Is Cryptocurrency Safe for Your Retirement Plan?

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Cryptocurrency is alluring for a lot of investors. It’s hard to overlook Bitcoin and Ethereum rising to $65,000 and $4,300 (1) in the last few months. But these crypto currencies have also dropped to $36,977 and $2,587 at the time of writing this article.

For someone in retirement or close to retirement, crypto may or may not be a smart addition to their portfolio.

Where Cryptocurrency Stands for Current Retirees or Someone Close to Retirement

A lot of our clients are interested in Bitcoin and other cryptocurrencies. There are stories of people investing $10,000 in these investments that are now worth $1 million or more. High returns on investment are always going to raise a person’s interest.

There are also some people saying that crypto could replace the dollar, which would make it less volatile and a lot more attractive,

The question is, for someone that is close to or in retirement, could you afford losing 40% or 50% of your investment in a month?

Crypto can provide massive returns, but you’re also entering an investment that can cause you to lose a lot of money overnight. Talks of regulating crypto in the past month sent a bunch of the currencies spiraling downward.

Your goal and objective when investing in cryptocurrency will be the determining factor in whether or not to add it to your portfolio. The last thing you want to do is secure your retirement only to see your portfolio suffer massive overnight losses.

Assessing Risk and How Risk Pertains to Crypto

Cryptocurrencies have a lot of risk because it’s still so new. You have strong backers like Elon Musk that can push Bitcoin high with one announcement and cause it to tumble with another.

Government regulations are also another issue.

All of this uncertainty adds to the risk of investing in cryptocurrency. Are you willing to lose 30% to 50% of your portfolio in a few weeks? If not, then cryptocurrency isn’t for you.

When we talk to our clients and run a risk assessment, people are typically willing to risk 5% to 10% of their portfolio. Let’s look at a real-world example. Let’s assume that you have $1 million in a retirement portfolio:

  • 5% to 10% loss would be $50,000 to $100,000
  • 30% to 50% loss would be $300,000 to $500,000

Wiping out $300,000 of your retirement can be very difficult for a person to withstand. For most people that have been investing and building up a retirement account throughout their adult life, jeopardizing retirement for crypto is simply unthinkable.

There are also some clients that are willing to put maybe 10% of their portfolio, or $100,000 using the example above, into crypto. If the person is comfortable losing this money, they may think that the risk is worth the reward.

How Much of Your Retirement Portfolio Are You Willing to Risk?

If you’re willing to take a risk on the unknown, you’ll want to ask yourself: how much should I risk? You can funnel 2% of your portfolio, or $20,000 into crypto, and keep the rest in low-risk investments.

While you stand to gain and lose a lot, most people are fine with diversifying into crypto if the potential loss isn’t devastating.

If you can afford to lose the money, you should have the mentality that you’re willing to lose it all. Perhaps you don’t mind losing $1,000 or even $100,000, and if this is the case, you can definitely invest in crypto.

We wouldn’t recommend a significantly high percentage of your retirement account being used for crypto because you worked hard for your retirement.

And if you do decide to invest in crypto, what is the upside? Will you pull out of the investment if you see 50% returns, or will you keep your money in the investment for the long-term? There are a lot of questions to ask yourself.

In the ideal world, we advise our clients that have worked so hard to secure their retirement that they should only invest amounts that they’re comfortable losing. The last thing you want is to not have enough money to retire because of a riskier investment.

If you’re close to retirement, are you willing to lose your retirement to crypto?

For most people, the answer is no.

Understanding Crypto Well Enough

Retirement planning is a learning experience. If you want to secure your retirement, you need to understand the investment vehicles that you’re choosing. In our opinion, and through experience, we only invest in things that we understand.

Sure, cryptocurrency has a lot of upsides, but if you don’t understand it, you don’t know what it can be applied to in the real world.

You don’t need to be a teacher of crypto, but we do recommend that if you want to add this investment to your portfolio, be sure that you know how they work.

Crypto is “created.” The coins are mined using processing power. The concept is all digital and essentially made up. But through backing, these digital currencies have been able to grow.

A lot of people want a decentralized currency, and this has given crypto its basis for existing.

You need to ask how crypto works.

  • What is crypto mining?
  • How are transactions logged?
  • What’s the future of crypto?

If you can answer these questions, then you may find that cryptocurrency is a good option for you. 

For our clients, we aim for stability in their portfolios. We certainly don’t want to lose all of a portfolio overnight, and we minimize risk with a diversified portfolio. Cryptocurrency is one of the investments that can lose a significant amount of value overnight, so there’s little that you can do to adjust your portfolio to reduce imminent risk,

You can go to bed at night and wake up with 30% of losses.

As advisors, we don’t invest our clients’ money in crypto because there’s far too much risk. We’ve had some clients that want to take on that risk and will invest themselves. But for us, with a long-term retirement plan in mind, we only recommend investing in small amounts of crypto at this time.

If a major government backs a digital currency or creates their own, we may change our mind completely on cryptocurrency investing.

But for now, we only recommend investing in crypto if it’s money that you can lose.

If you want more information about preparing your finances for the future or retirement, check out our complimentary Master Class, ‘3 Steps to Secure Your Retirement’. 

In this class, we teach you the steps you need to take to secure your dream retirement. Get the complimentary Master Class here.

Resources

  1. https://economictimes.indiatimes.com/markets/cryptocurrency/bitcoin-rises-4-eyes-37000-ethereum-gains-8/articleshow/83114422.cms

What is an Exchange Traded Fund (ETF)?

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You may have heard of an exchange traded fund, or an ETF before when trying to plan out your retirement or boost your investment portfolio. But what is an ETF and how would you benefit from one?

That’s exactly what we’re going to discuss in this article. We’re going to cover two main concepts:

  1. What is an ETF?
  2. Action items to secure your retirement

What are Exchange Traded Funds?

ETFs have grown in popularity over the past few years, with a lot of money being funneled into them for people’s retirement. We also use them in our own practice, but they should be a part of a diverse portfolio rather than the only investment that you make.

We’re going to compare an ETF to a few investment vehicles so that you have a clear understanding of ETFs and why you may want to add them to your retirement plan.

What is an ETF?

An ETF is a stock, and you can purchase it in the same way that you buy an individual stock. But the ETF itself is not a singular company. When you purchase an ETF, you’re buying into a stock of stocks.

If you wanted to purchase technology stocks, you might consider Google, Amazon, Oracle, Microsoft and plenty of others. 

You would have to sit down, do your research and then purchase the stocks separately. An ETF can make this process easier by allowing you to purchase shares in the ETF, which contains a diverse set of technology stocks.

One purchase allows you to purchase a nice portfolio of stocks without needing to sit down and pick and choose stocks. It’s a lot easier to manage a single ETF than it is to manage 20 tech stocks.

If you know anything about mutual funds, you may assume that they’re the same as an ETF, but they’re not.

ETFs vs Mutual Funds

Mutual funds are one of the most common and original forms of investing outside of a single stock. A mutual fund is, at the heart of things, a company that has different investment objectives.

The objective can be:

  • Mirror the S&P 500
  • Mirror a sector, such as tech or healthcare

The company behind the fund will align the fund’s stocks with this objective. Within a mutual fund, there are many moving parts, including a portfolio manager and various other employees.

A mutual fund will purchase a variety of stocks and place them into their fund.

Mutual funds are a great way to invest in a more hands-off manner because you don’t have to actively manage the mutual fund. The main drawback of the mutual fund is that there are management fees, which can be high.

Since the mutual fund is a company with employees and researchers, they do have fees, which eventually eat into your investments.

ETFs are a natural move forward because they’re more cost-effective than a mutual fund.

Another major difference between an ETF and a mutual fund is that when you put in a buy or sell order for a mutual fund, the order doesn’t go through until the market closes for the day. This can be bad for your investment.

Let’s see an example.

  • Overnight, a bunch of market indicators point to energy stocks dropping tomorrow.
  • You put in a sell order at 9:30 in the morning to avoid losses.
  • Mutual fund sell orders aren’t executed until the market closes, so you sustain losses.

You’ll find a lot of retirement accounts, such as a 401(k), relying heavily on mutual funds. 

Actively Managed ETFs

A new trend is popping up where people are gravitating toward actively managed ETFs, which are very similar to mutual funds without the constraints of only being able to purchase or sell at the end of the trading day.

The downside of an actively managed ETF is that you’ll pay more fees.

If you want to manage your portfolio, you can simply sell the ETF and purchase another one if the ETF isn’t performing well. So, you have a lot of options when it comes to ETFs, and if you don’t mind paying the additional fees, you can even choose an actively managed ETF.

You can also choose the old school investment route where you purchase single stocks, add them into your account and manage everything yourself.

ETF vs Stock Purchases

If you want to build a portfolio of stocks, you can go out and purchase stocks individually. You may want to invest heavily in healthcare stocks, or perhaps you’re interested in small- and mid-sized companies.

You can go out and purchase a lot of individual stocks to properly diversify your portfolio.

But you want to manage your risks when you’re investing your retirement. If you purchase just one or two hot stocks, you can make a ton of money or lose a ton of money. Instead, purchasing a mix of stocks across sectors allows you to take on less risk in your portfolio.

Volatility is less of a concern when you have stocks in multiple sectors.

You may own hundreds of individual stocks, leading to statements that span dozens of pages. It can easily get confusing when trying to figure out which stock is a small- or medium-sized company, and then keeping up with all of these companies can be very difficult.

Researching the direction of each company and their stock is a full-time job in itself when you have a portfolio of 100 or 200 stocks.

