So, maybe you have done some research on different types of investments, but you don't know where to purchase these investments. Typically, in order to purchase different types of investments, you will need to open up an investment account with your bank or an investment brokerage firm. Here are the typical accounts that you can open:
* Individual investment account. This type of account will allow you to buy and sell (on your own or with the help of an advisor) without restrictions; however, there are no tax advantages.
* Individual Retirement Account (IRA). This is a great account to invest money for retirement because it provides tax advantages. The money placed in an IRA is considered pre-tax and you pay no taxes on returns until you take the money out. Because you do not have to pay taxes on your money it will grow larger. You can contribute $4,000 per year tax free. Individuals aged 50 and older can contribute up to 100% of earned income or $5,000 whichever is less. However, if you pull out your money before you reach 59 ½, you will have to pay taxes PLUS you may have to pay an additional penalty.
* Roth IRA. A Roth IRA is similar to a regular IRA, except that it is after-tax money. Therefore, you do not get an additional tax deduction for this type of account. However, after the age of 59 ½, you can pull your money out tax free.
* 401(k) Plan. Many employers offer a 401(k) plan to their employees. This allows you to have money pulled from your paycheck each month and invested in mutual funds before tax. In addition, employers will typically match your investment up to 6% of your income. If your employer offers a 401(k) plan you should be investing as much as possible in it.
If you currently would like to open one of the above mentioned investment accounts, you have many options. For those just getting started, there are many discount brokerages online; such as Scottrade, Zecco, E-Trade, Charles Schwab, and many others. Or there is probably dozens of financial planners or stock brokers in your area that would happy to help you invest your money. (However, do your homework, before choosing any sort of financial advisor).
Investing is an essential part of planning for retirement. Using the time value of money, investments can grow very quickly. The examples below shows what $500 a month earning a return of 6%, 9%, and 12% can do over 30 years:
* $500/mth at 6% for 30 years = $502,257
* $500/mth at 9% for 30 years = $915,371
* $500/mth at 12% for 30 years = $1,747,482
These examples assume no previous savings. As you can see, simply earning the average market return of 12% over the next 30 years will grow your $500 savings into a healthy nest egg of nearly $1.8 million.
Invest with a Plan
Overall, it is important to invest with a plan.
* First, determine how much you need to retire on.
* Second, determine how many years before you plan to retire.
* Third, figure out what type of return you will need to meet your retirement savings goal.
* Fourth, pick investments that you are comfortable with (and will still allow you to achieve your investment/retirement goals).
* Fifth, open the appropriate accounts in order to meet these goals.
In addition, you would be wise to consult a financial advisor. A good advisor will be able to determine which specific funds or investments are appropriate for your individual situation.
Monday, May 12, 2008
Long Term Investment
There are two types of long-term investment accounts. They are Individual Retirement Account-IRA-- and Education Saving Account--ESA. These accounts are very beneficial for those individuals who have long-term horizons in their investments. These accounts offer income tax advantages to the investors besides building wealth over long time.
Individual Retirement Account-IRA
An Individual Retirement Account is a personal retirement savings account that offers tax benefits to the investors. It allows them to deposit a part of their income into a tax deferred brokerage account. To explain it further, you are given the benefit of tax deferment when your earnings accumulate without having to pay taxes on them. You have to pay taxes when you start withdrawing the money.
You get two benefits from this provision. First, the growth of your money will be tax-free. You get more to invest if you do not have to pay taxes immediately and also you will be in a lower tax bracket when you retire. You thus pay less in taxes on your withdrawals.
Contributions to this account may also be tax-deductible. For example, if your yearly salary were $ 45, 000 before taxes and you invest $2,000 a year into a regular IRA, you would deduct that $2,000 from the $45,000 and then leaving you with $43,000 in taxable income.
IRAs are of different types:
Traditional IRA
A Traditional IRA is a retirement account that permits the investors to defer taxes on their earnings until they start taking their money out. The money that the individuals invest is tax deductible in the year it is put in. The investors can participate up to the age of 70. They can presently contribute up to $4,000 every year. If you are 50 years old, you can contribute $5,000 every year.
