We encourage you to be responsible and keep the future in mind. The first thing to keep in mind is that it’s very easy to spend a lump sum right away without thinking about the consequences. While the monthly payment option protects your money from overspending, a lump sum should be handled with frugality and practicality in mind. A large portion of this amount should be invested safely and wisely, particularly if you are very near to your own retirement age, and you do not have time to ride out market fluctuations. When investing, you should consider a conservative estimate of you and your spouse’s life expectancies weighed against your annual income needs, adjusted for rising healthcare costs. Continue reading...
This is rarely an option, but the IRS does allow it. In general, you can’t withdraw money from a Pension Plan before you retire. You also may not be able to make non-recurring withdrawals after retirement, unless it is a lump-sum settlement. If your plan allowed it, the IRS would treat it just like withdrawals from a 401(k). Withdrawals before 59 ½ would be penalized with a 10% early withdrawal tax. Continue reading...
There is no guaranteed option to make lump-sum distributions from pension plans. You may be able to take a lump-sum distribution, but the option is not always available. Most employers are eager to get another participant (liability) off the books. This kind of settlement is a lot like a debt settlement, in fact, that’s exactly what it is to the plan fund. As long as you are part of the plan, you represent an unknown quantity of liability, because they have to keep paying your benefits, and possibly spousal benefits for as long as either of you shall live. This is an option you may have upon reaching retirement, if the plan offers it to you. Continue reading...
Defined Benefit plans guarantee a certain amount of retirement income to an employee based on the employee’s current salary, years at the employer, and other factors. A Defined Benefit Plan involves a promise made to you by your employer to pay you a certain monthly “benefit” for the rest of your life, or for a certain number of years after retirement. The amount of the payment is pre-calculated using a formula which typically involves your age, your salary, the number of years you’ve worked for your employer, along with other factors. Continue reading...
Payout options in the realm of annuities tend to be guaranteed by the insurance company providing the annuity, and may come in many forms depending on the investor’s preference. Annuities can pay income to the annuitant in a few ways. One of the ways is to turn the entire balance of the annuity into a pension-like income stream for life, or jointly on two lives. The payout tends to be higher than the safe withdrawal rate than investors can use in an investment account, and it provide guarantees and surety where it wouldn’t exist otherwise. You can also elect to have these payments start off slightly lower, and then to increase at a guaranteed rate, to keep up with the cost of living. Continue reading...
Regular pension payments are periodic distributions. Yes. This will be the default option on pension arrangements, unless companies are trying to settle with pensioners for lump-sum amounts that will lessen the plan’s long term liability. The options for periodic distributions will always be for periods less than or up to a year in length. Periodic distributions can help you sleep better at night, knowing that you have a fixed stream of income for the rest of your life. It may not be enough to sustain your lifestyle completely, but it will give you a sense of financial security and prohibit overspending in a way that the lump-sum distribution does not. Continue reading...
You may not be able to make non-recurring withdrawals of various amounts from a Cash Balance plan. After you retire, you’ll typically have two options: a fixed monthly payment for the rest of your life, or a lump-sum payment. Cash balance plans generally do not allow random, non-recurring withdrawals because the individual account was always a hypothetical account. The administrative work of fetching various sums for everyone and keeping up with the total pool of plan assets is not the administrator’s prerogative with these plans. Continue reading...
Cash Balance plans are Defined Benefit plans, but are not much like Pensions as you may know them, or other types of retirement plans, for that matter. On one side of the retirement isle you have defined contribution plans, such as 401(k)s and SEPs and so on, where the contributions are certain, or at least ascertainable, while the ending balance or benefit of each employee’s account is unknown, or at least does not have to be (and in most cases isn’t). Continue reading...
Periodic distributions are one of the main ways that former employees enjoy the benefits of a Cash Balance plan. Yes, you can take periodic distributions from your cash-balance plan. As opposed to the other option (lump-sum distribution), opting for the periodic distribution can help you sleep better at night, knowing that you have a fixed stream of income for the rest of your life. This Life Annuity option is mandated by law to be an option to participants of a cash balance plan. Continue reading...
A Balloon Loan has lower debt payments than a fully amortized loan up until a lump sum payment at the end of a term. Balloon loans have relatively low monthly payments due over their term and then a large lump sum payment for the remaining balance at the end. This can be advantageous if someone or a business knows they will be paid in a certain way that fits well with this schedule. Other people and businesses may be planning to use a more flexible approach where the lump sum due at the end is rolled into a new financing schedule (such as a two-step mortgage), and this is usually done if there is a reset provision in the contract. Continue reading...