ETFs, on the other hand, allow you to purchase 100s of stocks at once. You purchase into an ETF that has massive diversification that helps keep volatility low and reduces your own management. It’s also much easier to see an overview of your portfolio with an ETF versus hundreds of stocks.

Remember, ETFs can be bought or sold just like stock, so your buy or sell order goes through immediately. 

Real World Example of ETFs in Action

Last year, in 2020, the pandemic hit, and the market was starting to fall. We chose to sell off our ETFs as the market dipped, sat on cash, and then bought back in when stimulus checks were sent out and the market started to perform better.

If you remember, Zoom and Amazon were performing very well and benefitted from the pandemic, along with other stocks.

Online and tech companies, especially large cap ETFs, were our go-to choice because these were the stocks that were performing best. When these companies started to cool towards the end of the year, we moved back to small- and mid-cap companies that began to perform very well.

You can choose a broad asset class, such as technology, or you can narrow your ETF down further with biotech ETFs.

ETFs are a great option because they allow you to purchase:

  • Indexes
  • Bonds
  • Stocks
  • Precious metals
  • Different classes of ETFs
  • Country-based ETFs

From a fee perspective, ETFs are more affordable than other options available. We’re seeing the entire investment world start to see the value of ETFs and even some 401(k) plans are moving in this direction.

If you want to learn more about what we do or how we can help you secure your retirement, you can sign up for 15-minute introductory call with us.

How Do Financial Advisors Get Paid?

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When people come to us for financial advice, and particularly retirement planning, they have a very important question to ask: how do financial advisors get paid? You’re entrusting an advisor with your money, and you have a right to know how that person’s fees are structured.

A client might like everything we’re talking about, but they almost always ask how we’re getting paid.

We think it’s very important to know how an advisor is paid because it’s your money being invested. There are three traditional ways that financial experts may be paid:

3 Ways a Financial Advisor Can Be Paid

1. Commission

Commission-based payments have been around the longest, and there’s always some controversy here. Let’s say that an advisor recommends purchasing 100 stocks in Microsoft. He or she may be paid a commission on this purchase.

When someone handles your money, they may be paid commissions, which some clients aren’t happy about.

There are a lot of people that assume commission-based is bad because the advisor:

  • Is incentivized to sell you a product
  • Puts their interest first
  • Etc.

But this isn’t always the case. There are a lot of good products that are commissionable. In some cases, products are always commissionable. Life insurance, for example, is commissionable, and the insurer pays an advisor commission because they recommend the product.

There are times when an advisor can’t get away from the commission, but this doesn’t mean that the product is bad by any means.

An annuity, which pays out money in disbursements, is one that needs servicing. Since the advisor is servicing the annuity, the insurer will pay them a commission because servicing can last 10 years or more.

An advisor may receive a commission:

  • Once per buy-in and/or
  • Once per year, etc.

Mutual funds are another product where there are three different types:

  • A Shares
  • B Shares
  • C Shares

A shares are commissionable and provide an advisor with a certain percentage upfront. B shares don’t have upfront costs, but when you sell the shares, a charge is made and goes to the advisor.

There are also some mutual funds that pay a small commission to the advisor annually.

Real estate investment trusts (REITs) also have commission attached to them. An advisor may be paid with an REIT in many ways:

  • Commission, which is most common. The advisor is paid by the REIT, but you’ll be required to keep the money in the trust for a specified period of time.
  • There are some REITs that don’t pay commission in the same way, which we’ll be talking about in the next sections.

It’s best to ask your advisor if they receive commission. Advisors may also have the option to waive a commission. For example, an A share commission can be waived.

Note: In the financial industry, the commissions are highly regulated. The financial advisor working on your retirement planning can’t do much in terms of changing the commission due to the strict regulation on these products.

2. Fee-only

Fee-only advisors can help you with retirement planning, and this classification means that the advisor cannot help you with a product that gives commission. For example, let’s assume that an advisor is looking through your retirement plan and thinks life insurance would be an amazing option for you.

As an advisor that offers fee-only services, it is required that refer you to someone else for this product because they cannot receive a commission on it.

This is a very restrictive space.

Fees can be:

  • Hourly fees
  • Flat rate
  • Asset-based (percentage of the funds or estate managed)

Asset-based fees are often preferred because as your estate or portfolio grows, the advisor is paid more. This type of fee structure makes sense for a lot of people because it’s in the best interest of the advisor to maximize your returns so that they’re paid more.

3. Fee-based

A fee-based advisor allows the individual to offer both commission and fee-only services, which offers the financial planner the most flexibility. If one of these financial professionals thinks that you may need life insurance, they can offer you this without needing to refer you to someone else.

In the broad spectrum, fee-based makes sense because the advisor can do everything for you.

But we recommend working with someone who is a fiduciary. 

What is a fiduciary?

A fiduciary is held to the highest standard. As a fiduciary ourselves, this means that we must take care of the client first. As a client, this provides you with the most protection.

When speaking to a financial planner who is fee-only or fee-based, any time that there’s a conflict of interest, such as a commission being paid for a product recommendation, it must be disclosed.

We work on a fee-based arrangement, and when we make a recommendation that has a commission, we have to disclose everything to the client.

Ultimately, commissions are built into rates, so there’s always some payment coming from the client. We believe as long as the advisor is upfront and you know all of the fees and/or commissions upfront, commissions are perfectly fine.

If you want more information about preparing your finances for the future or retirement, check out our complimentary Master Class, ‘3 Steps to Secure Your Retirement’. 

In this class, we teach you the steps you need to take to secure your dream retirement. Get the complimentary Master Class here.

Planning for Medicaid – What You Need to know!

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A lot of our clients that are in the midst of retirement planning hear about Medicaid planning. Since there are a lot of questions and misconceptions surrounding planning for retirement and Medicaid, we thought that it would be a great idea to clear up a few of these questions so that you can secure your retirement.

What is Medicaid and How Does It Relate to Your Retirement Planning?

Medicaid is a government program, and it’s, essentially, health insurance for certain individuals that meet a certain set of criteria, primarily “limited means.” There are a few criteria that must be met:

  • Limited income
  • Limited assets
  • Aged 65 or older, or disabled

Medicare vs Medicaid

When you hear the requirement “being 65 or older,” it’s not uncommon to think Medicare. There’s a difference between the two, and while they may both be an option for someone 65 or older, it’s important for your own retirement planning to understand the key differences between the two. 

  • Medicare isn’t means tested, so if you’re over 65, you qualify for the program.
  • Medicaid does require certain asset and income limits to qualify.

Medicaid, if you qualify, offers superb benefits if you can qualify for it. When it comes to long-term care, Medicare doesn’t cover much (20 days full coverage or 100-day partial). Medicaid will provide long-term care coverage, which is great for older individuals that may need to go into a nursing home.

Medicaid Planning and Your Retirement

Retirement planning is often all about protecting your assets and ensuring that you can draw an income stream to pay for your basic costs of living. Planning for Medicaid, since there are restrictions on income and assets, can be a little tricky.

Medicaid’s strict asset limit is $2,000 for assets, which doesn’t include your house or vehicle.

Protecting assets in the advance of the need is ideal because you can use strategic planning to qualify for Medicaid. A lot of people may assume that they can simply transfer assets out of their name to qualify, and this would be correct to an extent.

Medicare has a five-year lookback period, which, effectively, looks at whether you’ve transferred assets in the last five years. If you have transferred assets, you will be penalized and will lose eligibility for a period of time.

Pre-planning can help by allowing you to:

  • Plan five years in advance to transfer assets
  • Eliminate the risk of a penalty or losing eligibility

That’s why we recommend that you plan ahead of time if you think that Medicaid will be beneficial for you. You really want to think far ahead so that if you do need long-term care, Medicaid is available for you.

Trust us: the government will do its due diligence to make sure that you qualify for Medicaid.

But what about a crisis? You can’t predict everything. You might be as healthy as an ox at 64 and a half, and then a week after you’re 65, crisis strikes, and you need long-term care. There is crisis planning strategies that can help in these situations.

Crisis Planning to Meet Medicaid Eligibility

Medicaid’s rules change, and crisis strategies that work today, may not work tomorrow. The rules tend to get more stringent, so there’s no guarantee that one strategy will work for you. A few tactics that may work are:

  • Transferring assets to a disabled child or a trust for a disabled child because there’s no penalty.
  • If you’re under 65, a first-party special needs trust can be created.
  • You may be able to transfer assets to a spouse, but this can be tricky because there may be assets that are jointly owned.

Crisis planning involves trying to convert your countable assets into non-countable assets. Let’s assume that you have a lot of cash. One method may be to pay off your mortgage. A home is a non-countable asset.

By paying off your home, you’re able to transfer cash out of your accounts while building equity in your home.

Strategies like this can be a major part of your retirement plan to qualify for Medicaid.

Married Couple Crisis Planning

Married couples also have strategies that they can use if crisis strikes, including:

  • Medicaid compliant annuity
  • Medicaid compliant promissory notes

When you’re married, Medicaid will look at the combined assets and require the couple to spend down possibly half of the gross asset amount. Let’s say that you have $100,000 in cash as a couple.

Medicaid may say that you need to spend $50,000 or so to qualify for Medicaid if one spouse is in long-term care and the other is not.

The spouse can choose to:

  • Transfer the assets to the non-long-term care spouse, or
  • Put the assets in a Medicaid compliant annuity

If this strategy was employed, the spouse that needs Medicaid would then qualify for Medicaid. 

