EDU Articles
Popular articles
What is Chapter 12?
Chapter 12 is a category of bankruptcy filing that can be made by a family farmer. It is otherwise similar in structure to Chapter 13 bankruptcy, where the debtor can prove an income and a trustee serves as intermediary between the debtor and the creditors. A family farmer will still be permitted to operate the farm once he has filed Chapter 12 bankruptcy. Like a Chapter 13 filing, the debtor will be allowed to propose a debt repayment schedule that he or she believes would be successful over the following 3-5 years. Some assets would be liquidated to pay off debts, but most of it would be paid according to the repayment schedule, under the care of a trustee who would serve as the proxy for the debtor in the remainder of the dealings with the creditors. 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 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...
What is Accelerated Amortization?
Accelerated amortization is the recalculation of an amortization schedule, such as mortgage payments, after the borrower pays off some of the debt ahead of schedule. Amortization describes the accounting practice of giving a one-time expense a retirement schedule or payment plan by which it is to be either deducted for tax purposes, repaid, or paid out. Accelerated amortizations allow for more payments or deductions in the early years rather than later years. Continue reading...
What is an Asset-Backed Security?
Asset-backed securities are bonds or notes that come in several forms, but they typically use the cash flows from debt repayment as the asset that backs them. The assets that back the bonds called asset-backed securities (ABS) can be basically anything with a fairly predictable cash flow, but debt repayment cash flows tend to be used the most. These include credit card debt, home equity loans, auto loans, student loans, and so forth. Continue reading...
What is a 529 Plan?
529 plans are accounts designed to help families save for the future college expenses of young family members. A 529 Plan is designed to help you save money now to pay your child’s college expenses later. Investment companies who design a plan, which looks similar to a retail mutual fund account or IRA, will partner with state governments to offer the state’s official 529 plan. Families can invest in a 529 and gain access to an array of mutual funds. Continue reading...
Can I Take a Loan From my Cash-Balance Plan?
The IRS permits such loans, but it is rare to find a plan that allows it. In the vast majority of cases, you cannot. Though the IRS permits it, the administrative burden of a defined benefit plan is already significant for an employer, and it is much more likely that they will not make a provision for loans in the plan document. As far as the IRS is concerned, generally speaking, these plans have the same rules as other qualified plans. If a small partnership or LLC with a cash balance plan wants to put loan provisions into their plan document, they can do it. Continue reading...
What is the Difference Between Cash-Balance Plans and Other Retirement Plans?
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...
Will Having a 529 Plan for My Child Impact His/Her Eligibility For Financial Aid in the Future?
It will be factored in when considering financial aid eligibility. Unfortunately, having a 529 Plan may affect your child’s eligibility for financial aid in the future. If a parent owns the account, in 2016 the financial aid office will take 5.64% of the account’s value (and all other non-retirement investment accounts) into consideration when determining how much financial aid a student can receive. Continue reading...
What is a Keogh plan?
Keogh plans are any type of qualified plan at a sole proprietorship or partnership. Keogh plans come in various forms, and this is because they are actually quite a broad category. IRS Publication 560 (found here) divides workplace retirement plans into SIMPLE IRAs, SEP IRAs, and Qualified Plans. This last category, Qualified Plans, includes profit-sharing plans, 401(k)s, 403(b)s, money purchase plans, and defined benefit plans such as pensions and salary continuation plans. Continue reading...
Should I pay for financial planning services?
Any professional that you work with for financial planning is going to be compensated for the work they do, but there are different ways they earn their pay. Whether it’s worth it to you is another question. If you have enough knowledge and time on your hands, and your investment portfolio is not very complicated, you may be able to manage it on your own. This can save you some money on financial advisor fees. Continue reading...
What are My Keogh Plan Investment Options?
Keoghs can hold a wide range of investments, and it will mostly depend on your plan trustee. Keogh plans have the ability to include many investment options, from stocks to bonds, certificates of deposit to cash value life insurance, and so on. Keep in mind that Keogh Plan investments are usually determined by the financial institution at which your Keogh Plan is established. When opening a Keogh Plan, be sure to check what investment options the financial institution offers, and how much in fees and commissions they would charge for these investments. Standard ERISA rules apply, so all employees must be offered the same options. Continue reading...
What are the Contribution Limits For My 529 Plan?
