, property management fees, maintenance and repair costs, advertising, legal and accounting fees) are oftentimes tax deductible, as is depreciation.

Section 1031 tax-free exchanges. A 1031 exchange allows an investor to do a tax-free swap, or exchange, of one investment property for another one, while deferring the payment of capital gains taxes on the transactions. Unfortunately, “1031s” are not allowable nor applicable to the sale of traditional stocks, bonds, nor mutual funds.

Capital gains tax exemption on the sale of a primary residence. If you are single, you will pay no capital gains tax on the first $250,000 of profit on the sale of your primary residence; married couples are entitled to a full $500,000 exemption. And while this $250K/$500K exemption is allowable only once every two years, it is a very powerful way to have more of your money compoundwithout paying Uncle Sam, as you pursue the goal of retiring with 2 million dollars. Additionally, many people consider moving and downsizing their primary residence as they enter into retirement, which can potentially unlock significant equity that can then be added to your retirement nest egg.

2. Leverage

While all-cash transactions have recently become more popular in today’s red-hot and competitive real estate market, the most common way to buy real estate continues to be by borrowing money to do so. This is also known as leverage. While it can be a double-edged sword (problems can quickly arise if property values decline, too much money is borrowed, or the interest paid on borrowed funds is too high), leverage provides a wonderful opportunity to own MORE of an asset for less money, expanding your potential to see your nest egg grow.

The simplest example of leverage is the down payment “obligation” when purchasing a primary residence. You typically only have to put down, 20% of the cash to buy and own100% of the asset! And while the borrowing and down payment terms may not be quite as favorable, the same leverage opportunity holds true when buying and owning investment real estate. In today’s ultra-low interest rate environment, larger amounts of money can be borrowed more cheaply (read: at lower interest rates), affording investors additional leverage when building and growing their overall net worth. This can be quite helpful in accomplishing the goal of retiring with 2 million dollars!

Bonus Step – AFTER You Have Retired with 2 Million Dollars – Pick the Right Place to Retire

Clearly, maximizing your lifestyle post-retirement requires attention to the cost of living. Stretching a dollar is always important, and retiring with 2 million dollars “buys” you options, specifically, on where you choose to live.

Click the thumbnail below for the ThinkAdvisor.com slideshow that focuses on the 8 Best U.S. Cities for Retirement Over the Past 5 Years:

It is important to note that accumulating enough money is only Act One when determining whether retiring on $2 million is feasible. Figuring out how to properly, and sustainably, withdraw money (AKA decumulate) from your nest egg is Act Two, and is just as, if not more important to get right. A way-too-simplified back-of-the-envelope computation might look like this:

  • $2,000,000 nest egg x 3.5% annual withdrawal rate = $70,000/year
  • $70,000/year – 25% in assumed federal and state income taxes = $52,500/year net retirement income, or $4,375/month

Information is intended to be general in nature, for simplistic illustrative purposes only, and is not intended to serve as Investment

advice, since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances.

However, there are a myriad of additional variables and considerations that factor into this “retirement calculus.” What about pensions? Inflation? Social Security? Income from part-time work? Variability in market growth and investment returns? Appropriateness and sustainability of a 3.5% annual withdrawal rate? Increases in health care and insurance expenses as you age? Legacy and philanthropic planning and objectives? The list of important and yet very subjective considerations goes on and on. When developing a customized retirement income plan, the nuance in working through and deciphering each consideration cannot be understated.

Is retiring with 2 million dollars doable? Is $2 million enough to be happy and comfortable? As our President communicated to his wife, “it depends ,” and without a much deeper analysis of the variables mentioned above, it can be very difficult to accurately answer. However, what we can say with confidence is that if you have, or have nearly, accumulated $2 million for retirement, you have an excellent head start, and have probably secured yourself many attractive options. In our opinion, wealth is not defined by a set amount of dollars, but by the freedom it affords you. And having options and choices on how to live your life is the essence of what freedom, and retirement, truly is.

What’s Happening at TPW?

When the cat’s away, the mice will play!

A happy Towerpoint Wealth family (minus President, Joseph Eschleman) enjoyed a pre-Thanksgiving lunch (complete with oysters) together at Camden Spit & Larder in downtown Sacramento!

Our President spent his Thanksgiving week in Surf City, USA (AKA Huntington Beach, CA), where he enjoyed a successful day of deep sea fishing. That’s a California scorpionfish on Joseph’s line – don’t touch those dorsal spines, they are very poisonous!

While our entire TPW family was out of the office on the Friday after Thanksgiving, we were all still working (with some help from the little ones!) in our respective WFH offices!

Chart / Infograph of the Week

Inflation is no longer being called “transitory” and is now here more permanently, according to Federal Reserve chairman, Jerome Powell.

Thanks to Visual Capitalist for the infographic below. Understanding that it has been virtually impossible to avoid, please reply to this email and let us know what recent purchase you’ve made where you have specifically noticed today’s inflationary pressures.