When you’re working on your retirement plan, it’s so important to spend the time to get your estate planning documents in place. You should have a will and other documents drafted, but one of the most important for Medicaid purposes is your power of attorney documents.

The power of attorney can use gifting strategies to help their spouse or loved one qualify for Medicaid using some of the strategies we just outlined above.

When to Seriously Start Thinking About Medicaid Planning

You can use legal strategies to qualify for Medicaid. It’s really never too early to begin your planning or at least start thinking about the planning. For example, even 35-year-olds can get into an accident or get diagnosed with cancer and need to enter long-term care.

A person in their 30s obviously isn’t thinking about long-term care, but the right legal documents would give their spouse or loved one the authority to transfer assets in their name to cover the cost of long-term care.

Long-term care is extremely expensive, so it’s never bad to think about Medicaid early on.

Since COVID hit, prices have skyrocketed for long-term care. Depending on your area, the cost can be $10,000 to $20,000 a month for care. It’s really important to consider how you would pay for such high expenses for long-term care.

Downsides of Early Medicaid Planning

If you’re healthy and/or young, chances are, you don’t want to transfer your assets away. But let’s say that you do. You know that you have an aggressive form of cancer and will need to be in long-term care.

You can transfer assets to your children, spend a year in long-term care, and then you make a recovery and can go back to normal life.

There’s no guarantee that your children will transfer the assets back to you, and you lose full control of these assets upon transfer. You should never take giving away assets lightly. While you’re sheltering these assets from Medicaid, the loss of control can have lasting implications, too.

Are you trying to secure your retirement and are considering your Medicaid or long-term healthcare needs? Give us a call today for a free consultation.

How to Avoid a Scam!

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Trusting your retirement savings with someone else is difficult. If you’ve spent your life working hard, the last thing you want to do is lose your retirement because of a fraudulent advisor. Bernie Madoff is a name that a lot of people in retirement planning associate with fraud.

After all, Madoff stole around $20 billion (1) in principal funds from his clients, although his firm stated they had returns of $65 billion.

If you want to secure your retirement, you need to know that your advisor isn’t pocketing your money and spending it to live the life of a billionaire. 

Today, we’re going to talk about safeguarding yourself against the Bernie Madoffs of the world.

Quick Background on Bernie Madoff for Everyone That Doesn’t Know

Bernie Madoff’s activities, initially, were legal. He setup custodianships so that he could manage his clients’ money. When you sign over custodianship, you’re putting a lot of trust in an advisor because manipulation can occur.

There’s a lot of oversight, but as we saw with Madoff’s business, regulators didn’t regulate him or his books like they should have.

He had free rein to move money to accounts, forge return numbers and get away with living the life of a billionaire in the process.

99% of Financial Advisors vs Bernie Madoff

Madoff ran a Ponzi scheme, and he did it exceptionally well, even though the activity was obviously illegal. When you hire an advisor, 99.99% of the time you’ll be hiring someone that isn’t Madoff.

You’re going to give someone access to your money, but it’s different than what Madoff was able to do.

When you work with someone – like us, for example – we use a third-party custodianship, which puts your money into Charles Schwab. You can also have money put into Fidelity, TD Ameritrade, or another custodian. It’s very difficult to create your own custodianship. These custodians will provide oversight for you.

For example, these entities create the statements that are sent to you so that an advisor can’t say, “hey, you made 15% returns,” when you really made 2% returns this year.

Bernie Madoff was able to manipulate the statements sent to his clients, who thought they were making a ton of money. Investors were happy to see their portfolios go up and didn’t question their statements.

Madoff, for all of the bad that he did, caused a shift in the way financial advisors can manage money. Oversight and regulations that allowed him to get away with his scam have been strengthened to provide safeguards for investors so that their money is safer in the hands of an advisor.

One of the protections that are in place now is that you own the entirety of your account.

Let’s say that we were managing your money and you decided that it’s time to go in a different direction. You could:

  • Contact Charles Schwab
  • Remove us from the account

You can log into your account to see the activities going on, which does provide some level of peace of mind that your funds are being managed properly. The custodian even prepares all of your tax documents.

Administering Your Account on Your Behalf

As an advisor, if you allow us to administer your account, we do have the power to put in an order to send you funds from the account. The power of an administrator provides us with some opportunities to manage your account, but you’ll never be able to ask us to personally write a check on your behalf.

And that’s a good thing.

The majority of advisors are setup in a similar way to us so that they don’t have the custodianship over your money. A third-party, well-known custodian will provide the oversight and protection necessary to keep your money safe and secure.

Licensing and an Advisor

Industry certification is a must-have in financial planning and the insurance industry. Your advisor should meet all of your state requirements and have the required certifications.

For example, we’re certified financial planners, but we’re also FINRA licensed.

FINRA provides oversight in the world of securities, and they have a variety of licensing available. Licenses offer protections that allow you, as someone looking for a financial planner, to have some peace of mind that your advisor is someone legitimate.

You should ask your advisor about their licensing and even go to your state’s board to learn more about licensing requirements.

If you look into 5 advisors and one says, “no, I don’t need a license,” that should be a red flag that maybe something isn’t right.

But licensing alone doesn’t mean that you can’t be taken advantage of or enter into a Ponzi scheme. Licensing should be seen as a bonus and adds credibility to the advisor, but that’s not the only thing that you should be considering when choosing a financial adviser.

Structure of the Advisor’s Business

Advisors can structure or setup their business in different ways. We’re setup as an RIA, or registered investment advisor, which gives us the ability to act on the behalf of our clients. Since we’re an RIA, we’re held to a fiduciary standard.

What does this mean?

This means that we have to put the client’s interest above our own. You’ll find that broker dealers and agents have their own setups.

And there are different ways that advisors are paid. For example, we’re paid a fee for managing money. We don’t receive commissions on transactions, so there’s no incentive for us to push you to one security or financial vehicle over another.

Brokerages, on the other hand, may be reputable, have a license and can push you to a mutual fund or other investment option. These brokers can sell mutual funds, securities, etc.

You should go to your state’s site and try to find out if the person you’re dealing with is licensed. Licensing means that the advisor is being regulated and must remain compliant.

Money Transfer the Right Way

Even if someone is licensed, this doesn’t mean that there aren’t ways in which fraud can take place. The biggest concern is when money transfers occur because there’s a standard, “right way” for these transfers to take place, and a not-so-standard means of transfers.

What’s the Right Way to Transfer Money?

The right way to transfer money is to write a check to a custodian company, not the investment company themselves. Custodians are highly regulated and are the safest option for transferring money.

What’s the Wrong Way to Transfer Money?

Let’s assume that you’re working with XYZ Corp and you want to invest funds. If you’re making a check out to XYZ Corp, you’re handing over your money directly. The company may be honest and put the funds into your account, or some or all of it can be taken.

It’s not a good idea for you to write checks directly to the financial advisor unless it’s to pay their fees.

When you read about Ponzi schemes, 99.99% of the time, the investor writes a check to the investment company that will then “disperse” the money to your account. If you’re not writing a check directly to the custodian, you’re putting yourself at risk.

Investing your money is always a risk, but you shouldn’t have to stress when you put your trust in a financial advisor. If you do your due diligence, you’ll be able to reduce the risk of being a victim of a Ponzi scheme.

Sources

1. https://www.wyff4.com/article/5-things-to-know-bernie-madoff-scam/36124939#:~:text=steal%20%2465%20billion.-,His%20Ponzi%20scheme%20is%20often%20referred%20to%20as%20a%20%2465,but%20those%20returns%20never%20existed.

Trusts Explained – What you need to know!

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Trusts can be a powerful part of your estate plan, but they’re not a tool that every estate needs to leverage. Do you need a trust? Let’s find out.

What is a Trust?

One of the most common questions we’re asked when working with someone that is in the retirement planning phase of their life is: do you need a trust? And the answer isn’t that simple. A trust may be a way for you to secure your retirement while putting assets in a trust for someone else, but it’s not an estate planning tool for every person or situation.

You can think of a trust as a relationship between:

  • Person that sets it up (grantor)
  • Beneficiary (beneficiary)
  • Person that takes care of the trust (trustee)

An example of a trust can be as simple as:

  • Giving someone $20 
  • Ask the person to give the money to someone else

When you create a trust, you’re allowing the trustee to grant assets, on your behalf, to the beneficiary.

When to Consider a Trust in Your Overall Estate Plan

A trust is not a part of everyone’s retirement planning because it’s really a part of your estate plan. You’ll be creating a trust for someone else, although while you’re alive, you may have access to the trust and all assets within, depending on how the trust was created.

Do you need a trust? No, it’s optional.

But that doesn’t mean that you might not benefit from one. A trust is a good option when you have:

  • Children who are too young to really be a beneficiary
  • Children who are disabled and receiving benefits that they may lose from inheritance
  • Beneficiaries suffering from addiction that may only be granted items in the trust under certain conditions

We also see a lot of trusts being made because the parent of a child isn’t sure that their child’s marriage is going to last, and they do not want part of their estate to go to the ex-wife or ex-husband.

A will distributes the assets out easily in an estate plan, while a trust allows the trustee to manage the estate over time until the beneficiary is ready to receive all or part of the trust.

Trusts are a great way to help divide assets in a second marriage. Perhaps you have children from your first marriage or prior to your second marriage, and you want them to receive a portion of your estate upon your death.

If you don’t have a trust in place, your assets would go to your spouse who may or may not distribute assets to these children.

