What Happens to My Annuity After I Die?
Annuities allow you to designate beneficiaries, but the payouts or benefits they receive depend on the wording in the contract, and can vary greatly. Annuities, even if they are designated as Individual IRAs or qualified accounts, can have joint annuitants. This way, if an income stream has been elected that is joint-life, then your beneficiary, whether a spouse or even a younger family member, will continue to receive payments for life. These options can all be elected at purchase. Continue reading...
How is a Roth IRA Different from a Traditional IRA?
The most basic difference is that the Roth contributions are made after-tax while the Traditional IRA contributions are usually deductible from income. Both Roth and Traditional IRAs provide for tax-deferred growth of your assets. However, the contributions you make into your IRA are pretax (or, more accurately, tax-deductible), and contributions you make to your Roth IRA are after-tax. The annual contribution limits for each are usually the same, and, in fact, a person can contribute up to this amount in either of these combined in a given year. Continue reading...
What is a Home Equity Conversion Mortgage?
The main type of reverse mortgage that people get today is the Home Equity Conversion Mortgage, backed by the US Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA). These reverse mortgages are available to people age 62 or older who are interested in leveraging their home equity to gain liquidity, either in the form of a lump sum, monthly payments, or other arrangement. A Home Equity Conversion Mortgage (HECM) is a reverse mortgage available to homeowners age 62 or older, insured by the Federal Housing Administration (FHA). Continue reading...
How Does a Health Savings Account Work?
A Health Savings Account (HSA) allows the owner to save (and invest) money in an account, which can be used to pay for health expenses on a tax advantaged basis. Generally speaking, your contributions to a HSA are tax deductible, the earnings grow on a tax deferred basis, and you can withdraw the money tax free if used for a qualified health expense. As 2016, you are allowed to contribute $3,350 (for individuals) and $6,750 (for families) to the account, plus an additional $1,000 if you’re over 55. Continue reading...
What is Net Present Value?
Net Present Value (NPV) is the difference between present value of net inflows versus the present value of outflows (expenses). The net present value is a good analyst tool for measuring the profitability of a company’s project or new undertaking, like expansion into a new market. It measures the anticipated cash inflows (revenues) from the undertaking versus the anticipated costs of the new project (also in present value terms). Continue reading...
What are Accounting Controls?
Internal control systems and procedures can ensure the accuracy and reliability of financial accounts at a business. Accounting controls are meant to ensure that the numbers being put onto the books are accurate. Internal controls are the practices that employees are trained to do, and may be audited on, which general involve some oversight or double-checking to filter out mistakes. This not only prevents mistakes, but also malfeasance, embezzlement and fraud. Accounting done wrong can result in criminal penalties, bankruptcy, and tax problems. Continue reading...
A-/A3 — credit rating
A- — S&P / Fitch A3 — Moody’s Rating institutions assign various levels of credit ratings to signify the chance of default; the A-/A3 rating is considered Investment Grade, but it is getting closer to the Junk Bond range. If a company or debt issue has a rating of A-/A3, it means that S&P and Fitch have given it an A- and Moody’s has given it an A3 rating. They have their own symbology for their ratings system but these are at the same level on both scales: these ratings are at the 6th or 7th degree from the top possible ratings, which is AAA/Aaa. Continue reading...
What is a Bankruptcy Trustee?
A bankruptcy trustee is appointed to oversee the liquidation of a debtor’s estate. A bankruptcy trustee has an obligation to do all he or she can to maximize the amount that a bankrupt entity’s estate can pay to the debtor’s unsecured creditors. The trustee must also challenge the claims of a creditor where appropriate. The estate is constituted of all of the bankrupt entity’s nonexempt assets. The trustee will oversee the “341” meeting, in the case of Chapter 7 bankruptcy. Continue reading...
If I Want to Establish a Keogh Plan, Do I Have to Establish One for All Employees of My Business?
Keogh plans have minimum eligibility requirements that will probably include most of your employees, but not necessarily all of them. If an employer established a Keogh Plan, eligible employees must be allowed to start a Keogh Plan account as well. Eligibility requirements include: being over 21 years of age and having worked at least a year as a full-time employee for the employer, where full-time is defined as working over 1,000 hours in a year. Seasonal workers, non-resident alien employees, union employees, and non-working partners or owners in the business can be excluded. Continue reading...
What is delta hedging?
Delta hedging is the process of reducing exposure to potential loss resulting from price fluctuations in the security underlying his or her options positions by bringing the delta – or price relationship between options and their underlying securities – of a portfolio to zero, or closer to it (a position called ‘delta neutral’ or ‘delta hedged’). This is accomplished by purchasing financial instruments which counterbalance each other's exposure to price fluctuations, often adding short or long positions in other options or the underlying securities themselves. Continue reading...