Quote of the Week

In the spirit of the Thanksgiving holiday, we enjoyed American Trappist monk, writer, theologian, mystic, poet, social activist, and scholar Thomas Merton’s quote below…

Cartoon of the Week

A snarky and insightful cartoon from Real Life Adventures, roasts not only how buying high and selling low is an all-too-common problem, but also how novice investors lose money and disciplined investors make money during a market panic.

Ah, the folly of the investing world…

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

Download Newsletter Towerpoint Wealth

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

We love social media, and are always actively growing our social media community!

Follow us on any of these platforms you use, and then message us with your favorite charity, and we will happily donate $10 to it!

Click HERE to follow TPW on LinkedIn

Click HERE to follow TPW on Facebook

Click HERE to follow TPW on Instagram

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Restricted Stock Units – What is an RSU? 10.28.2021

Restricted Stock Units (RSUs) can be a significant component of an employee’s compensation package. But what is an RSU? How are they treated for tax purposes? Taxation of Restricted Stock Units? What are stock options? How do you plan most effectively when your RSUs vest? Net worth means what? The 411 on Restricted Stock Units will tackle these questions and more.

What is an RSU?

RSUs, also commonly known as restricted stock shares, are a form of stock based compensation whereby an employee receives rights to shares of stock in a company that are subject to certain restrictions. These units do not represent actual ownership or equity interest in the company and as such hold no dividend or voting rights. (1) However, once the restriction is lifted, the units are converted to actual company shares and an employee owns the  shares outright (same as traditional stock ownership).  

The restriction on the units is generally based on a vesting schedule. Most vesting schedules will fall into one of two categories:

  • Time-based: based on the period of employment. Common time-based vesting schedules are between three to five years and are either pro-rata or “cliff” based. For a “cliff” based schedule, all shares vest fully at the end of the schedule.       
  • Performance-based: based on the company achieving a performance goal. Common performance-based vesting schedules are based on a company achieving a particular stock price or a return on equity, or earnings per share.    

    *There is a hybrid-approach between time-based and performance-based known as time-accelerated. Vesting is on a time-based schedule but may be accelerated by the company achieving a performance-based goal.  

RSU and stock options | How Are RSUs Different Than Vested Stock Options?

When most people think of stock based compensation, vested stock options, or the right to buy a company’s stock at some future date at a price established now (the strike price), are typically what first comes to mind.  

Historically, vested stock options have been the most popular form of stock based compensation. And up until 2004, stock options merited favorable accounting treatment as a company could avoid recognizing compensation expense by issuing the options.  

In 2004, this loophole was eliminated and subsequently RSUs/restricted stock shares, aka units, emerged as the preferred form of equity compensation.  

RSUs and stock options have some notable differences:

RSU Strategy | RSU Vested Stock Options Restricted Stock Units White Paper 2021 Towerpoint Wealth | What is an RSU?

Scenario 1: An employee is granted 1,000 RSUs when the market price of the company’s stock is $10. When the RSUs vest, the stock price has fallen to $8. The shares are still worth $8,000 to the employee.  

Scenario 2: An employee is granted 1,000 stock options with a strike price of $10. During the window to exercise these vested options, the market price of the stock is always below $10. These options will expire worthless to the employee.  

*There are many other forms of nontraditional compensation, such as Stock Appreciation Rights (SARs), Phantom Stock, and Profit Interests. None of these are as widely used as RSUs or Stock Options and will not be a focus in this paper.

What Is the Taxation of Restricted Stock Units?

RSUs are taxed upon delivery of the shares (i.e., when the restriction has been lifted).     

At time of delivery, the shares are included in an employee’s taxable income as compensation at the fair market value of the total shares. The taxation of restricted stock units is identical to normal wage income and as such, is included on an employee’s W-2. (3)    

Taxation of Restricted Stock Units? Shares Stock Market White Paper Towerpoint Wealth

The shares are subject to federal and employment tax (Social Security and Medicare) and state and local tax as well.     

For paying the taxes due on delivery, companies will provide an employee with either one uniform withholding method or several options as follows:

  • Net-settlement:a company “holds back” shares to cover the taxes and then the company pays the tax from its own cash reserve. This is the most common practice.      
  • Pay cash: an employee receives all shares and covers the income tax burden out of their own pocket. This is a riskier strategy than net-settlement, as it results simultaneously in a more concentrated equity allocation and lower cash balance (less money to pay the taxes).
  • Sell to cover:an employee sells the shares needed to cover the income tax burden on their own. This method provides no real advantage over net-settlement and places the additional burden of selling the shares on the employee.   

When an employee ultimately sells their vested shares, they will pay capital gains tax on any appreciation over the market price of the shares on the vesting date. If the shares are held longer than one year after vesting, the sales proceeds will be taxed at the more favorable long-term capital gains rate. (4)

Restricted Stock Units Stock Options Vesting Dates Towerpoint Wealth

Taxation of Restricted Stock Units Example:

An employee is granted 750 Restricted Stock Units on January 1, 2018. The market price of the stock at the time of

An employee is granted 750 RSUs on January 1, 2018. The market price of the stock at the time of grant is $10 and the RSUs vest pro-rata over three years: 

Each increment is taxable on its vesting date as ordinary income. The total ordinary income paid over the three years is $11,500. 