So, there are a lot of great reasons to choose a trust as a way to strengthen your estate plan. The trust type that you choose will be very important, too.

Most Common Types of Trusts

There are a lot of different types of trusts, and some of these trusts can be very specialized. We’re going to cover the most common types of trusts, but before we do, it’s important to discuss something that is very important for all estate planning matters: probate.

What is Probate and Why You Want to Avoid Probate

When assets are transferred at death, this would be considered probate. A will is, essentially, probate because it helps transfer assets after your death, while a trust can have assets put into it while you’re alive.

Let’s say that you have a house when you die. The house will go through probate and then be given to your heirs.

When assets go through probate, there are drawbacks, such as:

  • Fees 
  • Longer time to transfer the asset

But there are some circumstances where probate may be beneficial. This is not as common, but it can happen.

Revocable Living Trusts

A trust that provides protections for beneficiaries, but they have one key benefit: they’re in existence when you’re alive. While you’re alive, you can place assets in the trust to avoid probate.

Irrevocable Trusts

These trusts are often created for life insurance or charitable donations. Once created, these trusts cannot be modified, revoked or changed after their creation. If an asset is placed in the trust, it cannot be taken out even if your wishes change.

Testamentary Trusts

A very common type of trust that is built into your will. These trusts are only “created” upon your demise, and they’re often in place to protect children that are too young to benefit from the estate just yet.

Special Needs Trusts

A trust for someone that has qualified for Medicaid or Medicare benefits. These trusts are drafted in a way that provides funds to the individual while also ensuring that they qualify for their benefits.

You can also have a trust that is more unofficial but is used when someone is less mature, suffers from a medical condition or is an addict and, at this time, shouldn’t benefit from the trust.

The person can still receive their fair share of the estate, but in the case of an addiction, you can put the share in a trust so that when the child is sober, they can receive assets from the trust. A trustee will often be the deciding factor on whether a special needs trust beneficiary is ready to benefit from the trust.

When a Trust Doesn’t Make Sense for Your Estate Plan

Trusts are a good option for some, but they may not be a good option for others. The times when a trust doesn’t make much sense are:

  • All heirs are doing well with no concerns, in happy marriages, etc.
  • Most of your assets transfer outside of probate, i.e. life insurance, retirement funds, etc.

It truly comes down to the beneficiaries whether a trust is necessary. If you have family dynamics, where maybe an heir is on drugs or gambles, you may want a trust. On the other hand, there are times when a 20-year-old is mature and responsible, so a trust isn’t required.

Choosing a Trustee

Sometimes, choosing a trustee is easy. You have someone in your life that you trust and know will handle your trust accordingly. When you don’t have a clear person that you can trust to handle these matters, then you have a few potential options:

  • Family
  • Friends 
  • Accountant
  • Lawyer 

You can also choose co-trustees where two people are left in charge of the trust.

Deciding on a trustee is very difficult. The trustee may be in their position for 20+ years. A trust can be around for decades, meaning that the trustee is in a vital position where they have to make decisions on distributing money or investing assets so that the trust grows over time.

The trustee may have to tell children “no” when they ask for a distribution.

You have to choose a trustee that you can trust and is very responsible. Since this is a position that the trustee may be in for a long time, they need to be reliable, dependable, in good health and someone that you have a lot of faith in to do the right thing.

Trusts are a complicated form of estate planning, and it’s important to speak to an estate planning professional to help you really determine if a trust is a good option for your estate.If you want to learn more about how to secure your retirement or need help with your retirement planning, click here to schedule an introductory call with us.

How Does a Variable Annuity Work?

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A variable annuity is another type of investment that you can make and add to your retirement account. When we talk about variable annuities, it’s important to fully understand what an annuity is and what they offer to your retirement account.

If you want to implement an annuity into your account, it’s important to know the three main types of annuities available.

Types of Annuities

1. Immediate annuity

The most common form of an annuity is the immediate annuity where you provide an insurer a lump sum of money. In exchange for your lump sum, you receive a certain amount of guaranteed income every month or year (your choice) for the rest of your life. 

You’re giving up your cash, so you don’t have access to this liquidity any longer. Need a new roof? You’ll need to save your income from the annuity or use funds from another account to pay for it.

2. Fixed annuity

A fixed annuity means that you receive a fixed interest rate. Your principal will never fall below a certain amount, and you’re guaranteed a certain amount of interest. The only time your principal goes down is when you withdraw money from the account.

You can have two main kinds of fixed annuities:

  1. Declared rate. A declared rate annuity means that you’ll have a fixed interest rate for certain numbers of years and then can choose to keep money in the annuity or walk away.
  2. Fixed index rate. When you choose this type of fixed annuity, the interest rate is based on an index similar to the way a stock index works. But you cannot lose money with this type of annuity. You can earn 0% interest, but you can never go into negative territory.

You can always draw an income from a fixed annuity. 

3. Variable annuity

What is a variable annuity? Basically, this is a type of annuity that has its interest rate vary based on the type of investment that this annuity is in. For example, you may invest in a certain type of financial instrument.

When you invest in a variable annuity, you can lose money if the financial instrument performs poorly similar to how the stock market works.

How Do Variable Annuities Work?

All annuities have their limitations, but a lot of people are intrigued by the variable annuity because they feel more in control. It’s important to remember that this is also the riskiest annuity because there’s no guarantee of:

  • Interest rate
  • Principal in the account

And you’ll also need to know how to invest using a variable annuity. Since your money is going into investments, this is one of the areas that you really need to sit down and learn about before deciding which type of annuity is best for you.

Making, or potentially losing, money all comes down to your investments.

It works out like this:

  • Put a lump sum into a variable annuity
  • Choose investments in the annuity, called sub accounts

You may be able to invest in mutual funds, ETFs, etc. All of these investments are considered sub accounts.

When you invest in a variable annuity, your investments are limited to what the insurance company offers. The insurance company will allow certain types of investments, and you lose a lot of your control over your money in the process.

Insurance often structures the fund around their own company. For example, the insurer may have their own mutual fund, and you may only be able to invest in these funds that the insurer created.

You may have just 20 or 30 total options with a variable annuity rather than investing freely.

Once you choose a fund, you’re hands-off and are subject to the market risk. You may gain a lot of return, or you may lose out on your investment. The protection that’s offered with the fixed and immediate annuities is completely lost with a variable annuity.

Losing Beyond the Market Dip

For full disclosure, it’s important that we look at how you may lose money with a variable annuity. Let’s assume that you’re able to heavily invest in the S&P 500, and the market falls 30%.

You put $100,000 into the sub account, so now you’ve lost $30,000.

But then there are also other potential losses, which come from fees. You may lose $30,000, but then the fee can be 1.5% to 3% (1) or more (we’re seeing 3% to 5% in total), causing you even more losses. Fees are not based on gains or losses, so your account can go down to $50,000 and fees are still going to be charged.

There are a lot of fees, including:

  • Admin fees. Cost for the insurance company.
  • Mortality expense. Essentially a death benefit.
  • Investment expenses. Costs of about 1% annually for investing.
  • Rider charges. Protection or income protection that can be added on to the annuity. Fees typically range from 1% to 2%.

It’s important that you’re aware of these fees. A lot of these insurers also have surrender charges.

When Would It Be Smart to Use a Variable Annuity?

When you really start understanding a variable annuity and all of the fees involved, you’re going to think “why would I ever choose a variable annuity?” We agree. For most people, a variable annuity doesn’t make much sense because you’re taking on more risks for higher fees.

There is one instance that we can think of where we may recommend a variable annuity.

When does this type of annuity benefit you? All of the annuities are tax deferred, but if you have a variable annuity, you’re likely to also put money into an IRA.

If you have a lot of money that’s not in an IRA and want to leverage a variable annuity for tax purposes, this is really the only time when you may want to put your money into a variable annuity.

What a Variable Annuity Might Look Like for Tax Purposes

Let’s say that you have $100,000 in a variable annuity and $100,000 in a brokerage account. When your brokerage account goes up or down, you’re going to pay taxes and capital gains. In the variability annuity, you wouldn’t be paying taxes because the account is tax deferred.

But when you do take money from the annuity, all of your gains are fully taxable.

You’re paying out taxes later on, which is a nice perk, but these taxes are still going to come out of the account. Keep in mind that the withdrawal from the account will be seen as income, so it’s not taken out as capital gains.

Taxes are not taken out of your original investment – just on the gains.

A variable annuity is beneficial when you don’t have a surrender charge and low fees and prefer tax deferral on your money.

While we don’t recommend a variable annuity to many of our clients, it’s still a viable investment option that you need to consider carefully. You may find that the tax deferment is great for your circumstances because you would rather be taxed at once rather than every year.

If you’re preparing for retirement and want a little guidance and peace of mind, schedule a 100%, no obligation introductory call with us today.

Sources

1. https://www.annuity.org/annuities/fees-and-commissions/

Beneficiaries – What you need to know!

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When you secure your retirement and have been diligent in your retirement planning, you’ll quickly find that your concerns may grow. One of the most common questions we get from others is: how to leave money to the next generation.

Our clients have a lot to say about leaving money to the next generation, including:

  • I’ve given enough to the next generation.
  • My goal is to enjoy my retirement. The kids can have what’s leftover.

But what happens if you’ve done everything that you wanted to do? You’ve traveled, purchased a vacation home and you still have more money than you need. Chances are that you’ll pass away with money that is left for your heirs.

You can use smart retirement planning to make sure that anything left does go to the next generation.

