How Can I Establish a SEP IRA?
SEP IRAs do not have to be established until taxes are filed for the year, and it can be done quickly. SEP IRAs require very little paperwork or trouble to establish. One form will notify the IRS that SEP contributions are being made for the year, and the amount. The only other documentation needed is a plan document, which establishes and outlines the eligibility rules for a particular plan, but this document only has to be kept on file at the business, and does not have to be submitted to the IRS or any regulatory authority. Continue reading...
What if My Long-Term Care Insurance Doesn’t Pay for My Expenses?
Most long-term care insurance policies are designed to mitigate the cost of long-term assisted living care, not to cover the entire daily cost. Retirees should plan to absorb some of the cost themselves, assuming that daily supervised care is needed. That being said, if you own a long-term care insurance policy and the insurance company is refusing to pay benefits for the care you need, then you may have a fight ahead of you. Continue reading...
What is a Certified Financial Planner?
A Certified Financial Planner (CFP) is a financial advisor capable of investment and insurance/estate planning. For an advisor that wants the “CFP” designation, they must complete the CFP Board’s initial and ongoing certification requirements, which include extensive exams in the areas of financial planning, taxes, insurance, estate planning and retirement. They must also complete continuing education courses. Continue reading...
What is Depreciation?
Depreciation is the accounting practice of recording the decreasing value of a fixed asset, such as a building or piece of equipment, over time, or, effectively, spreading the tax deduction for the cost of the asset over time. The IRS has created set schedules which describe the number of years over which a business can amortize the cost of a business asset for the purpose of tax deductions. The number of years is different for each type of asset or equipment. Continue reading...
What is Subordinated Debt?
Subordinated Debt is a junior security which will be serviced after the Unsubordinated Debt in the event of a company bankruptcy. Subordinated Debt has been deemed less important than the Unsubordinated Debt that a company has taken on, in terms of what priority it will have for payment in the event of company default. The amount of money and length of term on the loan are considerations when making this distinction. Continue reading...
What is an Adjustable Rate Mortgage?
A mortgage whose rate is variably adjusted according to the interest rate environment is known as an ARM. With an adjustable rate mortgage (ARM) , the interest rate is lower at the beginning than the fixed-rate alternative, but the customer bears the risk of interest rates going up in the future. The bank or institution creating such a product will usually peg the rate to a specific index or benchmark rate, and will also probably give the customer a cap at which rate hikes would stop. Continue reading...
What is a market-maker spread?
The difference between the Bid and Ask prices on a stock or other security are known as the Spread. Designated market makers are traders whose job it is to make a market for securities, by offering to buy or sell shares, and thus creating liquidity, often at the same time. Their money is made on the spread. In highly liquid markets, the spread will shrink. So if everyone is buying and selling the same stock one day, there may be virtually no spread between the Bid and the Ask price, and this is seen as efficient. Continue reading...
What is Chapter 13?
Chapter 13 bankruptcy is one of the most often used. It is similar to a Chapter 7, but it does not have income limits. It involves liquidating the assets of the debtor and making payment arrangements over a longer period of time than Chapter 7. Chapter 13 allows a debtor to propose a schedule for repaying debts that seems reasonable to the bankruptcy judge. It is for individuals who can prove steady income. Often Chapter 7 is filed by people who are impoverished, while Chapter 13 is the middle-to-upper class equivalent. Continue reading...
What is Market Value?
Market Value refers to the amount an asset can be sold for on the open market, at any given time. If you hold 100 shares of stock ABC that you can sell on the market for $50 apiece, your holdings have a market value of $5,000. Market value does not necessarily refer only to stocks. It can be any asset that can be bought or sold on the open market. Stocks tend to have greater levels of liquidity and broad-based market participation, so it is easier to disseminate a stocks market value at any point in time. Illiquid assets can be more difficult to value, such as real estate or works of art. Continue reading...
What is the difference between active and passive money management?
The debate on whether active or passive management is better for investors has polarized many advisors and theorists for years. There are two schools of thought when it comes to long-term investing. One basically states that you should determine a proper allocation of asset classes for yourself, buy index funds to reflect each particular asset class, and possibly rebalance the portfolio periodically. This basically means “set it and forget it,” and the investor must be willing to ignore fluctuations in the markets and maintain a faith in an Efficient Market. Continue reading...