If you contribute to the Traditional IRA, you do not have to pay any taxes on what you earn until you start withdrawing money. This is known as tax deferment. This type of account makes sense for the investors since by the time they retire; chances are that they will be in a lower tax bracket. It must be noted that if you are in a lower tax bracket you pay less in taxes on earnings from your IRA account when you retire.
You can make taxable distributions from a Traditional IRA beginning at the age of 59 without paying the penalties. The penalties, however, are levied on early withdrawals. If you withdraw your money before the age of 59, you have to pay a penalty of 10%. There can be exceptions to this rule, for example, penalty can be waived or reduced in case of owner's death or disability and also if you have to pay back taxes, buy a home for the first time, or, pay medical and higher education expenses.
Roth IRA
A Roth IRA is like a Traditional IRA. The only difference is that you pay taxes on the money you invest while your withdrawals are tax-free. Investors up to the age of 70 may currently contribute up to $4,000 every year. If you are 50, you can invest $5,000. If you think that you shall be in higher tax bracket when you retire, it is recommended that a Roth IRA can be a better retirement solution. A Roth IRA can allow your investment to grow tax-free. Five years after you invest, withdraws will not be taxed. After you have turned 59 or you can use your withdrawal for the first home purchase. Withdrawing early may attract a penalty of 10%.
Rollover IRA
"A Rollover IRA is a holding account. If you transfer funds or stock from a retirement plan such as a 401(k) or 403(b), the money or stock can stay in the Rollover IRA Account for a period of 60 days. The account owner controls the Rollover IRA account during those 60 days. After that, the funds need to be placed into another retirement plan. . A rollover may not be done more than once a year.
Education Saving Account-ESA
An Education Saving Account is a trust that is set up to pay educational expenses of the designated beneficiary who is generally a minor for whom the account is opened. This account must be opened before the beneficiary reaches the age of majority. The total contributions cannot exceed $2,000. The money must be distributed if the beneficiary reaches age of 30.
Individual Retirement Account-IRA
An Individual Retirement Account is a personal retirement savings account that offers tax benefits to the investors. It allows them to deposit a part of their income into a tax deferred brokerage account. To explain it further, you are given the benefit of tax deferment when your earnings accumulate without having to pay taxes on them. You have to pay taxes when you start withdrawing the money.
You get two benefits from this provision. First, the growth of your money will be tax-free. You get more to invest if you do not have to pay taxes immediately and also you will be in a lower tax bracket when you retire. You thus pay less in taxes on your withdrawals.
Contributions to this account may also be tax-deductible. For example, if your yearly salary were $ 45, 000 before taxes and you invest $2,000 a year into a regular IRA, you would deduct that $2,000 from the $45,000 and then leaving you with $43,000 in taxable income.
IRAs are of different types:
Traditional IRA
A Traditional IRA is a retirement account that permits the investors to defer taxes on their earnings until they start taking their money out. The money that the individuals invest is tax deductible in the year it is put in. The investors can participate up to the age of 70. They can presently contribute up to $4,000 every year. If you are 50 years old, you can contribute $5,000 every year.
If you contribute to the Traditional IRA, you do not have to pay any taxes on what you earn until you start withdrawing money. This is known as tax deferment. This type of account makes sense for the investors since by the time they retire; chances are that they will be in a lower tax bracket. It must be noted that if you are in a lower tax bracket you pay less in taxes on earnings from your IRA account when you retire.
You can make taxable distributions from a Traditional IRA beginning at the age of 59 without paying the penalties. The penalties, however, are levied on early withdrawals. If you withdraw your money before the age of 59, you have to pay a penalty of 10%. There can be exceptions to this rule, for example, penalty can be waived or reduced in case of owner's death or disability and also if you have to pay back taxes, buy a home for the first time, or, pay medical and higher education expenses.
Roth IRA
A Roth IRA is like a Traditional IRA. The only difference is that you pay taxes on the money you invest while your withdrawals are tax-free. Investors up to the age of 70 may currently contribute up to $4,000 every year. If you are 50, you can invest $5,000. If you think that you shall be in higher tax bracket when you retire, it is recommended that a Roth IRA can be a better retirement solution. A Roth IRA can allow your investment to grow tax-free. Five years after you invest, withdraws will not be taxed. After you have turned 59 or you can use your withdrawal for the first home purchase. Withdrawing early may attract a penalty of 10%.
