Personal Finance
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Welcome to the mysmp Personal Finance Education Center. Learn about the various types of retirement plans such as the 401k, IRA, Roth IRA, Keogh's and more. 401k planning is essential to any investor looking to properly save for their retirement. Understand contribution limits and distribution rules for the major retirement planning vehicles.
| 401k Planning - Retirement Savings Vehicle | A 401k plan is a defined contribution retirement savings account which is designed to provide you with great tax savings advantages and tax free investing. |
| 401k Withdrawal | If you are considering a 401k withdrawal, your options depend upon several key factors. Circumstances that might cause you to withdraw your funds from a 401k include a layoff, job change or retirement. Certain 401k withdrawal rules also apply to 401k hardship withdrawal, borrowing from 401k and 401k early withdrawal. |
| 403b Plans | A 403(b), also known as a tax deferred annuity or TDA, is a tax deferred retirement plan available to employees of public schools, tax-exempt organizations, employees of public schools which are organized by Indian Tribal governments, civilian faculty and staff of the Uninformed Services University of Health Sciences, and some ministers |
| Accrual Rate | This article provides an overview of accrual rates for pension plans, including an accrual rate definition. Fully indexed accrual rate plans like Social Security are explained in basic terms. Percentage and fractional plans are also discussed, along with performance indexing as a means of mitigating the effects of inflation. |
| Adjustable Rate Mortgage Basics | Coverage of the basic features of an adjustable rate mortgage. Discussion includes topics such as initial rate, adjustment period, index & margin, and interest rate caps. |
| Adjusted Gross Income (AGI) Definition & List of Deductions | The term adjusted gross income refers to an amount of income used to determine a tax payers total income tax liability. The "adjustments" to gross income are created by allowable deductions that are part of the IRS tax code |
| Alt-A Loans | Alt-A loans will have higher interest rates than your typical A-paper loans due to the added risk profile of the borrower. The added risk could come in the form of a higher debt to income ratio, high loan to value ratio, or even a credit rating which is less than excellent |
| Amortization Table | The amortization schedule provides insight into the specific dollar amounts that go towards the interest and principal components of your loan payment. |
| Annual Percentage Rate (APR) | APR, or annual percentage rate, refers to the periodic cost of borrowing times the number of periods in a year |
| Annualize | In order to derive a financial forecast, it is often necessary to annualize short-term results; this provides an estimate of future values based on the current available data |
| Annuities | An annuity is a contract, offered by an insurance company, that is designed to receive payments (lump sum or a series) from the purchaser of the annuity in exchange for a stream of periodic payments beginning at some point in the future |
| Avoiding Early Distribution Tax | To prevent investors from depleting their retirement savings, the IRS imposes a penalty of 10% for making any withdrawals or distributions from your retirement plans before you reach the age of 59.5. There are, however, exceptions to every rule it seems when it comes to the tax code |
| Balloon Mortgage | A balloon mortgage is a loan type where the borrower makes a fixed monthly payment for a fixed amount of time ranging from 5 to 15 years, and then is required to payoff outstanding principal balance on the home with a lump sum payment |
| Bankruptcy Trustees | Bankruptcy trustee duties and powers are discussed. An overview of bankruptcy trustee fees is also included, as well as differences between corporate and personal bankruptcy trustees. |
| Beneficiary | A beneficiary is a recipient of your assets upon your death. Many believe that setting up a will and naming beneficiaries in there is enough to properly transfer assets at the time of your death; however, this is not true. |
| Bridge Loan | A bridge loan, also known as "gap financing", is used by an individual or business for purposes of short term financing needs in lieu of obtaining permanent financing. Bridge loans allow the borrower to respond to situations that require immediate capital such as buying a new house or funding a critical business need |
| Capital Accumulation Plans | Capital accumulation is discussed, including a capital accumulation definition and discussion of various capital accumulation plans. Advantages of these flexible deferred-salary savings plans for employers and employees are considered, and tax advantages of capital accumulation plans are explained. |
| Collateral | The term collateral describes pledged assets that a borrower commits as security against a debt to secure the repayment of the loan |
| Debt To Income Ratio - DTI | Your debt to income ratio is simply the percent of your gross income that goes toward paying bills or other debts |