Taxation of Restricted Stock Units

Each increment is taxable on its vesting date as ordinary income. The total ordinary income paid over the three years is $11,500.

The employee then sells all 750 shares of stock three years after the last shares vest.

The employee held each share for more than one year, so the gain is treated as long-term. The employee’s long-term capital gain is $11,000 ($22,500 less $11,500) to be reported on Schedule D of their U.S. individual tax return.

What Are the Risks of Holding RSUs?

Utilized correctly, restricted stock units/restricted stock shares can be a wonderful complement to a traditional compensation package and can contribute substantially to an employee’s net worth. (5) This can be, however, a double-edged sword.

The overlying risk is that an employee can have too much of their net worth concentrated in one individual stock and for that matter, one individual company.

Let’s explore a scenario:

Jim has a net worth of $200,000, not including 2,000 shares of RSUs with his employer,  Snap Inc. On January 1, 2019, 100% of Jim’s 2,000 RSUs vest at $50 per share.

Great news! Jim’s net worth, on paper, has now increased by $100,000 overnight. Jim’s overall net worth is now $300,000

Jim decides to keep all his shares in Snap Inc. with the belief the stock price will continue to go up. 

He also sees his colleagues choosing to hold most of their shares, and fears that if Snap Inc.’s price soars, he will have missed out and his colleagues will all become wealthier than him. 

On July 1, 2019, Snap Inc. releases a weak earnings report and the share price drops to $20. Jim’s net worth is now $240,000, down 20% from January 1st. 

Even worse, Jim paid taxes at his ordinary rate on the original share value of $100,000 when the shares are now only worth $40,000.

And finally, because Jim has a significant portion of his net worth in the company he works for, he faces an additional and potentially catastrophic risk. What if Snap Inc. runs into serious financial struggles and he loses his job? Not only will Jim’s net worth plunge from further declines in Snap Inc.’s share price, he also will now have lost his primary source of income.

How Can I Most Effectively Plan for Restricted Stock Units, RSUs?

We recommend you discuss how to effectively plan for RSU shares with your financial advisor to ensure a decision is not made in a vacuum, but rather in the broader spectrum of your entire financial picture. Of course, we encourage collaboration with your tax advisor to determine the optimal strategy from a tax perspective as well.  

In reality, when RSUs vest, you may be better off by immediately (or over a short-term schedule) selling a sizeable portion of the vested units and using the proceeds to add to or build a diversified investment portfolio.    

Regardless, before you make any decisions, it can be helpful to explore the following questions:   

  • How much of your overall wealth is tied up in RSUs?  
  • Is your company growing quickly or slowly?   
  • What is your current tax situation? Is it better to wait more than one year after the shares vest to sell them to receive the more favorable long-term capital gains tax treatment?  
  • How long do you plan to be with the company?
  • What is your tolerance for risk?
  • If the market value of the stock was instead received in the form of a cash bonus, how much of this would you invest in the company stock?   

How can we Help?

While we at Towerpoint Wealth continue to believe in the importance of a diversified portfolio, we also understand every individual situation is unique, what growing net worth means to each individual is different, and understand emotions can play a significant albeit oftentimes problematic role in making sound financial decisions. This is especially the case for RSUs. If you would like to speak further about RSUs (or any nontraditional compensation for that matter), I encourage you to call, 916-405-9166, or Steve Pitchford (Sacramento Certified Financial Planner) email spitchford@towerpointwealth.com.

Download The 411 on Restricted Stock Units, What is an RSU?

Learn more about what is an RSU? on our YouTube Channel

(1)   While RSUs hold no automatic dividend rights, companies may choose to issue dividend equivalents. For example, when a company pays cash dividends to common stock holders, RSUs can be credited dividends for the same amount. These credits may ultimately be used to pay the taxes due when RSUs vest or can simply be paid out in cash.

(2) Stock Options can either be Incentive Stock Options (ISOs) or Nonqualified Stock Options (NQOs). They are treated differently for tax purposes.  

(3) When received, dividend equivalents are subject to the same tax rules as RSUs.

(4) Important to note that the shares must be held more than one year for long-term capital gains treatment. If sold exactly one year from the vesting date, they will be taxed at the higher short-term capital gains. 

(5) Net worth means the total value of all of an individual’s assets less their liabilities.

Towerpoint Wealth, LLC is a Registered Investment Adviser. This material is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Towerpoint Wealth, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Towerpoint Wealth, LLC unless a client service agreement is in place.

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Will Your Portfolio Fall to Pieces Due to Federal Income Tax Increases? 10.01.2021

Lots of talk. Lots of posturing. Lots of sound bites. But not a lot of action (so far, at least). A familiar refrain? It is, when it comes to our elected officials in Washington D.C.

washington gridlock Bipartisan Infrastructure Bill Summary

In today’s Trending Today newsletter, we are going to explore the $1.2 trillion bipartisan infrastructure bill, the $3.5 trillion infrastructure plan details, and, perhaps most importantly to investors, the potential federal income tax increases that may occur if and when either, or both, of these massive bills become law.