Rollover IRA
"A Rollover IRA is a holding account. If you transfer funds or stock from a retirement plan such as a 401(k) or 403(b), the money or stock can stay in the Rollover IRA Account for a period of 60 days. The account owner controls the Rollover IRA account during those 60 days. After that, the funds need to be placed into another retirement plan. . A rollover may not be done more than once a year.
Education Saving Account-ESA
An Education Saving Account is a trust that is set up to pay educational expenses of the designated beneficiary who is generally a minor for whom the account is opened. This account must be opened before the beneficiary reaches the age of majority. The total contributions cannot exceed $2,000. The money must be distributed if the beneficiary reaches age of 30.
Wednesday, March 26, 2008
Financing And Investment Accounts By Banks
Banks are beginning to acknowledge the elephant in the room, that many of their loan portfolios are too heavily weighted with real estate as collateral. Nationwide property sales slowdowns, a decline (sharp decline in some markets) in real estate values, and the recent subprime mortgage meltdown have led more and more banks to look for other asset categories to diversify their loan portfolios.
Enter investors who want to leverage portfolios of life settlements. Life settlements are discounted cash settlements paid by investors to life insurance policyholders. In exchange, investors later receive the full amount of the life insurance policy upon the passing of the insured; a win-win transaction. Policyholders, who choose to sell their policy, receive cash now to enhance the quality of their remaining days. Investors receive an excellent return on investment, historically a double-digit return.
Along with that, investors also receive something quite rare in today's increasingly interconnected investment world; returns that are uncorrelated to market, economic, and geo-political forces. According to a review of the Life Settlements Fund Limited (Series I) in April 2006, "Life settlements...are not correlated to any traded market - whether stock, bond, currency or commodity markets - nor to political or economic upheaval. Once invested the only variable affecting a Fund's return is the life expectancy of the policies held."
The July 30, 2007 cover story of Business Week, Profiting From Mortality states "Moreover, [life settlements are] 'uncorrelated assets,' meaning their performance isn't tied to what's happening in other markets. After all, death rates don't rise or fall based on what's happening to commodities, say. Uncorrelated assets like these are highly prized in an increasingly connected global financial system." Life settlements bring a true measure of diversification to investment portfolios at a time when most other investment asset categories are increasingly operating in parallel.
Banks have taken notice. An asset that diversifies an investment portfolio also diversifies a loan portfolio. A life settlement is essentially a contractual obligation of the life insurance company to pay a predefined amount in the future. Naturally, the big question is, when? Holding life settlements from many different individuals mitigates the risk of "when" (just like the insurance company that sells thousands of policies, not knowing exactly when any individual will pass away). The more life settlements an investor holds, the more predictable the portfolio's rate of return will be.
In the past two years, aggressive investors have pursued financing to leverage their life settlement holdings, for two good reasons: 1) to increase their return on equity, and 2) increasing their holdings further mitigates life expectancy risks, and improves the predictability of their rate of return.
Banks, just like investors, are becoming attracted to the uncorrelated nature of risks associated with life settlements. Risk to principal is low, and the likelihood of a profitable outcome is quite reasonable. Payouts are backed by insurance companies with strong reserves. Combine the recent real estates shocks, and now we have an environment where more and more loan committees are prepared to entertain an, until now, uncommon collateralization for financing. It does not fit into any pre-existing lending "box". But the need to diversify their banks' loan portfolios, the quest for secure loans, and the desire for new high net worth clients, have, however reluctantly, forced banks to look outside the box. This author's agency has participated in negotiations for investors in Texas, Arizona, Illinois, and Nebraska to arrange such financing with commercial banks.
Wall Street firms are grabbing up life settlements in bundles, securitizing them, (siphoning a bunch of value out of them for themselves), and offering them to the public with mediocre returns (reference the above mentioned Business Week article). Savvy investors have learned to hold fractional life settlements outright, finance their holdings for leverage, and achieve the "institutional rates of return" that some on Wall Street would prefer they be excluded from.
