The Fed has been commissioned with upholding the directive of the Federal Reserve Act. The Fed is technically an independent institution from the US Government, even though it works hand-in-hand with the Treasury Department on monetary policy issues. It functions partially as a self-regulatory organization for the banking industry, and the Regulations, which are named with letters of the alphabet, are meant to protect consumers, member banks, and the economy as a whole. The leadership of the Fed is comprised of both government appointees and private sector banking leaders. Continue reading...
Cash balance plans are a type of pension in which the benefit is stated as a future account balance rather than an income stream. A Cash-Balance Plan is very similar to a normal Pension Plan. You do not technically contribute anything to the plan (unless you are an owner-employee), and you don’t have any control over the assets which are managed on your behalf. In a normal pension, the benefit waiting for you in retirement is a monthly income stream, but in a Cash Balance plan, your future benefit is stated as an account balance, which you will be able to take as either a lump sum or an income stream. Continue reading...
Employers make the decision to establish a 40(k), but it has to be good enough for employees to want to participate. An employer is responsible for establishing a 401(k) and for overseeing it as the sponsor and fiduciary. A self-employed individual can also establish an Individual 401(k), which has the same contribution limits and requires none of the testing or auditing of a regular plan. Other options for work-site retirement plans are SIMPLE IRAs, SEP IRAs, and various kinds of profit-sharing and deferred compensation arrangements. Continue reading...
Chapter 7 is a type of bankruptcy filing that allows an individual to liquidate enough assets to repay their debts and to then be free and clear of debt obligations. This can help get a credit rating back on track sooner than another type of filing such as Chapter 13. Chapter 7 is for people with incomes below their state’s median income. By liquidating enough assets to pay off creditors, a debtor can use Chapter 7 to take care of all debts at once, or to have some of the debts forgiven if the debtor does not have adequate assets for liquidation. Continue reading...
There is no vesting required for self-employed 401(k) (aka Solo K) plans, since you are the employer and the employee. Vesting is a process in which assets that were completely owned by one party are eventually made the property of another party who has had use of the assets. In retirement plans, employer contributions typically have a vesting schedule, partially to give employees a reason to stick around for a few more years. Continue reading...
IRS Link to Publication — Found Here Publication 521 details the methods and requirements for tax deductions related to moving expenses, where the move is necessary to start a new job or maintain a job that requires relocation. The IRS requires that the situation passes tests regarding the distance of the residence to the new job and the time spent at the new job. If an individual moves in order to take a new employment opportunity, he or she may re Moving expenses include travel expenses as well as storage, transportation, and labor costs connected with moving furniture and whatnot. Continue reading...
Employers can contribute to an employee’s 401(k) on a matching basis. Some employers will make additional contributions to your 401(k) based on the amount of your own contributions. Matching can be done on a dollar-for-dollar basis, meaning that for every dollar you contribute to your account, they will add a dollar as well. It can also be done using a factor, such as ½, meaning they will contribute a dollar every time you contribute two. Continue reading...
All SEP contributions are immediately vested for employees. SEPs are funded entirely by employer contributions, and these contributions are immediately vested for the employee. In other words, the contribution belongs to you immediately after it has been made, notwithstanding standard withdrawal rules. Withdrawal rules for a SEP are the same as those for Traditional IRAs. Continue reading...
Generally a plan will allow you to leave your assets in there indefinitely, but this is probably not ideal for you. Most custodians will be happy to hold onto your account dollars as long as you’re willing to leave them there. They don’t have to spend any time servicing your account since you can’t make contributions and probably aren’t even able to reallocate your assets, and they will continue to make money on your account with the built-in fees. You may be charged inactive account fees or small account fees as well. Continue reading...
Employer contributions to SIMPLEs are immediately vested to the employee. The employer’s contributions into SIMPLE IRAs do not have any vesting restrictions. In other words, the contribution belongs to you immediately after it has been made, notwithstanding standard IRS rules for withdrawals from retirement accounts. SIMPLEs do have some restrictions during the first two years, however, that are known as the ‘Two Year Rule.’ Continue reading...
Different 401(k) custodians will have different distribution options available to participants in retirement. After you retire, you have at least two disbursement options: lump-sum distribution and periodic distribution. If you take a lump-sum distribution that is not bound for an IRA, you will incur a significant tax bill, since all 401(k) distributions are taxable. Periodic distributions may mean that every so often you can choose an amount to be paid out to you on a quarterly basis, for example, while your investments remain intact and you attempt to accrue more interest on your money. Continue reading...
Vesting is the schedule or process by which certain assets are eventually considered the property of an individual who uses them. If your employer provides some sort of matching, flat, or profit-sharing contribution to your retirement account at work, you will probably not be allowed keep the entire amount that they contributed if you change jobs or retire before a certain number of years have passed. Continue reading...
You may know that a 401(k) allows you to make payroll-deducted contributions to a retirement account before taxes are taken out, but how does it work? Employees can either become participants in a 401(k) by voluntary enrollment or by automatic enrollment with the ability to opt-out. Contributions go in before taxes are taken out, and this can reduce an individual’s taxable income or even income bracket for the year. Continue reading...
Vesting rules depend on the type of Keogh contributions being made. The IRS imposes certain rules on Keogh Plans, which includes vesting restrictions. Different employers might have totally different vesting schedules, as long as they satisfy the IRS rules. It depends on the type of contribution being made, such as matching or profit-sharing or money-purchase contributions, whether the plan is a QACA, and so on. Many contributions are immediately vested, while some are gradually vested over a few years, and some are on a cliff-vesting schedule. Continue reading...
You may not be vested in a pension if you lave too early, or you may have to accept a lower payout. This depends on how many years you worked for your employer, and other factors which are described in your pension plan document. In some cases, the employer can specify a minimum number of years you have to work for the company in order to receive a Pension. Otherwise, the amount you receive will be vested in portions over a few years, until you will be able to leave your job and keep 100% of the accrued Pension benefits. Continue reading...
The quick ratio (also known as an “acid test”) is a financial ratio used to measure how well equipped a company is to meet its short-term liquidity needs. It basically measures how much cash (or assets easily and quickly converted to cash) a company has available to meet its short-term liquidity obligations. Since inventories are assets but are not necessarily liquid, they are excluded from the calculation. Continue reading...
A company's balance sheet gives a picture of how all the assets, liabilities, and equities of the company "balance out." The basic accounting equation is Total Assets = Total Liabilities + Equity, and a Balance Sheet is going to detail these parts to show how everything adds up at the time of the report. With things equal on both sides of the equation, the company's books are balanced, the same way someone might go back through the carbon copies of checks they've written and "balance the checkbook" to make sure all checks written have been accounted for. Continue reading...
The IRS Code allows for certain penalty-free withdrawals, and gives the plan administrator the freedom to define certain other hardship exemptions. Certain kinds of retirement plan withdrawals are excluded from the 10% early withdrawal penalty tax. These include medical expenses which exceed 7.5% or 10% of Adjusted Gross Income, distributions to the family members of active duty military personnel who have been called to active duty, and distributions needed if the participant becomes disabled. Continue reading...
401(k) account balances can be taken to the next place of employment, rolled into IRAs, or cashed out. Sometimes people don’t know what to do with a 401(k) when the change jobs. If it sits there too long, and the employer cannot locate you because you changed addresses, your account balance will be taken over by the State in which you worked. Your state should be able to locate your file using your social security number and pay you the account balance as of the date they froze the 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...