Equity Indexed Annuity
by Takara Alexis
It isn't every day that you find the opportunity for potential growth containing true safety in the same financial vehicle. Commonly investors are urged to make one of two choices, either they give up a degree of safety in exchange for a bigger potential for growth or they accept less growth in exchange for a higher degree of safety.
Thanks to an innovation in the insurance industry, you can have the potential high returns available in the stock market and the security of a guarantee-it's called an equity indexed annuity.
Equity indexed annuities are exceptional back up choices for investors looking for safety in a low interest rate environment or a volatile market. Here's how they work, your return is based on the growth of a stock or equity index, such as the S&P 500.1 If stocks rise, you benefit from the increase. If stocks crash, you do not lose any money, most contracts guarantee a minimum return, commonly 3%.2 This is what makes these newer products so attractive to retired people and to those reaching retirement.
Now, imagine this scenario: Suppose you and I take a trip to Las Vegas for a few days. I decide to make you an offer. You could gamble at one of the casinos as much as you want for the whole time we're there and I will guarantee you in writing that even if you do bad you will not lose. In fact, I promise that you will walk away from the tables with no short of what you began with, plus some interest. If you win, you get to keep the winnings.
Clearly, there is no such thing as a free lunch, so the company that hands out the annuity will restrict the maximum returns that you get from a rising market in return for the downside protection they provide. This limit depends on the particular indexing method that the annuity company uses. One of the most common methods used to limit returns is something called the "participation rate."
Let's take a look at another hard time in the market and see how the index annuity would have carried out utilizing the annual reset method. One really good example of a prolonged bear market was the 1970's, in the 1973-74 downturn stock prices fell more than 40%. The S&P 500 closed at an all time high towards the end of 1972 and it was not until 1980 that these levels were retraced.
In today's market environment it is hard to beat an annuity that only goes up. Many seniors who fled the stock markets, locked in gains and purchased equity index annuities. They're now waiting for an upturn, which will generate further gains for them, not just a recovery to former highs. The use of these vehicles has allowed them some comfort during market fall offs.
Due to the complexity of equity index annuities I firmly suggest you consult with a knowledgeable investment specialist to see how they could fit into your financial plan.
Thursday, March 31, 2011
Friday, March 25, 2011
401k Rollover
401k Rollover
by Takara Alexis
Maybe you're about to change jobs, change companies, or change your career completely. Whatever change is a foot, we don't have to remind you how necessary it is to keep an eye on your retirement funds during hectic times. Assets for your retirement should be able to respond to any possible changes with ease.
If you're switching jobs and have an existing retirement plan, such as a 401(k), you should already have a Summary Plan Description in your possession. This will describe your retirement plan and the options available to you, regarding your old (or, soon to be old) companies plan. You want to share this document with a financial expert so both of you can chose what option fits you best.
Typically, you'll have three important options for your retirement fund when changing jobs. You can take your investment savings and keep the cash as a lump sum (sit), you are able to leave the money where it is (stay), or you could "roll over" your retirement money into a different retirement plan or an IRA. Every option has its pros and cons. Depending on your situation in life and in your career, you'll want to discuss with a financial expert and pick the best option for you.
If you choose to withdraw your money in a lump sum from a previous employer's retirement fund, you must pay taxes on the money you take out. In addition to those taxes, your employer is expected to take a 20% withholding from your lump sum, and if you are under 59 years old, you may also be forced to pay a 10% penalty tax.
You can roll over the lump sum and avoid the fine provided that you deposit the funds in an IRA or another employer plan within 60 days. You will need to make up the additional 20% withheld by your employer. The 20% withholding will be subtracted from your reported income when your taxes are due.
There are, however, exceptions to the laws of roll-overs for first time homebuyers. If you are clearing out your previous retirement fund and wish to use up to $10,000 towards the purchase of a first home, you're permitted to do so. You are taxed on the withdrawal, but you don't have to pay the extra 10% early withdrawal fee. In addition you have up to 120 days to use the $10,000 on a first-time home purchase rather than the basic 60 days.