Account Types That You Can Setup

A lot of accounts can be setup so that the remaining funds can be passed down responsibly, including:

  • IRAs
  • 401(k)s
  • Savings
  • Brokerage accounts
  • Life insurance
  • Annuities 

You may even have private property, such as a home or other belongings that you want to pass down to either the estate or a specific heir.

How We Would Handle These Accounts

When you enter into your retirement, you’re likely going to have multiple accounts that you’ve put money into, with the most common being an IRA and 401(k). Accounts always have their own set of issues:

Traditional IRAs/401(k)s 

These haven’t had taxes deducted from them yet, so you need a withdrawal plan in place. But these accounts also make it easy to add a beneficiary to them. You can often log into your account, such as your Charles Schwab account, and add the beneficiary online.

We’ve had a lot of clients that have forgotten about these accounts completely.

If you’re juggling multiple accounts, it’s easy to forget one that may have a few thousand dollars tucked away in it. There’s also the risk that you have already added a beneficiary that you may no longer want to leave money to. For example, your ex may have been the beneficiary, and if still listed as such, he or she will be the beneficiary even if that isn’t your wish.

We recommend that you secure your retirement by consolidating these accounts so that all of your money is in one place, and it’s much easier for you to manage these accounts. 

It’s important to note that 401(k) accounts can be consolidated down into an IRA if you’re no longer working or aged 59 ½ or older.

Savings Account

Savings accounts may not have high interest rates, but they’re a good option to have access to cash when you need it. These accounts lack the great returns you’ll see with other accounts, but you can easily setup what is known as a TOD, which is a transfer on death, or POD (payable on death).

When you set these options on your savings or options, the account is able to avoid probate, which your beneficiaries will thank you for.

You can also setup multiple beneficiaries because what happens if your main beneficiary dies before you do? 

Brokerage Accounts

Setting up a brokerage account properly makes it much easier to separate assets even when compared to a will. The brokerage account may have a beneficiary designation, POD or TOD, that you can designate.

You would name someone to your account.

When you die, all the person has to do is file a claim and provide proof of who they are. This is much easier for the beneficiary than having to deal with probate or the courts.

Life Insurance

A life insurance account is one of the best accounts that you can leave to an heir. Why? These accounts are paid tax-free, so beneficiaries never have to worry about advanced tax strategies to keep more money in the estate.

Roth IRA

Roth IRAs are tax-free, too. The beneficiary is required to take the money out within a ten-year period.

Assigning Primary, Contingent and Further Benefits

Retirement planning should include knowing who you want to assign as your beneficiaries. The standard beneficiary documentation will include:

  • Primary beneficiary, which would be your first choice of a beneficiary. This may be your wife, child or anyone you like.
  • Contingent beneficiary or beneficiaries, which are the person(s) that you’ll want to leave your accounts to if the primary beneficiary is deceased at the time the document is executed.

We recommend that if you have a second contingent, you’ll want to add them as well. A good example of this would be your grandchildren, which would be second contingents. You can have percentages assigned to all of the grandchildren, and this is actually tax advantageous in most cases.

An example of the tax advantages:

  • You want to leave money to one grandchild to pay for their schooling.
  • The child’s parent is wealthy.
  • You might think that leaving the account to your child and allowing them to pay for schooling is beneficial, but it is not.

If you list the grandchildren, the parent can use “disclaiming,” which would help them not go into another tax rate. The grandchild will have to take the money out, allowing them to, in most cases, pay far less taxes if the grandchildren are listed.

You need to make sure that the grandchild is listed as a second contingent so that the money can be passed to them rather than their parents through disclaiming.

This is a tactic that is primarily used for a 401(k) or an IRA.

Per Stirpes and Per Capita

When you fill out a beneficiary form, you’ll often have to choose by per stirpes and per capita. If you don’t choose one, it will normally default to per capita. What does this mean? This means that if you put down three beneficiaries, and one of your children dies, their portion would be dispersed to the two remaining children.

This means that the two beneficiaries would now receive 50% of the account.

If you want the money to go to that child’s grandchildren, you will put “per stirpes” next to your child’s name. This would disperse the funds to your child’s children evenly instead of the money going to only your children.

These are some of the best retirement planning methods that you can use to leave money to the next generation. Even if you don’t want to plan your retirement around the next generation, these tactics can help keep money in your estate.

If you want more information about preparing your finances for the future or retirement, check out our complimentary Master Class, ‘3 Steps to Secure Your Retirement’. 

In this class, we teach you the steps you need to take to secure your dream retirement. Get the complimentary Master Class here.

Click here to schedule a free, complimentary call with us to discuss how you can leave money to the next generation.

Should You Pay Off Your Mortgage?

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When does it make sense to pay off your mortgage?

There’s a lot to consider when thinking about paying off your mortgage. Your home is likely one of the most significant financial investments you’ll make in your lifetime, but it’s also an emotional one. As you near retirement, you may start to wonder if you’ll be better off without the burden of a mortgage ­– but that’s not always the case.

You can watch the video on this topic above, or to listen to the podcast episode, hit play below.

Read on to discover why you need to think about cash flow, alternative resources to cash savings, and if it’s a good choice for you to pay off your mortgage.

Why would you pay off your mortgage?

Before you make a decision about paying off your home, we want you to consider why you’d like to do this.

Perhaps it’s a life goal of yours to pay off your mortgage. Many of our clients dream of living mortgage-free, and it’s our job to help them think through this.

But there’s another school of thought that takes a more strategic approach to mortgage payments. This is where you focus less on paying it off in full and more on paying it off in a way that benefits you financially. For example, if you have a low-interest rate on your mortgage, your savings may be able to offset the interest if they’re invested well, e.g., in the stock market or even a CD.

How would you pay off your mortgage?

In order to pay off your mortgage, you have to have the funds. Think about where these are and where it makes sense to pull the money from.

If you have savings sitting in your bank account, it’s a good idea to use these to pay off your mortgage. Cash in the bank won’t be performing very well as interest rates are currently low­ – almost zero. There are also very few tax issues with this type of account, making it a simple choice.

However, if your savings are in an IRA, and you’d prefer to use this to pay off your mortgage, then you will have to think about the tax impact. IRA money is fully taxable. So, if you want to take $100,000 out of your IRA to pay off your mortgage, you’ll also have to factor tax onto that. You could end up paying an extra $20,000-$25,000 in taxes alone.

As you head into retirement, you want to make sure you have as much money as possible. So, spending thousands of dollars in tax probably isn’t the best decision. While you may feel emotionally inclined to pay off your mortgage, it’s vital to look at how it’ll impact your finances as a whole.

Understanding your cash flow

Say you owe $100,000 on your low-interest rate mortgage. You have enough in your savings to pay this off, but is this the right decision? You want to know if you should use your savings to pay off your mortgage or if you should invest it.

If you choose to invest it, you could get a rate of return anywhere between 6-10%. If your mortgage interest rate is only 2-3%, then you may be tempted to invest your savings instead. But this decision isn’t suitable for everyone.

One of the things we look at is your principal and interest payment on your remaining mortgage balance. Your monthly payments will have been calculated on a much larger sum, so one option is refinancing. However, it’s worth noting that this comes with a cost.

Let’s go back to the example. If you owe $100,000, you may be paying roughly $1,250 per month or $15,000 a year off your balance. This is 15%, which is an incredibly high rate. It would be extremely unlikely for you to earn 15% on any other account. In this case, you’ll have an instant positive cash flow of $15,000 per year by paying off your mortgage.

We understand that this can be hard to visualize for your specific situation. So, if you’d like to see a cash flow analysis on your current mortgage, we’d be happy to calculate this for you. Get in touch with us or book a complimentary call.

Should you use all of your savings to pay off your mortgage?

In a scenario where you have just enough saved to pay off your mortgage (and it makes financial sense to do so), you may feel uncomfortable about having little to no savings left. It can be a lot to stomach watching your account drop from $105,000 to $5,000!

A home equity line of credit can be a suitable solution here. This works in a similar way to a credit card, but the interest rate is typically very, very low. It also gives you access to cash that you can draw on, if you need. So, while you may only have $5,000 in your savings, a home equity line of credit allows you to access much larger sums.

If you do end up needing to use, say, $10,000, for a roof repair or to buy a new car, then we can work with you to find out the best way to pay it down.

Oftentimes people don’t consider a home equity line of credit when thinking about paying off their mortgage. However, it can be a great option. They’re very cheap right now with low interest rates and hardly any carrying costs and or annual fees. It’s also a far quicker and simpler solution compared to something like refinancing.

Should you pay off your mortgage before retirement?

One of the most powerful tools you can have in your retirement planning arsenal is a written income plan. This gives you a clear picture of your finances in retirement, including the possibilities if you do or don’t choose to pay off your mortgage.

If you’d like to see what your financial future looks like in retirement, we can help. We offer a completely free 15-minute phone call to anyone who has questions about retirement planning. So, if you want to know more about whether you should pay your mortgage off, book your call today.

How to Manage Your Money and Your Risk Exposure

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If you’re trying to learn how to manage your money and your risk exposure, you may be asking: how can I invest when the world’s economies are so uncertain? COVID-19 has caused a lot of investors to rethink their investment strategies because economies have slowed in the wake of the pandemic.

This is the topic that we’re going to be discussing today to help you better manage your money and risk exposure to weather potentially volatile markets.

Understanding the Need for Risk Management

Risk management is a major part of a lot of people’s lives. Think of it this way: you have insurance, right? You likely have insurance on your home and automobile. If a fire breaks out, you know that the insurance will cover the expenses to rebuild and get right back on with your life.

