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Time to Tiptoe Towards That Crypto? 06.18.2021

Whether you are skeptical, cautious, and apathetic, OR enraptured, excited and intrigued by it, crypto has exploded in global popularity over just the past year, and has, to one degree or another, captured the attention of most of the civilized world.

Bitcoin was released as the first decentralized cryptocurrency in 2009, and nine years later, in 2018, the Merriam-Webster Dictionary approved “cryptocurrency” as an official word. While many (ourselves here at Towerpoint Wealth included) believe that crypto is here to stay, there are still plenty of “no-coiners” who feel otherwise:

Many Westerners find it difficult to understand how a 12-year-old digital currency could be safer to hold than the US dollar, which has long been recognized as the reserve currency of the world. However, once you understand that the Federal Reserve, America’s central bank, has inflated the money supply to achieve its macroeconomic goals, it becomes a bit clearer. Note the “infamous” comment made by Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, in a March 22, 2020 interview on CBS’ 60 Minutes:

Do we have your attention now?

Rather than opine on the intrinsic details and inner-workings of crypto, it is important for most investors to note three main takeaways:

  1. Cryptocurrency is a digital, or virtual, asset. Many cryptocurrencies are decentralized and aspire to be a form of money and a medium of exchange
  2. Unlike fiat currencies, most cryptocurrencies operate without government oversight or intervention
  3. Most cryptocurrencies are managed by a large group of network participants, and are secured by advanced cryptography. Explaining the Crypto in Cryptocurrency does an excellent job of explaining cryptography further

Concurrently, the shift to embrace crypto as an investment vehicle is certainly on the rise. According to the Financial Planning Association’s 2021 Trends in Investing Survey, conducted by the Journal of Financial Planning:

  • More than a quarter (26%, to be exact) of financial advisors plan to increase their use or recommendation of cryptocurrencies over the next 12 months
  • Almost half (49%, to be exact) of advisors indicated that clients had asked them about investing in cryptocurrencies over the past six months

Do these two facts alone make crypto “good” or “appropriate” for integration into one’s investment portfolio? Certainly not, but it does speak to the inflection (some may say tipping) point where we find ourselves. El Salvador is pushing to become the first country to adopt bitcoin as legal tender. This feels more like a movement than a trend.

As a brief crypto aside/FYI, the term HODL (hold on for dear life) was coined (yes, pun intended) by a user in an internet bitcoin forum who misspelled “hold,” and now refers to a devout buy-and-hold crypto philosophy. Now you know!

Perhaps next month, Trending Today (TT) should pivot from cryptocurrency and cover NFTs (non-fungible tokens)? Is your head spinning and ready to explode yet? While we are joking about NFTs being the next TT topic, we cite them in light of our dialogue above about cryptocurrency, as NFTs are just another specific example of how quickly our world (both inside and outside the world of finance and investing) is changing. Are these immature assets with room for development? We would argue yes. However, we also argue for (read: encourage) you to be careful about dismissing new technologies too quickly, and to be scrutinous yet open-minded about the speed at which our society is evolving.

Aside #2: If you have three minutes, click HERE to watch an extremely funny (and surprisingly educational) Saturday Night Live skit about NFTs.

Crypto – Join Us for Our Cryptocurrency Webinar!

Bitcoin and Ethereum are two of the most popular of the more than 4,000 different cryptocurrencies in existence as of January 2021. Crypto has exploded in popularity over the past year, and has emerged not only as a new asset class, but also as an alternative store of value – some call it “digital gold.”

Click below to RSVP for this 45-minute educational Zoom webinar, in which Christopher King, CEO and Founder of Eaglebrook Advisors, will discuss the question: “Bitcoin – what is it?” as well as how cryptocurrencies and digital currencies can play an important complementary role within a properly diversified investment portfolio.
Wednesday, June 23
12:00PM – 12:45PM PST
Click HERE to RSVP

For every participating attendee, we will make a $10 donation to the Leukemia and Lymphoma Society – please invite a friend, colleague, or family member to also RSVP with this link!

What’s Happening at TPW?

As a work family, part of the Towerpoint Wealth culture is to regularly volunteer and find opportunities to give back to our community. Earlier this week, in conjunction with the Cathedral of the Blessed Sacrament and with the help of Marilynn Fairgood, the Cathedral’s Brown Bag Lunch program coordinator, we had an opportunity to assemble, and then distribute, sack lunches and other supplies to assist Sacramento’s homeless community.

Unquestionably this was a fulfilling experience for everyone involved, as the sincere gratitude and appreciation we received was both heartwarming and priceless.

Click HERE for an excellent article from KHOU-11 for additional information on how to help and volunteer for the Brown Bag Lunch program.