These are just the basic options you may have while switching careers and retirement plans. Deciding what to do with your retirement savings when changing companies or careers is one of the most important choices you will make. And if you are prepared in advance, you'll know when it comes time to confront change, you'll be ready.
by Takara Alexis
Maybe you're about to change jobs, change companies, or change your career completely. Whatever change is a foot, we don't have to remind you how necessary it is to keep an eye on your retirement funds during hectic times. Assets for your retirement should be able to respond to any possible changes with ease.
If you're switching jobs and have an existing retirement plan, such as a 401(k), you should already have a Summary Plan Description in your possession. This will describe your retirement plan and the options available to you, regarding your old (or, soon to be old) companies plan. You want to share this document with a financial expert so both of you can chose what option fits you best.
Typically, you'll have three important options for your retirement fund when changing jobs. You can take your investment savings and keep the cash as a lump sum (sit), you are able to leave the money where it is (stay), or you could "roll over" your retirement money into a different retirement plan or an IRA. Every option has its pros and cons. Depending on your situation in life and in your career, you'll want to discuss with a financial expert and pick the best option for you.
If you choose to withdraw your money in a lump sum from a previous employer's retirement fund, you must pay taxes on the money you take out. In addition to those taxes, your employer is expected to take a 20% withholding from your lump sum, and if you are under 59 years old, you may also be forced to pay a 10% penalty tax.
You can roll over the lump sum and avoid the fine provided that you deposit the funds in an IRA or another employer plan within 60 days. You will need to make up the additional 20% withheld by your employer. The 20% withholding will be subtracted from your reported income when your taxes are due.
There are, however, exceptions to the laws of roll-overs for first time homebuyers. If you are clearing out your previous retirement fund and wish to use up to $10,000 towards the purchase of a first home, you're permitted to do so. You are taxed on the withdrawal, but you don't have to pay the extra 10% early withdrawal fee. In addition you have up to 120 days to use the $10,000 on a first-time home purchase rather than the basic 60 days.
These are just the basic options you may have while switching careers and retirement plans. Deciding what to do with your retirement savings when changing companies or careers is one of the most important choices you will make. And if you are prepared in advance, you'll know when it comes time to confront change, you'll be ready.
Tuesday, March 22, 2011
Health Savings Accounts
Health Savings Accounts
by Takara Alexis
Health Savings Accounts (HSAs) have suffered under the complex regulations meant to discourage misuse. However, the accounts have power to do way more than just allow investors to save and pay for health-care expenses with tax-free money.
To be thought of as "qualified" the insurance plan needs to have a deductible of at least $1,150 for individuals or $2,300 for family, and contain a limit of $5,800 individual and $11,600 family for out-of-pocket costs. Choosing a policy that qualifies could include insurance and tax issues that should be discussed with professionals in those fields.
Many employers offer flexibility spending accounts for medical costs (and sometimes child care) that permit employees to put aside pre-tax dollars for medical expenses that aren't covered by the company's health insurance, including premiums and deductibles. Unlike flexible spending accounts, however, HSA contributions and gains can be carried over from year to year - there's no "use it or lose it" requirement - and you retain ownership of the funds even if you terminate employment.
If your employer allows a flexible spending account, you should take a description of the account requirements and limits when you discuss an HSA with your financial professional.
Because you establish an HSA independent of your employer, these accounts can accommodate a health care expense "safety net" should you happen to end your employment (voluntarily or involuntarily). Withdrawals for non-medical costs after the age of 65 are still taxable, and a 10% penalty applies for withdrawals that are non-medical before age 65.
If you plan on using Health Savings Account funds in the next term, a liquid, interest-bearing account such as a savings account might be suitable. However, if you do not count on an immediate need for all or part of your HSA funds, the accounts are self-directed, allowing you to use other investment choices. Your financial professional can assist you with determining which investment vehicle best suits your needs.
by Takara Alexis
Health Savings Accounts (HSAs) have suffered under the complex regulations meant to discourage misuse. However, the accounts have power to do way more than just allow investors to save and pay for health-care expenses with tax-free money.
To be thought of as "qualified" the insurance plan needs to have a deductible of at least $1,150 for individuals or $2,300 for family, and contain a limit of $5,800 individual and $11,600 family for out-of-pocket costs. Choosing a policy that qualifies could include insurance and tax issues that should be discussed with professionals in those fields.
