Fri04182014

Business

MONEY MATTERS: Fixed-indexed annuities

CharlesSimsJr-160If you want to participate in the potentially attractive returns of a market-driven investment but would also like a guaranteed return, an indexed annuity might be worth checking out.

The performance of indexed annuities, also referred to as equity-indexed or fixed-indexed annuities, are tied to an index (for example, the Standard & Poor's 500*). They provide investors with an opportunity to earn interest based on the performance of the index. If the index rises during a specified period in the accumulation phase, the investor participates in the gain. In the event that the market falls and the index posts a loss, the contract value is not affected. The annuity also has a guaranteed minimum rate of return, which is contingent on holding the indexed annuity until the end of the term.

This guaranteed minimum return comes at a price. The percentage of an index's gain that investors receive is called the participation rate. The participation rate of an indexed annuity can be anywhere from 50 percent to 100 percent. A participation rate of 80 percent, for example, and a 10 percent gain by the index would result in an 8 percent gain by the investor. Some indexed annuities have a cap rate, the maximum rate of interest the annuity will earn, which could potentially lower an investor's gain.

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Entrepreneurial burnout

burnout 600New business owners tend to hit the ground rolling – eager and exited to prove to the world that it can be done. A byproduct, however, is that the owner often works so hard that life is not balanced.

Time flies, the years – 2, 3, 4, 10 – pass and these well-intentioned entrepreneurs are still grinding. The kids are growing rapidly, recitals are missed and sports activities have to be watched on cell phone video. Going to work becomes something to dread and when they get there they have little to contribute other than being present.

Such owners may be experiencing entrepreneurial burnout, a state of emotional and physical exhaustion. With the weight of the livelihood of others in their hands, small business owners cannot afford burnout. Still, it is a troubling occurrence that happens all too frequently.

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Why your financial advisor is probably not your friend

WhyYourFinancial 600The importance of money is impressed upon most Americans as soon as we're old enough to buy candy. But the importance of money management is an entirely different story, says self-made millionaire Mike Finley.

"Think about all that we do to prepare children for the world; we fill them up with things we think are most important for doing well as adults and spend tens of thousands of dollars for higher education, but they never take a class on how to manage personal finances," says Finley, author of "Financial Happine$$," (www.thecrazymaninthepinkwig.com), which discusses his journey to financial literacy and applying the principles that allowed him to retire from the Army a wealthy man.

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When your child should file a tax return

MoneyMatter 600If your child only has earned income reported on a W-2 and the total isn't more than $5,350, then a return does not need to be filed. However, you'll want to file a return for a refund if there was any federal withholding, see Form W-2, box 2. If the total of earned income is over $5,350 a return must be filed.

Earned income includes wages and salaries on Forms W-2. If the child is self-employed, the Schedule C net income is included as earnings.

If the child received any 1099-INT, 1099-DIV, or 1099-B tax documents in addition to those W-2s, then unearned income was received and the rules does not apply.

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The grip of ‘liquid asset poverty’

assetpoor 600Today, middle class households feel the same financial stress that low-and- moderate income families have borne for years, says new research by the Corporation for Enterprise Development (CFED), a national nonprofit organization working to alleviate poverty and create economic opportunity.

In its report, Treading Water in the Deep End, CFED analyzes the financial security of American households and public policy responses to the financial crisis.

"As millions of Americans struggle to save for emergencies, investing in their futures is increasingly out of reach," states the report.

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Husband-wife team is a ‘couple’ of architects

robinsons 600The number of licensed African-American architects working in Tennessee – and across the United States for that matter – is a mere pittance compared to the overall percentage of architects working for themselves or for architectural firms.

Count the husband and wife team of Michael and Carolyn Robinson among those who are fortunate to work in a field that may indeed be considered by some as an exclusive membership club. This wasn't a factor for the Robinsons when they launched Robi4 Design and Planning, Inc. in 1999.

Consider the numbers: There were 105,596 registered (licensed) architects in the U.S., according a 2012 survey of U.S. architectural registration boards by the National Council of Architectural Registration Boards (NCARB). Of that number, 1,558 (or 1.5 percent) were African American, according to Dennis Alan Mann's Center for the Study of Practice at the University of Cincinnati.

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I’m self-employed: What are my saving options?

CharlesSimsJr-160Good news: There are a lot of them. The challenge is figuring out which of the major lone-eagle plans best suits you.

The most common retirement accounts for the self-employed are SEP IRAs, Simple IRAs and individual 401(k)s. These plans have two factors in common: up-front tax breaks and tax-deferred saving, meaning you don't pay taxes until you withdraw the money in retirement.

The Roth version of the individual 401(k) is slightly different: you don't get an up-front tax break, but your money not only grows tax free, withdrawals in retirement are also tax-free.