| Defined Benefit Plan | A defined benefit plan provides an employee with a set amount of money in the form of an annuity once retirement kicks in |
| Education Savings Account - Educational IRA | An education savings account (ESA) is designed to help families save for their child's educational expenses, whether it be for grade school, private school, or college. An education savings account is a tax advantaged investment account allowing families to make and grow investments at a tax-free rate |
| Employee Stock Ownership Plans | An employee stock ownership plan, or ESOP for short, is a stock bonus plan that invests corporate profits back into the stock of sponsoring employer by rewarding employees with company stock |
| FICO Score | The FICO score is a key tool used by many lenders to assess the creditworthiness of a borrower; it conducts a probability analysis on a borrowers credit report assessing the ability of an individual to repay his/her debts |
| Financial Rules of Thumb | Financial rules of thumb provide the framework for someone to achieve financial freedom. |
| Fixed Amortization Method | The fixed amortization method of determining substantially equal periodic payments is probably the most popular method out of the three available. The annual payment is derived by amortizing the account balance over a pre-determined number of years using the selected life expectancy table(uniform, single life, or joint and survivor) and interest rate that you choose. Once the annual payment is determined for the first year, it stays fixed for the remainder of the plan. |
| Fixed Annuitization Method | The fixed annuitization method of calculating Substantially equal periodic payments uses an interest rate assumption and a mortality assumption to arrive at an annuity factor which determines the annual distribution you may receive from your retirement plan |
| Home Equity Line of Credit - HELOC | A Home Equity Line of Credit, or HELOC, is a line of credit extended to a borrower using their house as collateral |
| Income Tax Rules for Retirement Plans | Discussion of a few common income tax rules for retirement plans. |
| Introduction To Adjustable Rate Mortgage (ARM) | An adjustable rate mortgage is a mortgage product which has an interest rate that changes periodically |
| Investing for Dummies - Keys for Becoming a Successful Investor | The stock market is a market where investors can buy and sell securities at a price agreeable to both parties. While the name of this article is investing for dummies, it actually does require some smarts to be successful in the stock market. Stock markets have been around for hundreds of years. |
| Joint Tenancy | Joint tenancy is an agreement between owners that upon death, the owner's assets are passed onto the surviving owner |
| Keogh Plans | A keogh plan is a qualified plan designed to help self-employed workers or individuals establish a tax-deferred retirement savings vehicle |
| Life Expectancy Tables | The life expectancy table provides a life expectancy factor which is used in the calculation of the SEPP, or substantially equal period payments for all types of distribution methods: Required Minimum Distribution, Fixed Amortization, and Fixed Annuitization |
| Loan To Value (LTV) | The LTV, or loan to value ratio, measures the amount of leverage you are using when you take a loan to purchase a property. LTV is measured by taking the first mortgage balance and dividing it by the appraised value of the home. |
| Money Purchase Pension Plan | A money purchase pension plan is a retirement savings vehicle, similar to a profit sharing plan, that guarantees a certain contribution to the employee every year. |
| Negative Amortization Loans | A negative amortization loan is a type of loan which lowers monthly payments below the amount required to cover the costs associated with that loan by increasing the loan balance. |
| Ordering Rules | When it comes time to taking a Roth IRA withdrawal, the IRS has established ordering rules which guide the order of distributing funds within your Roth IRA, for the purposes of tax reporting. These rules are put in place to order the sequence of distributions from various funding sources within your Roth IRA. |
| Pension Fund | A pension fund exists to provide retirement income to an organization's employees through the pension fund administrator's ability to create stable growth over the long run |
| Private Mortgage Insurance (PMI) | PMI, or private mortgage insurance, is a premium that borrowers must pay to the lender if their first mortgage balance is above 80% Loan to Value; PMI insures the lender against borrower's default |
| Profit Sharing Plans | Profit sharing plans allow companies to reward their employees by sharing their profits. Profit sharing is a great long term retirement vehicle for employees. |
| Qualified Dividend Definition & Requirements | Qualified dividends are monies received for investing in a stock paid out to the stockholder at a lower tax rate than normal dividends. Qualified dividends were introduced in the Jobs and Growth Tax Relief Reconciliation Act of 2003. |
| Qualified Plans | Qualified plans allow employers to create savings vehicles for their employees which carry special tax rules |