But do you have insurance on your 401(k)?

Since 1926, there have been 16 bear markets that occurred roughly every six years. During these periods, the market took a dip for over a year and a half, typically 22 months, and the market fell 20%, 30% or even higher during this time. On average, markets lose 39% of their value during a bear market.

For many people, this is a fire that is obliterating their 401(k) and retirement. Risk management is the insurance on your retirement to lower the risk of cutting your investment portfolio in half when a bear market occurs.

Importance of “No More Pies” Methodology

What “No More Pies” really means is that there’s no more standard pie chart that is given to you by a financial advisor and never updated.

A chart may be viable and worthwhile today, but markets change far too often to just follow without adjustments. Young investors may believe that they can ride the wave and not have to worry about market fluctuations.

But as you age, you should be lowering your risk tolerance.

No one wants to lose 50% of their investments. The investments may come back, but there’s never a guarantee. Even when they do come back, you’re looking at 7 to 10 years before recovering from a 50% loss. A person that is 65 waiting 10 years to recover their losses is going to lose a lot of valuable time in the process.

It’s also harder to recover from the loss when you’re drawing from the portfolio to live.

Managing Money During a Crisis: Why Not Being Passive Benefits You

Money management should always be on the top of your priority list because a passive portfolio is often set for failure. In the last year alone, we’ve seen markets highly influenced by both politics and the economy.

Passive investing is easy. You put your money into a bunch of financial vehicles, sit back and hold. The buy and hold strategy may work with some stocks and be a part of your portfolio. Yet, the passive investor isn’t adjusting to the market change or signals that show that this commodity is going to fall or that a cryptocurrency is going to tank in the next few weeks.

During a crisis, you want to:

·  Slowly start adjusting investments as problems start arising

·  Monitor and watch the markets for indicators of something brewing

·  Continue monitoring and adjusting your risk to navigate market volatility

A lot of people get overly concerned, pull all of their money out of the markets and lose out on the opportunity for strong market gains because they fear losses due to political or economic concerns.

It’s important to look at all of the variables, make daily assessments and adjust as risk increases or decreases.

If you go with gut decisions or you’re too cautious, you may miss out on market opportunities out of fear that you’ll make a misstep during a crisis. One of the worst choices that you can make is not doing anything and hoping for the best.

When you stay on top of the markets and adjust based on the indicators that are coming out daily, you’ll be adding that insurance to your retirement accounts that wasn’t available before.

If you want more information about preparing your finances for the future or retirement, check out our complimentary Master Class, ‘3 Steps to Secure Your Retirement’. 

In this class, we teach you the steps you need to take to secure your dream retirement. Get the complimentary Master Class here.

How the SECURE Act and Cares Act Affect Your IRA

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Changes made in 2019 have affected a lot of people’s retirement accounts and how they work for their beneficiaries. It’s important for anyone with an IRA to know how the Secure Act and Cares Act affect their IRA because the changes are both good and bad.

The SECURE Act and Your IRA

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law on December 20, 2019. Changes under the SECURE Act have both good and bad points, which have many people confused. These changes include:

Repeal on Age Restriction for Contributions

Before the ACT passed, you couldn’t contribute to your traditional IRA after you reached 70 ½. Now, you can continue making contributions after this age, which is beneficial for people that continue working after they reach 70 ½ age.

You will need to have eligible compensation to be able to make these contributions.

New 10% Early Distribution Penalty Exception

Exceptions are now given for adoption expenses along with the birth of a child. If you take distributions before 59 ½, any portion of the distribution that is taxable is subject to a 10% additional tax.

This is a steep penalty, and since most people don’t realize that they’ll suffer a 10% penalty until they do their taxes at the end of the year.

Under the new rules, there is a $5,000 exemption per participant if you want to take money out for qualified adoption or birth expenses. The changes are beneficial for anyone that plans to adopt or have a child and needs to find some way to pay for these expenses.

Death of the Stretch IRA

People save in retirement accounts because of tax deferment. You can allow compound interest to work for your retirement account and grow your money more without paying taxes now.

If you die, your beneficiaries can also leverage this same deferment to a certain extent.

Prior to the SECURE Act

A designated beneficiary could stretch distributions for your life expectancy. For a beneficiary, this was highly desirable because assets would remain in the account and grow year-over-year and only have to pay beneficiary required minimum distributions.

The practice was a great way to build wealth.

With a Roth IRA, the distributions became tax free with a qualified event, such as the death of the owner. For many beneficiaries, this was one of the most devastating changes under the SECURE Act.

The SECURE Act changed it so that the stretch IRAs now requires beneficiaries to drain the account in the first 10 years after the account owner’s death. The rule is in place for most non-spouse beneficiaries.

Distributions are optional from year 1 – 9, but if you don’t drain the account, you must increase it by the end of year 10.

A few exceptions are if the beneficiaries are:

  • Disabled
  • Chronically ill
  • Minor child
  • Spouse of the deceased

Even with a minor child, once the child hits the age of majority, the account is switched to the new 10-year period.

A lot of articles seem to miss on exception, which is if the beneficiary is no more than 10 years younger than the account owner. You’ll be able to take a distribution of the account over your lifetime.

What does this mean for you?

The stretch is available for older beneficiaries, which is a nice perk that is offered to eligible for certain beneficiaries. For any beneficiaries that are listed above, the stretch exists otherwise the SECURE Act does remove the stretch IRA.

Qualified Charitable Distributions (QCD) and Why You May Want to Make Them

QCDs shouldn’t be tied into your required minimum distributions. You can begin QCDs as long as you’re 70 ½ at the age of distribution. The Cares Act allows you to make a QCD without needing to take a required distribution.

A lot of financial managers are excited with changes to the QCD because, under the old rules, if you took a distribution from your retirement account, any pre-taxed amount is included in your income.

The exception is if you make a QCD to an eligible charity.

It’s vital that the charity be eligible because if the distribution is made to the charity, the distribution will be tax-free. You can do this up to $100,000 per person each year. Churches are included in this tax-free distribution treatment.

Note: Under the SECURE Act, you don’t have to start taking out your required minimum distribution (RMD) until you’re 72.

CARES Act and Its Importance to Your IRA, 401(k), etc.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act also has some important changes for your retirement accounts. Under the CARES Act, the RMDs aren’t required for 2020.

Under the CARES Act, if you lost your employment or income, you can take up to $100,000 in distributions from your account in 2020. You won’t need to claim 100% of the distribution on your taxes, but you can spread it across three years instead.

You’ll also not have to take a penalty due to the coronavirus-related distribution.

Qualifying for the distribution requires you to be a qualified individual, which falls into the following categories:

  • Test positive for COVID-19 (you, household member, etc.), or
  • Have your income, or a household member negatively impacted due to the coronavirus

If you took someone into your home this year, you could take this benefit if the person is experiencing hardship because of the pandemic. 

The IRS hasn’t mentioned how they will verify that your claims are true.

The CARES Act isn’t subject to that 10% early distribution penalty mentioned earlier.

Note: Many 401(k) plans don’t allow this distribution. You may be able to treat the distribution as a coronavirus distribution.

RMDs and 2021 Possibilities

A lot of advisers were uncertain of what changes may occur in 2021 as the pandemic lingered and even surged to start 2021. There was lot of speculation that there may be some RMD benefits, but this doesn’t seem to be the case as of April 2021.

It seems that those 72 or older will have to resume their RMDs in 2021, with a few changes to keep in mind:

  • You can postpone your 2021 RMD to April 1, 2022, but you will need to take two RMDs and risk having to pay higher taxes if the distribution puts you into a new tax bracket.
  • It’s expected that new legislation will take place in 2021, so you may want to hold off on your RMD because it’s possible that they could be affected.
  • Life expectancy tables have been updated by the IRS and will affect your RMD. The changes will reduce a 72’s first RMD by 6.57% under the change.

Congress has also signaled some interest in pushing the starting age for an RMD up to 75 years old, but it remains to be seen whether this type of legislation will be approved.

If you’re turning 72 this year, you will have to take your first RMD by April 1, 2022.

Overall, the SECURE and CARES Acts have changed IRA RMDs and have some tax advantages. If you’re confused about the changes, speaking to an adviser can add some clarity and help you make the most out of your retirement accounts.

If you want more information about preparing your finances for the future or retirement, check out our complimentary Master Class, ‘3 Steps to Secure Your Retirement’. 

In this class, we teach you the steps you need to take to secure your dream retirement. Get the complimentary Master Class here.

Buy and Hold is Dead: Why Risk Management is Fundamental in Today’s World

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Buy and sell investments were all the rage just a few years ago. People would invest in a new, hot tech stock, hold on to it and reap the benefit of their shares rising drastically. Warren Buffett was a major supporter of buying and holding, and the strategy led him to being one of the richest men in the world.

We’re here to tell you that the buy and hold is dead for the individual investor thanks to risk management.

Buy and Hold’s Main Flaw for Asset Allocation and Investing

Buy and hold is ideal for institutions that have an infinite lifespan. A business that can be around for a hundred years doesn’t need to concern itself with the prospect of their stock fluctuating up and down and potentially losing 50% of its value.

These institutions can continue holding until the stock recovers, which is something that a person nearing retirement may not be able to do.

A regular individual that is investing and holding is unlikely to withstand a plummeting stock market.

Risk assessment is an option that allows investors to interpret and react to a changing market. For example, the risk assessment for the most recent market crash could have helped a lot of investors keep money in their retirement and investment portfolios.