Chart of the Week – Crypto, Bitcoin

In our opinion, the most effective way to reduce and manage the risk of a properly diversified portfolio is to own various assets and investments with low correlations to each other. Understanding that no one can accurately predict the future performance of any investment, owning low (or even negatively) correlated assets can help mitigate damage during any particular market cycle.

Below is a simple chart (specifically, the darker blue dotted rectangle) that delineates the correlation between Bitcoin and the S&P 500 – at 0.19, this is an attractively low correlation. Put differently, Bitcoin oftentimes zigs when the stock market zags.

In addition to technology’s permeation into finance, 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.

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

Towerpoint Wealth Sacramento Independent Financial Advisor
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Towerpoint Wealth Co-Sponsored Educational Event with First Citizens Bank 06.11.21

“Coming together is a beginning. Keeping together is progress. Working together is success.” -Henry Ford

We feel sincerely fortunate and grateful for the partnership our firm has with First Citizens Bank here in Sacramento (and Roseville and Folsom), as the talent, knowledge, products, and services that FCB offers helps us more deeply help our clients manage their ENTIRE personal balance sheet, in the interests of removing the hassle of properly coordinating all of their financial affairs.

A big thank you to Ty Gibney for inviting us to participate in FCBs financial educational workshop yesterday, and to our Partner, Sacramento Wealth Advisor, Jonathan LaTurner, for hosting everyone at The Sutter Club! It was a thoughtful and well-assembled event, and in the interests of maintaining and growing the comprehensiveness of the service offering our wealth management clients require, we look forward to maintaining and deepening our partnership with FCB for many years to follow. 🙏

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401(k) Loans 03.31.01

401(k) Loans | You’ve recently made some money in the stock market and interest rates are still low, so you decide it is the perfect time to buy a home. But there is a dilemma – which assets should be used, and which accounts should be drawn from to fund the down payment? Should you liquidate investments held in your “regular” non-retirement account, or should you borrow from your 401(k)?

Many people don’t like the idea of funding a down payment by selling investments in a “regular” non-retirement account because of the possible income tax consequences. Instead, they sometimes choose to borrow from their 401(k), saying to themselves: I can save money NOW by borrowing from myself, AND I am paying myself interest on the loan! Sounds harmless, right? Not so fast!

Watch this video from our Sacramento Wealth Advisor and CPA, Matt Regan, to learn why treating your 401(k) like a piggy bank could have a material impact to your retirement plan and longer-term economic health.

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Comprehensive Estate Planning | TPW White paper 03.08.2021

Navigating the Tax Laws to Maximize | Your Beneficiary’s Inheritance | Comprehensive Estate Planning

When most individuals are establishing an estate plan, they generally only think about the tax consequences to themselves. But a truly comprehensive estate plan is one that takes planning a step further and considers the tax consequences the beneficiaries of the estate may face. When creating an estate plan, having a clear understanding of, and properly planning for these taxes will help ensure your beneficiaries get the largest inheritance possible.

When one inherits money as a beneficiary of an estate, there are three different taxes that oftentimes need to be understood and accounted for:

Let’s take a look at these individually:

Estate and Gift Tax

• The 2021 federal estate tax exemption (commonly known as the unified tax credit) amount is $11,700,000 per individual.
• Only the deceased taxpayer is subject to the estate tax when the estate value is greater than the unused exemption.
• Even if the decedent did not have a taxable estate, the estate of the decedent survived by a spouse should file Form 706, Estate Tax Return, to pass any remaining/unused unified tax credit exemption to the surviving spouse.
• When someone dies, their assets become property of their estate. Any income those assets generate is also part of the estate, and may trigger a requirement to file Form 1041, Income Tax Return for Estates and Trusts.
• An inheritance is not considered taxable income to the beneficiary.
• Currently, in addition to estate taxes assessed at the Federal level, 12 states and the District of Columbia also collect an estate tax. California does not currently have an estate tax.

Inheritance Tax

• Only six states currently collect this tax (Iowa, Kentucky,Maryland, Nebraska, New Jersey, and Pennsylvania).
• Property passing to a surviving spouse is exempt from inheritance taxes in all six of these states.

Income Tax

• Inherited retirement account distributions are subject to ordinary income taxes.
• If you sell or dispose of inherited property that is a capital asset, you will be subject to either a long-term capital gain or loss, regardless of how long you, as the beneficiary, have held the asset.

Additional considerations

Inherited Pre-Tax Retirement Accounts

• Eligible Designated Beneficiaries and Non-Eligible Designated Beneficiaries are subject to different required distribution rules.
• Consider Roth conversions to allow the beneficiaries to take tax-free distributions.