Legislators are taking a two-step approach in their efforts to pass President Biden’s ambitious jobs and infrastructure program, some provisions being Republican-friendly, and some Democrat-friendly. This two-track plan to pass this legislation works as follows: Put the GOP-friendly items in a $1.2 trillion bipartisan infrastructure bill that could pass on a bipartisan basis, and then put the rest in a much larger $3.5 trillion infrastructure bill that would attempt to pass on a party-line vote, via what is known as budget reconciliation, which only requires a simple majority to pass it.


The $1.2 trillion bipartisan infrastructure bill, known as the Infrastructure Investment and Jobs Act, already passed the Senate by a vote of 69-30 on August 10. Many people have asked: “What is the bipartisan infrastructure bill, and what’s in it?” Focusing on the traditional definition of infrastructure, the bill focuses on roads, bridges, rail, and water. It is truly a monumental measure, with an equally monumental 13 digit price tag!

What’s in the bipartisan infrastructure bill?

what is the bipartisan infrastructure bill

However, the bipartisan infrastructure bill cannot become law until it also passes the House of Representatives, and that is where things begin to become tricky.

Nancy Pelosi Federal Income Tax Increases

Speaker of the House Nancy Pelosi promised that the House would vote on the $1.2 trillion bipartisan infrastructure bill yesterday, but that vote was again delayed. The problem? Pelosi faces pressure from progressive Democrats, who say they will not support the “skinny” $1.2 trillion bipartisan infrastructure bill unless the much bigger $3.5 trillion infrastructure bill, focusing on human infrastructure and social spending such as climate change mitigation, increased child care funding, and health care expansions, also moves ahead.

We truly feel it is amazing that we live in a world where spending $1.2 trillion on a bipartisan infrastructure bill is considered “skinny,” but it is when compared to the $3.5 trillion infrastructure bill!

Financing such social programs as universal pre-kindergarten, extended childcare, and expansion of health insurance coverage provided under Obamacare, the $3.5 trillion infrastructure bill, known as the American Families Plan (AFP), it represents the largest expansion of federal spending since the New Deal. And, with this enormous price tag comes the concurrent federal income tax increases to fund it. Here are the potential “highlights”:

  • Federal income tax increases – the AFP will restore the 39.6% pre-Trump, pre-Tax Cuts and Jobs Act marginal ordinary income tax rate. This current marginal rate is 37%.
  • Multimillionaire excise tax – the AFP places a 3% excise tax on income in excess of $5 million
  • Higher corporate tax rates – the corporate tax rate is set to increase form 21% to 26.5%, with a new minimum tax of 16.5% on offshore earnings
  • Higher capital gains tax rates – the federal marginal capital gains tax rate for those with incomes higher than $400,000 will increase from 20% to 25%, and will be retroactive to September 13, 2021

And the less-likely but still possible proposals:

Additionally, the following indirect federal income tax increases are in the crosshairs:

  • Elimination of Roth IRA conversions for taxpayers filing jointly with incomes over $450,000, and for single taxpayers with incomes over $400,000
  • Elimination of “Backdoor” Roth IRA contributions, banned for ALL income levels
  • Mandatory taxable drawdowns of large IRAs – contributions to IRAs that have a total value of $10 million or more would be prohibited, IRAs and 401(k)s in excess of $10 million will have required minimum distributions of half of the amount over $10MM, and for retirement accounts over $20 million, everything over $20MM must be distributed immediately

Federal Income Tax Increases Explained

Still confused? Have more questions? Hungry for clear answers? Found below is a simple educational video we just produced, designed to break down the complicated topic of the $1.2 trillion bipartisan infrastructure bill, the $3.5 trillion infrastructure plan details, and the concurrent federal income tax increases that may occur, all specifically arranged in a digestible and easy-to-understand format.

Click HERE to watch the video!

Federal Income Tax Increases Explained

Be sure to also click the SUBSCRIBE button to follow

Towerpoint Wealth on YouTube!

Importantly, and regardless of how things shake out, at Towerpoint Wealth we sincerely believe three things:

  1. Taxes will be higher over the next few years, perhaps as early as January of 2022, and perhaps significantly for higher income earners
  2. It is very reasonable to assume that this infrastructure legislation, in one way, shape, or form, will become law, and that trillions of dollars will soon be spent by our Federal government
  3. The next three months represent the most important tax planning months in recent years, as potential federal income tax increases mentioned above could be effective as soon as 1/1/2022

These tax planning opportunities include:

  • Accelerate income into THIS YEAR, and defer tax deductions into future tax years, to leverage today’s low income tax rates and minimize tomorrow’s potential Federal income tax increases
  • Utilize a partial, or even full, Roth IRA conversion in 2021, for the same reason mentioned directly above
  • Evaluate gifting strategies, such as the utilization of a donor advised fund (DAF), to accelerate (or “bunch”) your charitable contributions to hurdle the standard deduction in 2021

Have a plan, and if you don’t, we encourage you to click HERE to message us and begin to discuss your circumstances further. With the high probability of federal income tax increases occurring in the near future, time is of the essence!