Many employers offer flexibility spending accounts for medical costs (and sometimes child care) that permit employees to put aside pre-tax dollars for medical expenses that aren't covered by the company's health insurance, including premiums and deductibles. Unlike flexible spending accounts, however, HSA contributions and gains can be carried over from year to year - there's no "use it or lose it" requirement - and you retain ownership of the funds even if you terminate employment.
If your employer allows a flexible spending account, you should take a description of the account requirements and limits when you discuss an HSA with your financial professional.
Because you establish an HSA independent of your employer, these accounts can accommodate a health care expense "safety net" should you happen to end your employment (voluntarily or involuntarily). Withdrawals for non-medical costs after the age of 65 are still taxable, and a 10% penalty applies for withdrawals that are non-medical before age 65.
If you plan on using Health Savings Account funds in the next term, a liquid, interest-bearing account such as a savings account might be suitable. However, if you do not count on an immediate need for all or part of your HSA funds, the accounts are self-directed, allowing you to use other investment choices. Your financial professional can assist you with determining which investment vehicle best suits your needs.
Tuesday, March 15, 2011
Business Insurance
Business Insurance
by Takara Alexis
Buying business insurance is one the best ways to prepare for the unexpected. Without proper protection, misfortunes such as the death of a partner or key employee, embezzlement, a lawsuit, or a natural disaster could spell the end of a thriving operation.
Various business owners buy general liability or umbrella liability insurance to disguise legal problems created by claims of negligence. These help protect against payments as the result of bodily injury or property damage, medical expenses, the cost of defending lawsuits, and settlement bonds or judgments needed during an appeal procedure.
Despite popular belief, homeowners insurance policies don't generally take care of home-based business losses. Commonly required insurance areas for home-based businesses include business property, professional liability, personal and advertising injury, loss of business data, felonies and theft, and disability.
Web-based businesses might want to look into specialized insurance that covers liability for destruction done by hackers and viruses. Also, e-insurance usually covers specialized online activities, including lawsuits resulting from meta tag abuse, banner advertising, or electronic copyright infringement.
Required in every state with the exception of Texas, worker's compensation insurance pays for employees' medical costs and missed wages if injured while working. The amount of insurance employers needs to carry, rate of payment, and what types of employees must be carried varies depending on the state. In most cases, business owners, independent contractors, domestic employees in private homes, farm workers, and unpaid volunteers are exempt.
Some businesses may wish to acquire insurance that covers losses during natural disasters, fires, and other catastrophes that may cause the operation to shut down for a long time.
Many licensed professionals need protection against payments as the result of bodily injury or property damage, medical expenses, the cost of defending lawsuits, investigations and settlements, and bonds or judgments required during an appeal procedure.
by Takara Alexis
Buying business insurance is one the best ways to prepare for the unexpected. Without proper protection, misfortunes such as the death of a partner or key employee, embezzlement, a lawsuit, or a natural disaster could spell the end of a thriving operation.
Various business owners buy general liability or umbrella liability insurance to disguise legal problems created by claims of negligence. These help protect against payments as the result of bodily injury or property damage, medical expenses, the cost of defending lawsuits, and settlement bonds or judgments needed during an appeal procedure.
Despite popular belief, homeowners insurance policies don't generally take care of home-based business losses. Commonly required insurance areas for home-based businesses include business property, professional liability, personal and advertising injury, loss of business data, felonies and theft, and disability.
Web-based businesses might want to look into specialized insurance that covers liability for destruction done by hackers and viruses. Also, e-insurance usually covers specialized online activities, including lawsuits resulting from meta tag abuse, banner advertising, or electronic copyright infringement.
Required in every state with the exception of Texas, worker's compensation insurance pays for employees' medical costs and missed wages if injured while working. The amount of insurance employers needs to carry, rate of payment, and what types of employees must be carried varies depending on the state. In most cases, business owners, independent contractors, domestic employees in private homes, farm workers, and unpaid volunteers are exempt.
Some businesses may wish to acquire insurance that covers losses during natural disasters, fires, and other catastrophes that may cause the operation to shut down for a long time.
Many licensed professionals need protection against payments as the result of bodily injury or property damage, medical expenses, the cost of defending lawsuits, investigations and settlements, and bonds or judgments required during an appeal procedure.
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