A life settlement, also known as a viatical settlement, is a lump sum payment that purchases a person’s life insurance contract from them and makes the life settlement company the new beneficiary. These have become more regulated in last 20 years due to the questionable moral dilemma that this presents. They tend to only work for permanent life insurance products like whole life and universal life, since the viatical company will know that it will get a return on its investment. Life insurance companies have some of the most impressive returns, in a risk-adjusted perspective, on the money in their general account. Continue reading...
Periodic distribution is a planned intermittent payment of cash from a 401(k). If you choose to have your money distributed periodically, you will usually have a choice between monthly, quarterly, or even annual payments. Money distributed periodically is not subject to the same 20% withholding the lump-sum payment is. The periodic payments are treated as wages, and, because plan participants taking these payments in retirement may find it easy to calculate what their income will be for the year, they can instead plan for their actual tax bracket, or opt-out of withholding if they prefer. Continue reading...
A penny Stock is a term for equity shares valued below $5, many of which are not registered with the SEC and trade over-the-counter. They do trade on over-the-counter exchanges regulated by FINRA. Penny Stocks are equity in companies that may be small or have bad credit ratings, whose shares are priced below $5, per the SEC definition, but below $1 in the more widely accepted street definition. Because they do not have to observe all of the disclosure requirements of the SEC, there is not very much transparency about the companies or brokers issuing penny stocks. Continue reading...
It is possible to get a settlement arrangement that allows you to settle your debts for less than you owe, but there are consequences. An individual can personally seek a settlement with the credit card company or other creditor that they may owe, or they can enlist the help of a debt settlement company. People should only seek to settle when they have no other option, because their credit score will be badly damaged for many years. Continue reading...
The length of time after a trade is executed that the securities are due delivered and the payment is due paid varies for different types of transactions, but the date on which this occurs is the settlement date. Most exchange-traded corporate securities in the United States are required to be settled three days after the trade order is entered, which is called T+3. That date is the settlement date, and is the final date on which the transaction must be finalized by both parties involved. Continue reading...
Settling an account is laying all outstanding business on an account to rest. Account settlement is an idea that can take a few forms. Settlement is when acceptable “consideration” (compensation or pay) has been provided and both parties agree that the matter is settled, resolved, and no further debts or obligations exist for that item of business. Many people have heard the term “settlement” with regards to legal matters, in which the defendant pays off the plaintiff before an actual trial and usually can avoid officially admitting guilt. Continue reading...
A short position is a sale made by an investor for a security which he or she will deliver to the buyer in the near future, but which he or she is hoping will go down in price in the near future so that a profit can be retained from the price collected in the short sale. A short position is a bearish play on a security which an investor believes will decrease in price in the near future. The investor offers shares for sale, and collects the current market price for the shares from the buyer. Continue reading...
The Pink Sheets used to be printed on pink paper and contained the bid and ask prices of penny stocks which were not listed on major exchanges. Today the Pink Sheets are operated online by OTC Markets Inc but fulfill the same role. The Pink Sheets will list penny stocks which may or may not be found on other micro-cap exchanges. To be listed on the Pink Sheets, there are no listing requirements, such as cap-size; companies must only file one form and which provides some current financial information, but update information may not be required as time goes on, and hence companies listed only on the pink sheets are considered the most speculative and risky equity plays an investor can make. Continue reading...
This seems to be a better choice than debt settlement, and it may make payments easier. Debt consolidation allows people to pay one bill a month towards their debt obligation, rather than many, and it may also give them a lower interest rate payment. A debt consolidation company or bank can settle the outstanding debts of the individual; this settlement amount plus fees becomes the principal loan amount or a new loan, which will probably be designed to have lower payments than the individual was paying before consolidation. Continue reading...
Credit counselors can negotiate debt management strategies with lenders on behalf of individuals with debt problems, as well as providing behavioral financial habit construction counseling. Debtors seek out credit counselors to find out what their options are to get out of debt and to get some coaching during the process. Credit counselors can be certified through several accredited institutions who are overseen by the Department of Justice in the United States, and they may be part of a non-profit organization, lending institution, or independent financial practice. Continue reading...