What’s Happening at TPW?

Our always-photogenic Director of Research and Analytics, Nathan Billigmeier, and his beautiful wife Jessica, post together prior to heading into the brand new Safe Credit Union Performing Arts Center in downtown Sacramento to see a stellar performance of Hamilton!

Nathan Billigmeier Director of Research and Analytics

Most of the Towerpoint Wealth family (and extended family!) had a fun day of golf two Monday’s ago, directly supporting the Rotary Club of Arden-Arcade and the Rotary Club of Granite Bay to raise resources and money for homelessness, at-risk youth, and local schools and parks.

It was quite the “Around the World” golf tournament, specifically the craft beer, jello shots, and marshmallow drive on the TPW-hosted 7th hole!

Graph of the Week

Are you a nocoiner, or do you HODL?

A compelling chart below suggests that cryptocurrency does not appear to be going away any time soon!

What do you think is going to happen with crypto? Click HERE to message us and let us know your thoughts!

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

Click here to Download

Towerpoint Wealth Sacramento Independent Financial Advisor

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

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The Bipartisan Infrastructure Bill and the $3.5 Trillion Infrastructure Bill 10.01.2021

Are Federal Income Tax Increases Looming?

Our elected officials in Washington DC are working diligently to pass a $1.2 trillion bipartisan infrastructure bill, and also a much larger $3.5 trillion human infrastructure bill.

Click below to watch our President, Joseph F. Eschleman, and learn more about:

1. The mechanics of both bills, and the current status of the soap opera in D.C., as the U.S. House of Representatives and the U.S. Senate continue to posture, grandstand, debate, and negotiate

2. Learn about the specifics regarding the looming federal income tax increases that may soon be coming

3. SPECIFIC ideas on 4Q, 2021 tax planning strategies that you can apply before the new year (and potentially, the new taxes) is upon us

If you think federal income taxes will remain low, then this video is NOT for you; if you think we are in for federal income tax increases, then click thumbs up and pay attention to these ideas!

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Will EVs Rise Mean Combustion’s Demise? 08.27.2021

Big Oil. A somewhat-pejorative name used to describe the world’s six largest publicly traded oil and gas companies:


BPChevronExxonMobilRoyal Dutch ShellTotalEnergies, and ConocoPhillips.

BP, Chevron, ExxonMobil, Royal Dutch Shell, TotalEnergies, and ConocoPhillips

These “supermajors” are facing intense challenges, specifically to their oil reserves and production. Pressure to cut back traditional upstream spending and redirect capital into renewable energy projects is intense, which we believe will drive oil supply down and oil prices higher.

Renewable svs Oil and Gas

Oil production growth outside of OPEC+ has been extremely difficult to achieve, and recent ESG pressures have exacerbated these problems. In what the New York Times dubbed a “stunning defeat” for ExxonMobil, and a huge win for ESG proponents, activist investor Engine No. 1 secured three new directors (out of 12 total) to ExxonMobil’s board of directors, with a specific mandate to reduce the company’s carbon footprint by curtailing capital investments into its upstream oil and gas businesses. At about the same time, a Dutch court ruled that Royal Dutch Shell must cut its CO2 output by 45% by 2030 to align company policy with the Paris Climate Accord.

What will happen when the other supermajors are also forced comply with mounting ESG and governmental pressures and reduce upstream spending? We believe non-OPEC production will continue to decline, further paving the way towards increased capital expenditures for renewable energy projects. Rystad Energy analysis forecasts renewable energy projects to set a new record in 2021 ($243 billion), narrowing the gap with oil and gas spending (projected to be relatively flat at $311 billion).

These facts all align with the multi-step strategy that President Biden announced just earlier this month: By 2030, half of all new vehicles sold in the US should be electric. And while this goal is a bit loftier than the EV sales projections found below, the transition from oil to electric is obviously no longer a trend, but instead a full-blown movement.

Electric Vehicle Stocks

Underscoring this movement was the pledge made by executives from the three largest US auto companies: 40 to 50% of their new car sales would be electric by the end of the decade. Understanding that gas-powered vehicles are the single biggest source of greenhouse gases in the US (producing more than 25% of our total emissions), a rapid shift from combustion engines to EVs continues to aggressively take place. Need further confirmation?

The question certainly remains: Will consumers buy them?

At Towerpoint Wealth, we recognize there are obstacles: higher sticker prices, the lack of widespread charging stations (needed for longer-distance drivers), stress to the country’s power grid (if every American drove an EV today, the US could end up using about 25% more electricity than it does today), and pressure from labor unions (EVs have 30-40% fewer moving parts, and require fewer workers to assemble) are all headwinds to this movement. However, we also believe it is just a matter of time before combustion-engine vehicles take their place next to rotary phones, VCRs, and the folding maps.

rotary phones, VCRs, and the folding maps

What’s Happening at TPW?