Enter investors who want to leverage portfolios of life settlements. Life settlements are discounted cash settlements paid by investors to life insurance policyholders. In exchange, investors later receive the full amount of the life insurance policy upon the passing of the insured; a win-win transaction. Policyholders, who choose to sell their policy, receive cash now to enhance the quality of their remaining days. Investors receive an excellent return on investment, historically a double-digit return.
Along with that, investors also receive something quite rare in today's increasingly interconnected investment world; returns that are uncorrelated to market, economic, and geo-political forces. According to a review of the Life Settlements Fund Limited (Series I) in April 2006, "Life settlements...are not correlated to any traded market - whether stock, bond, currency or commodity markets - nor to political or economic upheaval. Once invested the only variable affecting a Fund's return is the life expectancy of the policies held."
The July 30, 2007 cover story of Business Week, Profiting From Mortality states "Moreover, [life settlements are] 'uncorrelated assets,' meaning their performance isn't tied to what's happening in other markets. After all, death rates don't rise or fall based on what's happening to commodities, say. Uncorrelated assets like these are highly prized in an increasingly connected global financial system." Life settlements bring a true measure of diversification to investment portfolios at a time when most other investment asset categories are increasingly operating in parallel.
Banks have taken notice. An asset that diversifies an investment portfolio also diversifies a loan portfolio. A life settlement is essentially a contractual obligation of the life insurance company to pay a predefined amount in the future. Naturally, the big question is, when? Holding life settlements from many different individuals mitigates the risk of "when" (just like the insurance company that sells thousands of policies, not knowing exactly when any individual will pass away). The more life settlements an investor holds, the more predictable the portfolio's rate of return will be.
In the past two years, aggressive investors have pursued financing to leverage their life settlement holdings, for two good reasons: 1) to increase their return on equity, and 2) increasing their holdings further mitigates life expectancy risks, and improves the predictability of their rate of return.
Banks, just like investors, are becoming attracted to the uncorrelated nature of risks associated with life settlements. Risk to principal is low, and the likelihood of a profitable outcome is quite reasonable. Payouts are backed by insurance companies with strong reserves. Combine the recent real estates shocks, and now we have an environment where more and more loan committees are prepared to entertain an, until now, uncommon collateralization for financing. It does not fit into any pre-existing lending "box". But the need to diversify their banks' loan portfolios, the quest for secure loans, and the desire for new high net worth clients, have, however reluctantly, forced banks to look outside the box. This author's agency has participated in negotiations for investors in Texas, Arizona, Illinois, and Nebraska to arrange such financing with commercial banks.
Wall Street firms are grabbing up life settlements in bundles, securitizing them, (siphoning a bunch of value out of them for themselves), and offering them to the public with mediocre returns (reference the above mentioned Business Week article). Savvy investors have learned to hold fractional life settlements outright, finance their holdings for leverage, and achieve the "institutional rates of return" that some on Wall Street would prefer they be excluded from.
Research On Different Types Of Investments Accounts
So, maybe you have done some research on different types of investments, but you don't know where to purchase these investments. Typically, in order to purchase different types of investments, you will need to open up an investment account with your bank or an investment brokerage firm. Here are the typical accounts that you can open:
* Individual investment account. This type of account will allow you to buy and sell (on your own or with the help of an advisor) without restrictions; however, there are no tax advantages.
* Individual Retirement Account (IRA). This is a great account to invest money for retirement because it provides tax advantages. The money placed in an IRA is considered pre-tax and you pay no taxes on returns until you take the money out. Because you do not have to pay taxes on your money it will grow larger. You can contribute $4,000 per year tax free. Individuals aged 50 and older can contribute up to 100% of earned income or $5,000 whichever is less. However, if you pull out your money before you reach 59 ½, you will have to pay taxes PLUS you may have to pay an additional penalty.
* Roth IRA. A Roth IRA is similar to a regular IRA, except that it is after-tax money. Therefore, you do not get an additional tax deduction for this type of account. However, after the age of 59 ½, you can pull your money out tax free.
* 401(k) Plan. Many employers offer a 401(k) plan to their employees. This allows you to have money pulled from your paycheck each month and invested in mutual funds before tax. In addition, employers will typically match your investment up to 6% of your income. If your employer offers a 401(k) plan you should be investing as much as possible in it.