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So you want to be billionaire? Think about it!

onwealthynigeria 600Many entrepreneurs struggle to make ends meet and make payroll on a regular basis. Others make it so big that they reach billionaire status. That's a level beyond the dreams of most and that is why most will not ever make it.
According to Forbes magazine, it is the thought processes and patterns of billionaires that separate them from other business owners. So let's look closely at a few of the characteristics of those that have achieved the ultimate.

Dream and mindset

Mark Zuckerberg of FaceBook, Richard Branson of Virgin, Steve Jobs of Apple, Bill Gates of Apple, and Oprah Winfrey of Harpo all dream large. This country is full of "mom and pop" stores and restaurants whose owners have fulfilled their dreams of business ownership. While many are happy and satisfied at their current levels of success, there are billionaires who have taken a store concept to a whole new level.

Consider Wal-Mart, which has multiple stores in cities across the country. Sam Walton had the mindset and vision to take the concept of one store to many stores. The goal was achieved as vision was coupled with the execution of plans to get there. Today, the Forbes Richest People in America List features several members of the Walton family.

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Think globally, act locally

Herbert LesterA Scottish town planner may have been the first person to use the concept, if not the exact words, back in the early 1900s: "Think globally, act locally." Regardless of its origins or history, it needs to be an idea practiced by every person wanting to participate in Memphis' share of the global economy.

As workers, investors, inventors, innovators, entrepreneurs, business people or community members, we are part and parcel of a global economy, and it is not waiting for any of us.

Thomas Friedman, in his 2005 bestseller, "The World is Flat," tells this fable to illustrate the urgency of the matter:

Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn't matter whether you are a lion or a gazelle: when the sun comes up, you'd better be running.

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Tax-deferred investments and early withdrawal

moneymatter 600Withdrawing funds from a tax-deferred retirement account before age 59½ generally triggers a 10 percent federal income tax penalty; all distributions are subject to ordinary income tax. However, there are certain situations in which you are allowed to make early withdrawals from a retirement account and avoid the tax penalty.

IRAs and employer-sponsored retirement plans have different exceptions, although the regulations are similar.

IRA exceptions

The death of the IRA owner: Upon your death, your designated beneficiaries may begin taking distributions from your account. Beneficiaries are subject to annual required minimum distributions.

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Taxes: Making the most of refunds

TaxRefunds 600With W-2s and 1099s in hand, most folks expecting a refund are lining up to file those returns. The doors are open to the many tax preparers who have waited patiently for the season to arrive. Once the money arrives there are many things that can be done with those much-anticipated dollars. Plan to get the most out of the money and improve your financial position. So, let's discuss a few of the many options of spending the refund checks.

Checking, savings or money market account

One option is to save your refund check for a rainy day or emergency. Experts advise that savings should equal between three and six months of expenses for cushion in the event of layoffs or cutbacks. This rainy day or emergency fund is separate from other accounts to make sure that it is not spent or mingled with the rest of the funds. It is to be used for the mortgage, rent, car repairs and such in times of need.

Instead of spending every cent received, try placing some in a checking, savings or money market account. The Internal Revenue Service (IRS) through direct deposit will place your money electronically into your account as instructed. The IRS will even divide your refund over multiple accounts with the completion of Form 8888, which is the Allocation of Refund Form.

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Taxes: What is my filing status?

taxes 600To adequately – and legally – decrease our tax liability we must understand various components of our tax return. Let's begin with filing status.

What is a filing status?

A taxpayer's filing status impacts which tax rate is used and which standard deductions apply when calculating federal income tax for the year. For the most part, five different statuses are considered. They are: single, head of household, married filing separately, married filing jointly and qualifying widow/widower with dependents.

Keep in mind that there may be exceptions to the rules that may be more beneficial to you. So, speaking with a tax professional is recommended. Let's review the categories to determine which status applies to your situation.

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Overcoming retirement challenges

CharlesSimsJr-160In a 2013 survey of people aged 50 to 70 with $100,000 or more in investable assets, 90 percent reported that they had experienced at least one setback in saving for retirement. In fact, the average respondent had experienced four setbacks with an average loss or missed opportunity of $117,000.

The future is always uncertain, and as the saying goes, "Life happens." It would be wise to prepare for the unexpected and react logically rather than emotionally when faced with retirement challenges. Here are some obstacles you might need to overcome.

Surviving market downturns. More than half of those surveyed said their assets had been reduced by market losses during the Great Recession. Yet another survey suggested that about 50 percent of workers who were 32 to 51 when the recession started actually showed gains in their retirement accounts during the 2007 to 2009 period. This group may have had lower balances when the recession began, and it's likely that they continued saving throughout the downturn, which might have helped them benefit when the market started to improve. Remember that all investments are subject to market fluctuation and the potential for loss.

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