Three generations of Eschleman men!

Our President, Joseph Eschleman, attended the Philadelphia Phillies / Tampa Bay Rays game on Wednesday evening at Citizens Bank Park in Philly, with his father Eric and his 11-year-old son, Henry.

The Phils blew the game in the ninth inning, but all three Eschlemans had a great time together!

President, Joseph Eschleman, attended the Philadelphia Phillies his father Eric and his 11-year-old son, Henry

In an effort to maximize our productivity as a firm, we were early to adopt Salesforce as our customer relationship management (CRM) software.

Salesforce forms the backbone of our operations, allowing us to efficiently administer and manage all of our interactions with clients, colleagues, prospects, and friends.

A huge thank you to Ryan O’ConnellDynasty Financial Partners’ CRM specialist (in the photo, “sandwiched” between Michelle Venezia and Lori Heppner after lunch yesterday) for being on site this week to assist with a Salesforce instance upgrade, helping us to stay ahead of the curve and better interface and communicate with each of our clients!

Ryan O'Connell Dynasty Financial Partners Michelle Venezia Lori Heppner

Illustrations/Graphs of the Week

Have you heard that federal capital gains taxes may soon be increasing?

Although the final details of President Biden’s American Families Plan to potentially increase capital gains taxes (to pay for some portion of the various US Congressional domestic priorities such as education and child care) are not yet specified, they are likely to influence securities prices and financial market conditions.

Oddly, the chart below depicts the price return of the S&P 500 index six months before and six months after capital gains taxes were increased.

By far (and we feel, surprisingly), the six months BEFORE capital gains taxes are increased represent the periods of most risk to equity prices.

Capital Gains Tax Stocks


Trending Today

As the 24/7 news cycle churns, twists, and turns, there have been a number of trending and notable events that have occurred over the past few weeks:

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

Click here to Download
http://towerpointwealth.com/wp-content/uploads/2021/09/Will_EVs_Rise_Mean_Combustions_Demise.pdf
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Restricted Stock Units | RSU 04.28.2021

Restricted Stock Units | A common program many publicly traded companies offer to their employees is an Employee Stock Purchase Plan. But ESPPs aren’t the only stock plan out there. Many companies have a different type of stock compensation program that allows them to grant you shares, called Restricted Stock Units, or RSUs for short. 

Restricted Stock Units are a way for an employer to compensate employees by granting them actual shares of company stock. The grant is “restricted” because it is subject to a vesting schedule. Therefore, the employee typically only receives the shares after the vesting date. Once the shares are delivered, the grant is considered compensation income and your taxable income is the market value of the shares.  

When you later sell the shares, you will also recognize income on any appreciation over and above the market price of the shares back on the vesting date. Your holding period will determine whether the gain is subject to short-term ordinary income rates, or lower long-term capital gains rates. 

Watch this video from our Sacramento Wealth Advisor and CPA, Matt Regan, to learn the taxation rules associated with RSUs, and the importance of planning to limit your overall tax liability.

Sacramento Certified Public Account, Matt Regan
Sacramento Wealth Advisor | Sacramento Financial Advisor

Restricted Stock Units, RSUs | Last week, I spoke about a common program many publicly traded companies offer to their employees, an Employee Stock Purchase Plan, or ESPP for short. If you recall, these plans afford you an opportunity to buy shares of the company you work for at a discounted price. But ESPPs aren’t the only stock plan out there. Many companies have a different type of stock compensation program that allows them to grant you shares, called Restricted Stock Units, or RSUs for short. 

Hi Everyone, Matt Regan here from Towerpoint Wealth, and today I am going to discuss the basics of RSUs.

As I just mentioned, RSUs are a way for an employer to compensate employees by granting them actual shares of company stock. The grant is “restricted” because it is subject to a vesting schedule. As you would expect, the employee typically only receives the shares after the vesting date. 

Vesting schedules are often time-based, requiring you to work at the company for a certain period before your RSUs begin to vest. A common schedule is a “graded” vesting schedule, which means the vesting of the grant occurs in serial portions. Vesting schedules can also have “cliff” vesting, which means 100% of the RSU grant vests after you have completed a specific stated service period of say three or four years. And finally, the vesting schedule can also be performance-based, meaning tied to company-specific or stock-market targets.

With RSUs, you are only taxed when the shares are delivered, which is almost always at vesting. Your taxable income is the market value of the shares upon vesting. The grant is considered compensation income, and is subject to mandatory federal, state, and local income and employment tax withholding. The most common practice of paying these taxes is by surrendering the necessary amount of newly delivered shares back to the company. This holds or “tenders” shares to cover your tax obligation. When you later sell the shares, you will also recognize income on any appreciation over and above the market price of the shares back on the vesting date. Your holding period will obviously determine whether the gain is subject to short-term ordinary income rates, or lower long-term capital gains rates. 