If you currently would like to open one of the above mentioned investment accounts, you have many options. For those just getting started, there are many discount brokerages online; such as Scottrade, Zecco, E-Trade, Charles Schwab, and many others. Or there is probably dozens of financial planners or stock brokers in your area that would happy to help you invest your money. (However, do your homework, before choosing any sort of financial advisor).
Investing is an essential part of planning for retirement. Using the time value of money, investments can grow very quickly. The examples below shows what $500 a month earning a return of 6%, 9%, and 12% can do over 30 years:
* $500/mth at 6% for 30 years = $502,257
* $500/mth at 9% for 30 years = $915,371
* $500/mth at 12% for 30 years = $1,747,482
These examples assume no previous savings. As you can see, simply earning the average market return of 12% over the next 30 years will grow your $500 savings into a healthy nest egg of nearly $1.8 million.
Invest with a Plan
Overall, it is important to invest with a plan.
* First, determine how much you need to retire on.
* Second, determine how many years before you plan to retire.
* Third, figure out what type of return you will need to meet your retirement savings goal.
* Fourth, pick investments that you are comfortable with (and will still allow you to achieve your investment/retirement goals).
* Fifth, open the appropriate accounts in order to meet these goals.
In addition, you would be wise to consult a financial advisor. A good advisor will be able to determine which specific funds or investments are appropriate for your individual situation.
* Individual investment account. This type of account will allow you to buy and sell (on your own or with the help of an advisor) without restrictions; however, there are no tax advantages.
* Individual Retirement Account (IRA). This is a great account to invest money for retirement because it provides tax advantages. The money placed in an IRA is considered pre-tax and you pay no taxes on returns until you take the money out. Because you do not have to pay taxes on your money it will grow larger. You can contribute $4,000 per year tax free. Individuals aged 50 and older can contribute up to 100% of earned income or $5,000 whichever is less. However, if you pull out your money before you reach 59 ½, you will have to pay taxes PLUS you may have to pay an additional penalty.
* Roth IRA. A Roth IRA is similar to a regular IRA, except that it is after-tax money. Therefore, you do not get an additional tax deduction for this type of account. However, after the age of 59 ½, you can pull your money out tax free.
* 401(k) Plan. Many employers offer a 401(k) plan to their employees. This allows you to have money pulled from your paycheck each month and invested in mutual funds before tax. In addition, employers will typically match your investment up to 6% of your income. If your employer offers a 401(k) plan you should be investing as much as possible in it.
If you currently would like to open one of the above mentioned investment accounts, you have many options. For those just getting started, there are many discount brokerages online; such as Scottrade, Zecco, E-Trade, Charles Schwab, and many others. Or there is probably dozens of financial planners or stock brokers in your area that would happy to help you invest your money. (However, do your homework, before choosing any sort of financial advisor).
Investing is an essential part of planning for retirement. Using the time value of money, investments can grow very quickly. The examples below shows what $500 a month earning a return of 6%, 9%, and 12% can do over 30 years:
* $500/mth at 6% for 30 years = $502,257
* $500/mth at 9% for 30 years = $915,371
* $500/mth at 12% for 30 years = $1,747,482
These examples assume no previous savings. As you can see, simply earning the average market return of 12% over the next 30 years will grow your $500 savings into a healthy nest egg of nearly $1.8 million.
Invest with a Plan
Overall, it is important to invest with a plan.
* First, determine how much you need to retire on.
* Second, determine how many years before you plan to retire.
* Third, figure out what type of return you will need to meet your retirement savings goal.
* Fourth, pick investments that you are comfortable with (and will still allow you to achieve your investment/retirement goals).
* Fifth, open the appropriate accounts in order to meet these goals.
In addition, you would be wise to consult a financial advisor. A good advisor will be able to determine which specific funds or investments are appropriate for your individual situation.
Friday, February 29, 2008
Offshore Investment Banks And Accounting
Switzerland has been the world's largest offshore tax haven for some time. For wealthier individuals there are guarantees and assurances that other offshore banking jurisdictions do not have. They are specifically designed for the ultra wealthy.
Swiss banks are also regarded by far as the most secure and stable as they have the safest asset holdings along with the asset prosperity provided to their clients. This makes opening an investment bank account with a Swiss bank all the more enticing for those who are privileged. When a Swiss bank account is opened, the individual opening the account will be privy to undisputed personal service and wealth protection which is unmatched by any other Bank in the world.