Parents and family members, or actually anyone, can contribute up to the annual gift tax exclusion limits, and beyond. Several people can fund 529 plans for the same person or child, and any one person can maintain as many 529 plans as they would like. Each person can contribute up to the annual gift tax exclusion amount, which in 2016 is $14,000, per beneficiary. 529 plans have a special provision that allows the owner of the account to exceed the gift tax exclusion by contributing up to $70,000 at once – but no contributions can be made for 5 years after that, because this provision is really just allowing you to accelerate the contributions. Continue reading...
What is a Dividend Rollover Plan?
Dividend rollover plan is another, rarely used way to refer to a Dividend Reinvestment Plan (DRIP). Unfortunately just reinvesting dividends in a systematic way will not get you out of any tax implication associated with the dividends attributed to your account. An automatic dividend reinvestment plan (DRIP) is an option in some investment accounts and financial products. Any dividends paid out will be reinvested in the same mutual fund, ETF, or stock at the earliest possible opportunity. Continue reading...
What are the 457 Plan Contribution Limits?
Contribution limits depend on if you are making contributions as a government employee, a non-profit employee, or a highly compensated employee. Government employees can defer up to $18,000, plus a $6,000 catch-up contribution for those over 50, in 2016. These plans use the same elective deferral limits as 401(k)s. A non-governmental, non-profit employee can only contribute the $18,000, and is not allowed to make the $6,000 catch-up. Both of these types of employees are allowed to use the alternate catch-up provision of 457s, however. Continue reading...
Who Offers Defined Benefit Plans?
Any employer can offer a Defined Benefit plan, but not many do anymore. Before the introduction of Defined Contribution Plans, most large corporations such as General Electric, General Motors, etc. offered only Defined Benefit Plans. Over the years, it has put a huge burden on these corporations to guarantee the performance of these plans. If the plan has not performed according to the assumptions, the company would have to contribute the difference, which would have to come from their profits. In order to shift the burden to the employees, most companies now offer Defined Contribution Plans (such as 401(k)s, etc.) instead of Defined Benefit Plans. Continue reading...
Can I Take a Loan From My Pension Plan?
Generally this won’t be an option that your plan allows, but the IRS has approved it if the employer wants to. Generally speaking, you cannot. Hypothetically, if allowed in the plan document, and if the pension fund had enough of a surplus to handle such withdrawals, the IRS might find it permissible. The laws concerning such loans are the same for all qualified accounts, such as 401(k)s. An enrolled actuary would need to help you define when a loan might be allowable in particular deferred benefit plan. A Pension’s main goal is to pay out in retirement for the duration of the obligation, which may be your life and possibly the life of your spouse. Because of the massive liability they shoulder, pensions are inherently rigid and uncompromising when it comes to loans and withdrawals. Continue reading...
What is the Difference Between a Thrift Savings Plan and Other Retirement Plans?
The main difference is that the TSP is only for Federal employees. A Thrift Savings Plan is essentially a 401(k) for employees of the federal government. It functions in the same ways and is subject to the same limitations. The contribution limits and catch-up limits are the same, as well as the employer contribution limit. The plan actually has lower fees than most 401(k)s, so that’s one difference. The investment options are fairly limited, but not much more than regular 401(k)s. There are basically 5 index funds to choose from and then a series of target-date funds that blend the index funds. Continue reading...
What Is a Promissory Note?
A promissory note is a financial instrument that contains a written promise by one party (the note's issuer or maker) to pay another party (the note's payee) a definite sum of money, either on demand or at a specified future date. In this article, we'll delve into what a promissory note is, how it works, its types, and the advantages and disadvantages of using one. Promissory notes can be thought of as a financial intermediary between the informality of an IOU (I Owe You) and the strict structure of a loan contract. An IOU simply acknowledges a debt, while a promissory note includes a promise to pay on demand or at a set date, along with details on the repayment process. Continue reading...
What is a Dividend Reinvestment Plan?
A Dividend Reinvestment Plan, referred to as DRIP, is a plan offered by corporations that allows investors to reinvest their dividends in full or partial shares of additional stock, on the dividend payment date. Accessing a DRIP is typically a good long-term investment play - it allows for the investor to repurchase shares at a discount to the share price, and by accumulating additional shares over time increases equity ownership in the company. Continue reading...