So, there you have it. While RSU’s may not be as complicated as ESPP plans, the tax planning for them is just as important. Understanding when your shares will vest gives you the opportunity to plan in advance to ensure you can limit your overall tax liability. Feel free to contact me on LinkedIn, Facebook, or Instagram to discuss the taxation of RSU’s in greater detail. Thanks, and have a great day.

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Employee Stock Purchase Plan 04.21.2021

Employee Stock Purchase Plan | If you are an employee of a publicly traded company, it most likely offers an #employeestockpurchaseplan, or #ESPP for short. These are excellent plans to take advantage of as they allow employees to purchase company stock at a #discount. However, what most people do not fully understand are the #tax consequences of selling the stock.

With an ESPP, you are not taxed at the time the shares are purchased, but instead only when you sell. As you may expect, the tax consequences of the sale will be different, depending specifically on how long you have held the shares. This holding period will determine if the sale is a #qualifyingdisposition or #disqualifyingdisposition.

Watch this video from our Sacramento Wealth Advisor and CPA, Matt Regan, to learn the taxation rules associated with ESPP plans, and the importance of having a “disposition strategy” that will produce the best economic result for you.

Sacramento Certified Public Account, Matt Regan | Sacramento Wealth Advisor | Sacramento Financial Advisor

If you are an employee of a publicly traded company, it most likely offers an employee stock purchase plan, or ESPP for short. These usually are excellent plans to take advantage of, oftentimes allowing employees to use after-tax payroll deductions to purchase company stock at a discount, which can be as high as 15% off the actual market price of the stock! However, what most people do not fully understand are the tax consequences of selling the stock acquired through these plans. 

Hi Everyone, Matt Regan here from Towerpoint Wealth and today I am going to discuss the taxation rules associated with ESPP plans, understanding the importance of having a “disposition strategy” that will produce the best economic result for you.

With an ESPP, also known as a qualified Section 423 plan, you are not taxed at the time the shares are purchased, but instead only when you sell. Employees can generally sell shares at any time, which is great if you have immediate cash needs, or want to reinvest the money into other assets. However, the tax consequences of the sale will be different, depending specifically on how long you have held the shares. This holding period will determine if the sale is a “qualifying disposition” or “disqualifying disposition,” which governs how much of the gain will be taxed at capital gains rates, or at less favorable ordinary income rates. 

A qualifying disposition occurs when you sell your shares after holding them for at least one year from the purchase date, *and* at least two years from the offering date. The rules say that you will pay ordinary income tax on the lesser of either 1) The discount offered based on the offering date price, or 2) the gain between the actual purchase price and the final sale price. The remainder of the gain, if there is one, will be taxed at the more favorable long-term capital gains rate. 

If you don’t meet the holding period requirements for a qualifying disposition, then by default you end up with a disqualifying disposition. You will pay “regular” ordinary income tax on the difference between the actual purchase price and the purchase date market price, and you’ll pay capital gain tax rates on the difference between the purchase date price and the final sales price.

A little complicated, I know. As you can see, it is incredibly important you understand the ESPP tax rules and how they can impact the amount of money you end up keeping in your pocket, if and when you decide to sell any shares you own in your plan. Feel free to contact me on LinkedIn, Facebook, or Instagram to discuss a disposition strategy that is best for you given your circumstances and financial goals. Thanks, and have a great day.

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Trading vs. Investing 04.15.2021

Trading vs. Investing | These two terms Trading vs. Investing are often used interchangeably by many, understanding the goal of both is to generate profit in the stock market. However, they represent two very different philosophies in how you approach the market. 

Oftentimes when we watch movies and TV shows about the stock market, we see a Gordon Gekko-type of character, quickly buying and selling stocks, making the big bucks, and living an opulent life. They make trading look seductive. But, as you would expect, it can be a very risky enterprise.

Investing, on the other hand, involves strategically buying an asset you expect to rise in value over time, independent of any shorter-term movements in its price. Investors usually have a longer-term time horizon, and look to build wealth through *discipline*, gradual appreciation, and compound interest.

Watch this video from our Sacramento Wealth Advisor and CPA, Matt Regan, to learn the pros and cons of both investment philosophies and how you can incorporate both approaches into your own portfolio.  

Sacramento Certified Public Account, Matt Regan | mregan@towerpointwealth.com
Sacramento Wealth Advisor | Sacramento Financial Advisor | Trading vs. Investing

Trading vs investing | Two terms that are often used interchangeably by many, understanding the goal of both is to generate profit in the stock market. However, they represent two very different philosophies in how you approach the market. Depending on your level of market expertise, time availability, risk tolerance, emotional discipline, and goals, one of these approaches may be better for you than the other.

Hi Everyone, Matt Regan here from Towerpoint Wealth, and today I am going to discuss the differences between Trading vs investing, and why you would want to incorporate either of these philosophies into your investment strategy.