Between 1999 and 2013, the S&P 500 was below its average until mid-2013.

Tens of millions of investors needed their money during this time. For example, a person in 1999 at 55 might have needed just average returns over the next decade to retire comfortably. But the market dipped by as much as 50%, causing the investor to put his life on hold.

Massive fluctuations in the market, even over a 10-year period, can be devastating for an investor or someone that has been growing an investment portfolio for retirement because 10 years is a long time.

Risk Management is Not Timing the Market

Risk management is about the ebb and flow of the market. When the market starts to become too risky, a risk management approach will take immediate measurements in the market to reallocate investments to help avoid massive losses.

And there are a lot of approaches that we take to determine risk, including:

  • Supply and demand balances to better understand how an investment may pan out in the short-, mid- and long-term.
  • The inner workings of a market. This helps us determine what the lows and highs are for a certain industry’s stock to pinpoint potential risks that an average investor may not realize is happening in the market.

Risk management also includes another important aspect: when to get back into the market. For example, when the market began to tank in 2006, a lot of investors sold off their stock and never really got back into the market because they didn’t have the data to properly calculate their risks.

Proper risk management can alert an investor when the market is good to enter again and when, even if it’s difficult, it’s time to offload an investment.

Risk Off and How a Risk Manager Determines When It’s Time to Reduce Risk

Risk is all based on a timeframe. In most circumstances, there’s a short and long timeframe that may indicate that it’s time to offload certain stocks. A long-term timeframe may be based on supply and demand measurements, especially internally in markets where these factors aren’t witnessed by the average investor.

Oftentimes, when markets are seeing a sway in supply and demand, it’s months after these internal factors are being recorded.

Rebalancing a portfolio to remove assets that may suffer from these factors is a good idea, and you may stay out of these markets for the long-term, which can be five, six or even ten years. Short-term factors also play a role in risk management.

A short-term indicator can help a portfolio withstand short-term fluctuations, such as those seen with COVID. Stocks fell in the first-quarter of the year but rebounded, which allowed someone considering their risk to reenter the market at the right time and reap the growth seen just a quarter or two after.

Multiple timeframes can be followed, which are tailored to a specific client and based on:

  • Declining internals
  • Supply and demand
  • Improving fundamentals

Buy and hold is a good strategy for some, but as you age, risk management needs to takeover. The risks that you can face when you’re younger shouldn’t be a part of your portfolio later on in life when you have proper risk management in place.

Risk management models can help predict a market’s direction, allowing investors to capture a market’s upside while not capturing a lot of downside.

While you’ll always capture a little upside and downside, the right data and management strategy will allow you to capture more of the upside in the market, reducing risk and generating more gains in the long-term.

If you want more information about preparing your finances for the future or retirement, check out our complimentary Master Class, ‘3 Steps to Secure Your Retirement’. 

In this class, we teach you the steps you need to take to secure your dream retirement. Get the complimentary Master Class here.

How Does Inflation Affect Retirement?

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Are you concerned about how inflation is going to affect your retirement savings?

There’s a lot of talk right now about inflation and how it’s going to change in the future. When you’re planning for retirement, this can feel like a curveball.

However, it’s no secret that inflation does impact your spending over time, especially when you’re no longer earning a monthly income. What can help is knowing how much it will impact your spending and what you can do about it.

In this post, we share everything you need to know about inflation in retirement. We illustrate how varying inflation rates can affect your savings over time and why you need to carefully consider your spending plan.

You can watch the video on this topic above. To listen to the podcast episode, hit play below, or read on for more…

How inflation has changed in recent years

Inflation can have a very real impact on your retirement funds, which is why we include it as part of your written retirement plan. But it’s important that we base the inflation rate on realistic, yet conservative figures.

To do this, we look at the average rate over the last 10 and 100 years. So, over the last century, the average inflation rate is just over 3%, which is why, when we build a retirement income plan, we set it at 3%. However, if you look at the average over the last ten years, it’s 1.7%. Therefore, we consider 3% a conservative rate as we expect inflation to be closer to the 1.7 mark.

Inflation and retirement planning

In this example, we’re going to talk about fictional retiree Cindy. Cindy is 67 years old, and she’s decided to retire now. She’s saved $1.5 million and receives $3,000 a month in Social Security.

Typically, there is a cost-of-living adjustment (COLA) with Social Security, which is somewhat tied to inflation. However, in this example, we are not going to include this adjustment or any other raise to Cindy’s Social Security benefits.

The key player when thinking about inflation in retirement is spending. Cindy plans to spend $7,000 a month in her early years of retirement. This is more than she plans to spend long-term because she wants to travel and do lots of activities while she’s able to. So, her initial spending in retirement will be higher than in her later years.

At age 67, Cindy will have to combine her $3,000 from Social Security with a $4,000 draw from her savings to provide her with $7,000 each month. It’s important to note here that we are factoring in a conservative 5% rate of return on Cindy’s savings.

How inflation affects spending

By adding 3% of inflation every year to her monthly spending after retirement, it’s going to require Cindy to gradually withdraw more and more from her assets. So, what does this look like year on year? Here’s how a 3% rate is projected to affect Cindy’s planned $7,000 spending each month.

  • Year one: $7,000
  • Year two: $7,300
  • Year three: $7,500
  • At age 80: $10,000
  • At age 90: $14,000

If Cindy wants to continue the lifestyle she has at age 67 through into her 80s and 90s, she’s going to have to withdraw increasingly more from her savings each year. Here, you can clearly see how inflation puts significant pressure on your savings.

In this scenario, at age 90, Cindy’s savings of $1.5 million have now dwindled down to just $56,000. With a monthly spend of $14,000, this is too uncomfortably low for us. But what if inflation isn’t as high as 3%?

How much difference 1% makes

If inflation was particularly high (around 3%) Cindy would know that she has to cut back on her spending in order to be more financially secure at age 90. However, if inflation was more in line with the most recent 10-year average (1.7%), what difference would that make?

If Cindy plans to spend $7,000 a month with a 2% inflation rise, she’ll have $765,000 left in her savings at age 90. This tiny tweak leaves her with a far more comfortable figure.

Now, we can’t choose inflation rates, but it’s important to see how much a 1% difference can impact your retirement savings. For Cindy, a higher inflation rate means she has to be more conservative with her spending, or she risks running out of her savings. But she also knows that if inflation holds steady, she can spend more comfortably for longer.

Changing your spending plan as you age

A key part of our roles as retirement planners is to help people like Cindy think through their spending. In Cindy’s case, she wants to spend more in her initial retirement years. She could live comfortably off $5,000 a month ­– the $2,000 is just extra.

Now let’s see what happens if we change Cindy’s spending based on this plan. In this example, we’ll add 3% inflation to her monthly spending of $5,000 and allow her 10 years of “fun money” – an extra $2,000 a month, with 0% inflation.

With this spending approach, Cindy would have $1.1 million left in her savings at age 90. Compared to the two other scenarios, this spending plan is more likely to give her peace of mind that her finances are secure for longer.

Navigating inflation in your retirement plan

This type of scenario is very common for our clients. People often plan to make the most of their first 5-10 years in retirement and then consider cutting back. We illustrate how spending and inflation affect our clients’ financial situations so that they can make informed decisions about their retirement plan. 

Inflation is a factor you need to take into account when planning your finances for retirement. However, it’s often not an issue to stress over. If you’re concerned about how it will impact your retirement, do reach out to your financial advisor or get in touch with us.

We offer a 15 minute complimentary call and can help put your mind at ease about inflation, saving for retirement, or any other questions you may have about preparing for retirement. Book your call with one of our advisors here.

What is a Fiduciary and Why Is It Important?

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When searching for a financial advisor, you may have come across the term “fiduciary.” But what does it mean? And is it something you should check for before agreeing to work with a particular company or individual?

Choosing a financial advisor can be tricky. You want someone who will work hard for you, sourcing the right products and offering advice that you can rely on.

A fiduciary could be that person. They’re legally bound to put your interests first, regardless of how much they’ll make in return.

But that isn’t the complete picture. Not all financial businesses are fiduciaries, and that doesn’t mean you shouldn’t trust their advice.

In this post, we’re taking a detailed look at fiduciaries, including what they are, how they work, and why they could be the best option for your retirement plan.

You can watch the video on this topic above, or to listen to the podcast episode, hit play below. Or you can read on for more…

What is a fiduciary?

A fiduciary is a person or company that has a legal and ethical relationship of trust with another person. It’s a legal standard that holds financial advisors to account in their interactions with clients and customers.

The most important thing to remember about fiduciaries is that they must always act in their client’s interests. That means finding the best options based on the client’s requirements, regardless of the rate of commission they’ll receive for selling a certain product.

Fiduciaries are held to these standards through licensing and certification, including CFP (Certified Financial Planner) designation. So, when you see a financial advisor with these letters, you know they’re held to fiduciary standards and would lose their accreditation if they breached them.

By now you may be thinking, why aren’t all financial advisors fiduciaries? Shouldn’t they all act in the best interests of their clients?

Well, unfortunately, it’s not that simple. Fiduciary standards don’t work for every type of financial business, for reasons we’ll set out below.

What is suitability?

Suitability is the alternative to fiduciary. Think of it as a diluted version, wherein financial businesses aren’t held to the same strict standards.

Where fiduciaries always act in the best interests of their clients, suitability places more control in the hands of financial businesses. They don’t need to give the best advice and can recommend products based on commission, even if they’re not the best for the client.