The opening of a Swiss bank account is far simpler than you might think. Even many of the most prestigious offshore Swiss banks have simple application processes. You will be able to do the all the same account transactions as you can onshore.
Indeed opening an offshore investment account in Switzerland is the most important step you can take for both wealth growth and wealth protection.
Opening a Swiss bank account with deposits in the range of $300,000 would be best to set up in person. Some Swiss banks will send out their own representative for large sums to deposit at a clients place of choice. If you are setting up a Swiss bank account through the mail, you will first be required to follow these steps:
- Request the forms you will need to open the account.
- Have your signature verified at a Swiss Consulate, or by visiting any affiliated banks in Switzerland.
The procedure to open a Swiss bank account is similar in nature to opening a securities account with a few procedural policies in place, which is the same as what any financial institution goes through.
Swiss bankers have always had a solid reputation for managing many different investment portfolios and as such provide the following services:
- Investment planning
- Estate planning
- Wealth management
- Trust company establishment
- Gold numismatics
- Derivatives
- Confidential brokerage accounts
To ensure your privacy and confidentiality, every Swiss banking employee must sign the bank act's secrecy portion as a condition of their employment. Of special note, the banking act also stipulates that it is a criminal offence, with a possible jail sentence imposed for any employee or agent of the bank, if they have been found to divulge any confidential information at any time. In cases put before the courts and in general banking practices, this portion of the banking law has stipulated it is a serious offense, punishable by both fines and jail time, to divulge any customer information to any third party. This includes official requests from foreign governments. This makes opening an offshore investment bank account in Switzerland all the more attractive.
To open a Swiss investment account, the following requirements must be met: by most Swiss banks:
- $300,000 minimum opening balance in order to establish an account.
- A notarized copy of your passport.
- Reference letters from two different sources.
- Every client is required to fill out a "know your client" form.
- A signed 'Source of Funds' form must be filled out by each applicant.
Once these requirements are met by the individual or offshore company, the account can then be set up at the Swiss investment bank.
Research On Different Types Of Investment Accounts
So, maybe you have done some research on different types of investments, but you don't know where to purchase these investments. Typically, in order to purchase different types of investments, you will need to open up an investment account with your bank or an investment brokerage firm. Here are the typical accounts that you can open:
- Individual investment account. This type of account will allow you to buy and sell (on your own or with the help of an advisor) without restrictions; however, there are no tax advantages.
- Individual Retirement Account (IRA). This is a great account to invest money for retirement because it provides tax advantages. The money placed in an IRA is considered pre-tax and you pay no taxes on returns until you take the money out. Because you do not have to pay taxes on your money it will grow larger. You can contribute $4,000 per year tax free. Individuals aged 50 and older can contribute up to 100% of earned income or $5,000 whichever is less. However, if you pull out your money before you reach 59 ½, you will have to pay taxes PLUS you may have to pay an additional penalty.
- Roth IRA. A Roth IRA is similar to a regular IRA, except that it is after-tax money. Therefore, you do not get an additional tax deduction for this type of account. However, after the age of 59 ½, you can pull your money out tax free.
- 401(k) Plan. Many employers offer a 401(k) plan to their employees. This allows you to have money pulled from your paycheck each month and invested in mutual funds before tax. In addition, employers will typically match your investment up to 6% of your income. If your employer offers a 401(k) plan you should be investing as much as possible in it.
Investing is an essential part of planning for retirement. Using the time value of money, investments can grow very quickly. The examples below shows what $500 a month earning a return of 6%, 9%, and 12% can do over 30 years:
- $500/mth at 6% for 30 years = $502,257
- $500/mth at 9% for 30 years = $915,371
- $500/mth at 12% for 30 years = $1,747,482
Invest with a Plan
Overall, it is important to invest with a plan.
- First, determine how much you need to retire on.
- Second, determine how many years before you plan to retire.
- Third, figure out what type of return you will need to meet your retirement savings goal.
- Fourth, pick investments that you are comfortable with (and will still allow you to achieve your investment/retirement goals).
- Fifth, open the appropriate accounts in order to meet these goals.
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