Oftentimes when we watch movies and TV shows about the stock market, we see a Gordon Gekko-type of character, quickly buying and selling stocks, making the big bucks, and living an opulent life. They make trading look seductive. Trading focuses on timing market moves and buying and selling individual stocks within a short period of time to generate quick profits. As you would expect, it can be a very risky enterprise. If a trade doesn’t go your way, you can lose a lot of money in a very short period of time. The costs of short-term trading are also greater. The more trades you execute, the more fees or commissions you might have to pay. Also, any quick gains that are made will be subject to higher ordinary income tax rates, and not the lower long-term capital gains tax rate. These two costs can be a huge drag on overall portfolio growth.

Investing, on the other hand, involves strategically buying an asset you expect to rise in value over time, independent of any shorter-term movements in its price. Investors usually have a longer-term time horizon, and look to build wealth through discipline, gradual appreciation, and compound interest. Investors typically own a well-diversified portfolio of investments, and only sparingly make major adjustments. Since investors are not constantly buying and selling, the overall costs and drag on the portfolio oftentimes is lower as well. So, while investing may not be fast paced, nor exciting, at Towerpoint Wealth, we feel it is the best way to gain the highest return at the lowest risk.

So, there you have it. Both ways of approaching the stock market have their pros and cons. If you’re comfortable with the risks, trading can be an exciting way to earn quick profits. If reducing risk and taking a more methodical approach to building your net worth are your main goals, then you’ll want to stick with a longer-term investment philosophy. Regardless, these philosophies don’t need to be mutually exclusive, and if you are interested in learning how you can incorporate both approaches into your own portfolio, feel free to contact me on LinkedIn, Facebook, or Instagram for some expert guidance and to have a no-strings-attached conversation. Thanks, and have a great day.

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Coinbase | Largest cryptocurrency exchange 04.15.2021

Today, Coinbase Global Inc., the largest cryptocurrency exchange platform in the U.S., went public on the Nasdaq exchange via a direct listing under the ticker symbol COIN. Coinbase is the world’s third largest digital asset exchange, and by far the most well-known cryptocurrency exchange platform in the US. COIN provides a service that helps its users easily secure direct ownership of cryptocurrencies.

For years, cryptocurrency has faced skepticism and resistance, but the floodgates appear to continue to be opening as banks and businesses have begun accepting Bitcoin for transactions or investing heavily into it with corporate cash. Many people see Coinbase’s arrival on the stock market as further validation for cryptocurrencies, and a great PR opportunity for the entire crypto industry.

Watch this video from our Sacramento Wealth Advisor and CPA, Matt Regan, to learn more about Coinbase, what it means for the cryptocurrency world, and what it means for individual investors like you and me.

Sacramento Certified Public Account, Matt Regan
Sacramento Wealth Advisor | Sacramento Financial Advisor

Over the past year, Bitcoin has been on a tear. On April 13, 2020, a single coin was valued at $6,879. At the close of yesterday, a single coin was valued at $63,291, an 820% increase in value in just one year, just remarkable. This is clear evidence of just how much cryptocurrencies have continued to be viewed as a legitimate asset. And cryptos received another boost today, as Coinbase, the largest cryptocurrency exchange platform in the U.S., went public on the Nasdaq exchange via a direct listing, under the ticker symbol COIN.

Hi Everyone, Matt Regan here from Towerpoint Wealth, and today I am going discuss what Coinbase is, what it means for the cryptocurrency world, and what it means for individual investors like you and me.

Coinbase is the world’s third largest digital asset exchange, and by far the most well-known cryptocurrency exchange platform in the US. “COIN” provides a service that helps its users easily secure direct ownership of cryptocurrencies. About 90% of Coinbase’s revenue is currently derived directly from retail trading, with most if that here in the U.S., and centered primarily on the two largest cryptocurrencies: 1. Bitcoin and 2. Ethereum. The benefits to owning shares of Coinbase? Revenue and profit increase as interest and demand in cryptocurrencies continues to increase. The risks? ONE: The possibility for stricter governmental regulations, and TWO: Business and financial conditions for Coinbase could be negatively affected if demand for Bitcoin and Ethereum declines and is not replaced by new demand for other crypto assets.

For years, cryptocurrency has faced skepticism and resistance. Just this past February, Warren Buffett said “Cryptocurrencies basically have no value, and they don’t produce anything. I don’t have any cryptocurrency and I never will.” But at least for now, Warren appears to be wrong, as the floodgates appear to continue to be opening. Banks, credit card companies, professional sports franchises, and even automakers have begun to make moves into the space, either by accepting Bitcoin for transactions, or by investing heavily into it with corporate cash. Many people see Coinbase’s arrival on the stock market as further validation for cryptocurrencies, and a great PR opportunity for the entire crypto industry.

As cryptos become more mainstream, we feel confident that it doesn’t mean volatility will decrease. Just like mainstream markets, news developments and speculation fuel price swings. Crypto markets are less liquid than traditional financial markets, so this heightened volatility and a lack of liquidity can create a dangerous combination, as oftentimes they both feed off of each other. As a result, it is very important investors have a long-term investment strategy and the ability to control their financial emotions during these expected wild fluctuations. If you are interested in discussing how cryptocurrencies can fit into your own financial plan, contact me, Matt Regan, on LinkedIn, Facebook, or Instagram. Thanks, and have a great day.