Lowering the Value of Your Estate – Gifting

• Make annual cash gifts to your children, grandchildren, other family members, and even friends. You can also contribute cash to a 529 plan to help pay for future school to any individual you would like. The receipt of cash is non-taxable to the recipient, and, if the gift is below the $15,000 annual exclusion amount, you will not eat into your above-mentioned $11,700,000 lifetime estate and gift tax exemption amount.

Lowering the Value of Your Estate – Philanthropy

• If you are charitably inclined, you can make gifts of any size at any time while alive directly to charities or to a Donor Advised Fund. The donation of appreciated securities provides not only an immediate deduction of the fair market value of the stock at the time of contribution, but also avoids capital gains tax upon sale.
• Charitable contributions due to the death of the taxpayer result in a dollar for dollar reduction of the taxable estate.
• Additional vehicles available include Charitable Remainder Trusts or Charitable Lead Trusts.

Life Insurance

• If you are considering buying life insurance to either pay for the estate tax liability or provide more for your beneficiaries, set up a life insurance trust and have it purchase the policy so the death benefit isn’t included in your taxable estate.

Step-Up in Cost Basis – Take Advantage!

If you have appreciated stock or property and gift it to someone, the recipient gets the carried over basis and will have to pay capital gains when he or she sells the asset. Instead of gifting before your death, have them inherit it after your passing so they get a “step up” in basis and recognize a smaller gain on future disposition.

The Future of Estate Taxes Under the Biden Administration

• During his campaign, President Biden discussed the possibility of decreasing an individual’s federal estate tax exemption amount either to $5 million per individual (and $10 million for a married couple) or to the pre-Tax Cuts and Jobs Act amount of$3.5 million per individual (and $7 million for a married couple). This decrease in lifetime exemption could be paired with an increased top tax rate of 45 percent.
• President Biden also proposed eliminating stepped-up basis on death and possibly taxing unrealized capital gains at death at the proposed increased capital gains tax rates.

How Can We Help?

At Towerpoint Wealth, we are a legal fiduciary to you, and embrace the professional obligation we have to work 100% in your best interests. If you would like to learn more about Towerpoint Wealth and how we can help you achieve your financial goals, we encourage you to call (916-405-9164) or email (mregan@towerpointwealth.com) to open an objective dialogue.

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Choosing Who Will Inherit Your Retirement Accounts

You are working on your estate plan, and trying to figure out who you should name as the beneficiary of your 401k account and IRAs. Simple – the kids, right? Not so fast.

Click to watch the video below from our Wealth Advisor, Matt Regan, to learn the non-spouse beneficiary distribution rules for inherited and pre-tax IRAs and “regular” pre-tax 401ks, and why understanding these rules are so important for income tax and estate planning purposes.

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Five Things I Wish Someone Told Me Before I Became A Founder 02.12.2021

Our President, Joseph F. Eschleman, CIMA®, was interviewed by Candice Georgiadis, a contributing writer to Authority Magazine, as part of her series about leadership lessons of accomplished business leaders. Joseph’s story and message does an excellent job of summarizing not only how passionate and driven he is as President and founder of Towerpoint Wealth, but also the grit, tenacity, and hard work it takes to build and grow an individual advisory practice, and to then pivot, and ultimately build and grow a $300 million boutique wealth management firm.

Click HERE to read the Joseph Eschleman / Towerpoint Wealth story!

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Cryptocurrency – Wait, I Have to Pay Taxes??!!

Do you own/trade cryptocurrency? Interested in investing in BitcoinEthereum, or any of the other 4,000 cryptocurrencies currently available to own and trade?

If so, it is important you understand the income tax consequences of owning crypto.

If you are thinking about buying, selling, or trading cryptocurrencies, watch this quick video from our Wealth Advisor, Matt Regan, to learn the tax consequences of doing so.


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Suitability vs. Fiduciary

When hiring a financial advisor, you expect him or her to always act in your best interests, 100% of the time, right? Unfortunately, this is not always the case. Click below and watch a quick video from Matt Regan, and learn about the important difference between the fiduciary standard and the suitability standard, how they can impact your financial and wealth management plan, and ultimately, your success in growing and protecting your net worth and assets.

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Rich vs Wealthy

Would you rather be rich or wealthy? Do you know the difference? The small financial decisions we make today will have a huge impact on our future. Click below and take 60 seconds to watch Matt Regan’s video message, and click HERE to congratulate him on his new baby boy!

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The *Unreal* Real Estate Market of 2020

For a myriad of reasons, 2020 has been both a surreal and unreal year, and the growth in the value of residential real estate is illustrative of that. According to USA Today and the National Association of Realtors (NAR), despite the hard economic times caused by the COVID-19 pandemic, home prices rose in the first quarter of 2020 in 96% of U.S. metro markets. A few of the local Sacramento-area agents we work with have commented that “this [real estate] market is even hotter and crazier than it was at its peak in 2006.