That’s not to say financial advisors working within the suitability criteria are unethical. They still take into account a client’s requirements, and the products they recommend must align with their client’s financial goals.

But what kind of businesses and individuals would choose to work within the suitability criteria? And why do they choose not to adhere to fiduciary standards?

Typically, commission-based financial businesses are most likely to work to suitability standards. That’s because they need to make a certain rate of return, and so recommend products that are of more benefit to them than their clients.

This might sound questionable, but suitability is necessary to keep some businesses afloat. It’s also worth remembering that those working within the suitability criteria must consider their customer’s requirements; they can’t recommend poor products and bad deals.

For this reason, many suitability advisors take the stance of: “I’m not bound by the fiduciary law, but I treat my clients like I am.” This is a common practice but something you should take with a pinch of salt. After all, there’s a high likelihood that they’re benefiting from a sale as much as you are.

How do fiduciary and suitability compare?

To help you understand how fiduciary and suitability differ, here’s a helpful analogy showing how each model works in practice.

Let’s say you want to buy a new car for your family. The first dealership you visit recommends large saloons, station wagons, and SUVs, all at different price points. There’s no pressure to buy from the dealer, and you make a choice based on the information they’ve given.

Then, you visit another car lot. Here, the dealer recommends a car that, though suitable for a family, is slightly over your budget. However, they convince you that it’s the right car and you buy it even if it’s not the deal you were looking for.

Can you guess which was the fiduciary dealer and which was the suitability dealer?

That’s right, dealer one was a fiduciary. They offered lots of options that were suitable for families and didn’t recommend any cars that were over your budget to make more commission.

Dealer two was the suitability model. They had one or two suitable cars and used salesmanship to convince you to spend more, making more commission for themselves in the process.

Again, this might sound questionable, but it comes down to how a business is set up and the type of industry they work in.

A final word on fiduciaries and suitability

After reading this guide, you might be thinking that suitability advisors are all bad and fiduciaries are the only way to go – but don’t. Sure, you should be cautious about taking suitability advice at face value, but it doesn’t mean you’ll get a bad deal that doesn’t work for you.

At Peace of Mind Wealth Management, we choose to stay within the fiduciary arena because we believe it’s the best fit for our practice and our clients. Both Radon and Murs are accredited CFPs and are licensed investment advisors, meaning they’re legally bound by fiduciary standards.

If you’re looking for wealth management advice with the assurance of fiduciary accreditation, we can help. Putting your needs at the heart of everything we do, our financial services can help you on your retirement journey.

We hope this guide on fiduciaries helps you think differently about your financial decision-making. Remember, if you need any advice or expertise, our financial specialists are here to help. Book a complimentary 15-minute call with a member of our team to discuss your retirement goals today.

Reverse Mortgages Explained

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Reverse mortgages are a hot topic among retirees. Some retirees want to have access to a reverse mortgage for financial security, while others are still unsure of how they feel because of some of the practices in the industry in the 60s, 70s and 80s that gave these types of mortgages a bad name.

If you’re considering a reverse mortgage, it’s important to know what these mortgages offer you, their benefits and your obligations when taking out a reverse mortgage.

Traditional vs Reverse Mortgage

A traditional mortgage is what you likely used when you purchased your home. You’ll go through a mortgage company that has a lien on your home and will have to pay the mortgage note for 15, 20 or 30 years (terms can vary).

When you make a payment, you’ll be paying down your principal and interest.

Reverse mortgages are different because there are no payment obligations, but there will be a lien against the property. The loan will be paid at some time in the future where interest and principal are repaid, but the loan has no monthly obligation.

Since a reverse mortgage is only allowed for someone 62 or older, the lender often only recuperates their money when the last borrower passes away and the home is sold.

Reverse Mortgage Example

Confused?

Let’s look at an example:

  • You own a $500,000 home.
  • You own the home outright and no longer have a mortgage.
  • You want to take money out of the home through a reverse mortgage.

In this scenario, you’ll typically opt to take out money via a line of credit. You’ll likely be able to take out $275,000 if you’re 70 years old. You can take money out of this line of credit where the repayment is made at some time in the future.

With a reverse mortgage line of credit, there’s no repayment obligation, and these lines of credit cannot be:

  • Frozen
  • Reduced
  • Cancelled

A reverse mortgage line of credit can only be cancelled if the borrower doesn’t meet their obligations. During COVID-19, a lot of home equity lines of credit were frozen, leaving a lot of older homeowners unable to access money that could have potentially helped them navigate the pandemic.

Scenarios Where a Reverse Mortgage Makes Sense

A lot of people choose to do a reverse mortgage when they’re in retirement and still have a mortgage payment to make. The mortgage payment causes a cash flow problem, which causes a lot of people to take out a reverse mortgage to free up some cash.

Other people want to create a new source of income, while others open a line of credit for when they need long-term care insurance. Need to make a down payment for a continuous care retirement community? A reverse mortgage can help you generate the cash to make this payment.

There are also others that want to downsize, so they’ll use this mortgage to make a second or vacation home purchase.

Using the previous example, let’s say that you a $500,000 home and want to take $200,000 out for the down payment on a continuous care retirement community buy-in with the expectation that you’ll be able to move into the community in two years.

So, in two years, you’re able to move in and take out $200,000 in a reverse mortgage line of credit,

What happens?

  • Closing costs were rolled in.
  • Interest accrued for two years.
  • Loan balance is $240,000.

If the home is sold for $500,000, you would have net proceeds of $260,000 leftover. The sale of the house pays off the reverse mortgage, which doesn’t require any payments during the two-year period.

Baby Boomers Transitioning Into New Homes

Over a million baby boomers have decided to transition into a new home. The transition may be because the homeowner wants to:

  • Avoid having to do maintenance and move into a retirement community.
  • Downsize because their home is too big for them now.

A reverse mortgage can also be used in this scenario. The homebuyer can choose to use a reverse mortgage to invest money or to pay for the down payment for the new home. You can also opt to use the reverse mortgage money as a down payment, move into the retirement home and then sell off the other property to repay the reverse mortgage.

There are a lot of options to use the reverse mortgage to make money.

Now, when you’re reaching end of life and pass away, what happens to your heirs? Your heirs will have to pay the loan balance. Traditionally, the home’s appreciation will outpace the reverse mortgage loan balance interest growth.

The heirs would sell the home at the appreciated value and pay off the reverse mortgage.

Let’s assume that over a 10-year period, the home’s value rose $80,000. The loan value will, in most cases, rise less than this amount, allowing the heirs to sell the home with a net profit.

Using a Reverse Mortgage for Cash Flow When You Have Investments

COVID-19 is a prime example of when investors can use a reverse mortgage line of credit when the market’s conditions aren’t optimal. At the start of the pandemic when the markets dipped, a lot of people relied on their reverse mortgage because it’s:

  • Tax-free
  • Doesn’t require the sale of assets
  • Made more sense to use at the time

You don’t want to sell when the market is on a dip because you’ll be losing money. Instead, a lot of people used their reverse mortgage to allow the market to rebound before selling off the investments you have.

If you need $500 a month to pay your bills, you can draw from the line of credit much like an annuity.

#1 Misconception About A Reverse Mortgage

If you’re considering a reverse mortgage, the largest misconception is that the bank now owns the home. You still own your home, but the reverse mortgage lender has a lien on the home that allows them to be repaid when the home is sold.

Practices in the 60s through 80s did foster this misconception, but times have changed for the better.

Once you sell the home, you will receive 100% equity you have in the home minus the reverse mortgage repayment. So, once the reverse mortgage is repaid, you or your heirs will receive all of the remaining equity.

Can the Home Be Underwater?

No. The loans are backed by the FHA and insured for the borrowers and their heirs. For example, if a market collapse occurred and your $500,000 home is now worth $200,000 and your reverse mortgage was $300,000, you or your heirs would:

  • Sell the home for $200,000
  • Repay the $200,000
  • Not have to repay the remaining $100,000 balance

Essentially, your heirs would not be inheriting a debt that they cannot afford to repay with a home that has a reverse mortgage.

The heirs nor the estate would have to repay any excess debt beyond the price of the home at the market value at the time of sale of the home.

Steps to Taking Out a Reverse Mortgage

If you’re thinking about a reverse mortgage, you should sit down with a local representative of a reverse mortgage broker who can discuss your goals with you. Local representatives can see where you live and better understand what your needs are.

Local loan officers can run calculations to see if a reverse mortgage is a good option for you.

Counselors will request a meeting with you, which lasts about an hour, and ensures that the loan officer walked you through all of the steps in the mortgage process. If you decide the mortgage is a good option for you, an appraisal is done, and then closing takes about 30 days to complete.

Your money is then available for you to access after closing.

When you meet with a counselor, they do not have an opinion on the mortgage. Instead, the counselor answers all of your questions and provides you with all of the fine details relating to the reverse mortgage. These individuals make sure that you understand a reverse mortgage 100%.

Credit history is considered, but the lender wants to reduce the risk that you’ll go into default rather than make sure you have a high credit score.

A lot of homeowners want to enjoy a better retirement, and a reverse mortgage can help fund this goal. Yes, your heirs will not receive the full value of the home because the mortgage needs to be repaid, but you’ll be able to enjoy a better retirement.

And a lot of children are happy with their parent’s decision to take money out of their home to fund the retirement that they envisioned.

If you want more information about preparing your finances for the future or retirement, check out our complimentary Master Class, ‘3 Steps to Secure Your Retirement’. 

 In this class, we teach you the steps you need to take to secure your dream retirement. Get the complimentary Master Class here.