| Recharacterization | A Roth IRA recharacterization allows you to reclassify your IRA contribution, or conversion, from a Roth IRA back to a traditional one. |
| Required Minimum Distribution Method | The required minimum distribution method is a simple way of calculating substantially equal periodic payments and is one that resets every year. It is basically calculated by dividing your retirement account balance by your life expectancy factor as provided by the IRS grid. |
| Rollover IRA | A rollover IRA is a special type of IRA that is used to receive distributions from an employer sponsored qualified plan such as the 401(k) or profit sharing plans |
| Roth 401k | A Roth 401k allows employees to put after tax dollars into a retirements savings account and enjoy tax free distributions at retirement |
| Roth IRA | The Roth IRA allows qualified individuals to make after-tax contributions, yearly, into an investment account which will grow at a tax free rate. At retirement, individuals will be able to withdraw funds at a tax free rate. |
| Roth IRA Contribution | The Roth IRA contribution limit for 2009 is $5,000($6,000 for individuals above 50). Participation is subject to Roth IRA limits on income that is earned by an individual or couple. |
| Roth IRA Conversion | If you have a traditional IRA, Roth IRA, or even 401k, you may be considering a Roth IRA conversion, or Roth IRA rollover. Before you make the move, you need to consider the advantages and disadvantages of converting to Roth IRA. |
| Roth IRA Withdrawal | It is important that you understand the many different rules which surround a Roth IRA withdrawal. Understand the tax consequences for a qualified, non-qualified, and conversion Roth withdrawal |
| Secured Credit Card | A secured credit card is a type of card where the issuer requires the borrower to deposit some form of collateral into a special savings account. |
| Simple IRA | Simple IRAs, or also referred to as simplified incentive match plan, are designed to make it easier for small businesses of less than 100 people to offer retirement plan benefits. Similar to a 401(k), the SIMPLE IRA allows pre-tax deductions to be made from employee accounts. |
| Simplified Employee Pension - SEP | A SEP, or simplified employee pension, is a special form of an IRA which is designed for small businesses to allow a high rate of tax deferred savings. |
| Subprime Lending | The term subprime lending is assigned to loans (mortgage, credit card, auto, etc) that are issued to the riskiest group of borrowers. Subprime borrowers typically have below average credit scores and are tainted with more serious blemishes in their credit history; such as, bankrucpcy, charge-offs, debt consolidation, late payments, and high amounts of debt in relation to their credit lines |
| Substantially Equal Periodic Payments | Substantially equal periodic payments allows the participant the opportunity to withdraw funds from an IRA or other qualified retirement plan prior to retirement without the associated taxes or penalties. SEPP is a longer term solution to financial hardships |
| Taking Loans From Retirement Plans | Taking a loan from a qualified plan such as a 401(k) or employee stock ownership plan is allowed; however, some plans may not allow for it. If a plan would provide for the ability to take loans, there is a maximum amount which is the greater of $10,000 or 50% of your vested balance or $50,000, whichever is less. |
| Target Benefit Plans | A target benefit plan is a special type of money purchase pension plan which provides unguaranteed retirement benefits to employees due to the fact that retirement benefits are directly correlated to investment gains or losses. |
| Traditional IRA | A traditional IRA is an investment vehicle for retirement that allows you to contribute after-tax dollars to a tax deferred account on which you will not pay taxes on until you begin taking distributions at retirement; presumably in a lower tax bracket. |
| Truth in Lending | The truth in lending act was enacted to protect consumers against unfair and fraudulent lending practices through full transparency of key terms and conditions of a loan such as the APR, length of loan, and costs associated to the loan. |
| Types of Adjustable Rate Mortgages | There are three main types of adjustable rate mortgages; interest-only, hybrid, and payment-option. All of these pose long term threats to your financial health. Learn about how each of these three ARMs work. |
| Unemployment Rate | The unemployment rate represents the ratio of the workforce who is classified as "unemployed". An unemployed individual can be defined as a person who is of age 16, or older, who does not have a job and has been actively looking a job over the past 4 weeks. |
| Variable Annuities | A Variable Annuity is basically marketed as an insurance contract which will provide minimum monthly retirmement benefits |
| Vesting in Stock Options and Pension Plans | A vesting period is a period of time an investor or other person holding a right to something must wait until they are capable of fully exercising their rights and until those rights may not be taken away |
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