The environment 14 years ago was very different – during the U.S. housing bubble, real estate prices were artificially inflated due to speculative fervor, lax lending standards, and arguably negligent regulations. But when we fast forward to 2020, we find four reasons for this red hot market:

Historically LOW interest rates. Money is extremely “cheap” right now, as interest rates on mortgages continue to hit record lows.

Cheap money is analogous to low interest rates, meaning it doesn’t “cost” much to borrow. Mortgage rate cuts have given house hunters ~ 25% more buying power in less than two years, and that does not appear to be ending soon. The less it costs to borrow, the more a buyer may be inclined to do so when buying a home. Alternatively, the less it costs to borrow, the lower the homebuyer’s monthly mortgage payment. Adding this all up provides major stimulus to and demand for buying real estate.

Urban exodus. Just a few years ago, demand for city living was high, and people were piling into major metropolitan areas throughout the United States; now, the opposite is happening, and they are filing out in favor of suburban life.

Rent decreases are accelerating, as seven of the top ten priciest rental markets saw apartment prices drop 5% over the same time last year. Cultural and social opportunities that often draw people to metropolitan areas have largely shut down due to coronavirus. The perceived health concerns associated with public transportation and dense city living, high city taxes, the safety concerns and stress caused by demonstrations devolving into riots and other increases in crime, the desire for more space, and the ability to work remotely have all created a huge outflux from the cities, and concurrently, an influx of cash that has pushed up real estate prices in the ‘burbs.

Telecommuting / virtual working. Before COVID-19, only about 5% of workers did their jobs remotely. That figure has jumped to nearly half. Google, Twitter, and Facebook have led Silicon Valley in announcing plans to let, or even require, employees to work from home, at least for the next year, if not indefinitely. New York-based financial giants J.P. Morgan and Morgan Stanley have offered their employees a similar option. Telecommuting is no longer a trend, it is a full-blown movement. And that has allowed, or better put, freed people to live where they desire, and not feel geographically-tethered to their job location.

Inventory shortage. There is an imbalance. There are more buyers than sellers. Postponed purchases from March and April due to home-buying restrictions have created intense demand. Families are looking to upgrade, and, understanding we are all spending more time in our homes that before, people simply want more space. There was a nationwide industry shortage even before the pandemic hit, and the COVID-19 crisis has only exacerbated the problem. U.S. home values grew to $256,663 in August, an 0.7% increase from July, the largest increase since 2013, and inventory is 29.4% lower than a year ago! Builders are racing to catch up with demand, and rising prices should encourage more potential sellers to come off of the sidelines and list. But until those things occur, the shortage of inventory will continue to tilt the housing market in favor of sellers. Economics 101: When demand outstrips supply, prices go up.

How long this lasts remains to be seen. At Towerpoint Wealth, we believe that things will only begin to change in the real estate market when the uncertainty surrounding the job market, economy, and COVID-19 epidemic begin to subside.

What’s Happening at TPW?

The TPW crew enjoyed a “robust” teambuilding potluck earlier this week, highlighted by grass fed tri-tip marinated in “The Sauce for All Seasons,” Pearson’s Premium!

Our Partner, Wealth Manager, Jonathan LaTurner, our Director of Research and Analytics, Nathan Billigmeier, our new Wealth Advisor, Matt Regan, and our Director of Tax and Financial Planning, Steve Pitchford, enjoyed an early morning TPW team-building golf outing at William Land Golf Course!

TPW Service Highlight – Roth IRA conversions

While 2020 will rightfully be remembered for the challenging and unprecedented COVID-19 battle we have all been impacted by, at Towerpoint Wealth, we have continued to proactively work with clients to identify economic opportunities presented by the coronavirus crisis. Specifically, we have identified a “silver economic lining” tax planning strategy this year, one that is designed to take advantage of today’s low income tax rates, which we feel are temporary, while at the same time leave our clients better positioned for tomorrow’s higher income tax rates, which we feel are inevitable.

Below you will find 2020: The Perfect Year for a Roth Conversion, our newly-published white paper that discusses what a “Roth conversion” is, who may benefit from a Roth conversion, why 2020 is a potentially great year to do a Roth conversion, and how to utilize important tax planning tools to evaluate this opportunity.

Graph of the Week

While we obviously need to continue to remain disciplined, and understanding there is still more work to be done, the United States COVID-19 hospitalization numbers below, from Bespoke Investment Group, are encouraging. Less than one person per 10,000 population (or less than 100 people per 1MM population) is currently hospitalized with coronavirus.

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 complicated place, and we are here to help you properly plan for and make sense of it.

– Nathan, Raquel, Steve, Joseph, Lori, Jonathan, and Matt

Towerpoint Wealth Team : Sacramento Financial Advisor