retirement tax outline

• retirement account advantage: tax-deferral or tax-saving advantages for co. establishing retirement plan and individuals covered

Defined benefit plan

·       pension plan based on employee’s salary

·       employee puts away a %age of earnings for employee

·       employer manages plan

·       retiree get fixed dollar amount or fixed percentage of amount put in by employer

·       amount retiree gets-years of service and salary they received while working

·       managed for all qualified employees

·       plan is not separated into individual accounts

·       max contribution by employer-based on employee’s average compensation

·       can favor older employees>young employees

·       limit on amount that can be contributed/employee is greater with defined benefit plan > than defined contribution plan

·       IRS sets contribution limits

·       Deductible contributions for company only

·       Individual withdraw-taxed as ordinary income

·       Employees can make tax deductible contributions

Defined contribution plans

·       Employer can put in $ for employee

·       Employee can match what $ employees put in

·       Employee can contribute entire amount for account

·       Contributions in pretax dollars, taxed at withdrawal

A defined benefit plan is most advantageous for which of the following employees?

·       Older employees

·       Older have only a few years to put away $

·       Limit on contributed amount is higher>defined contribution plan limits

 

Profit sharing plan

·       Co. contribution based on co. profits

·       Higher salary employees get more>benefits

·       Company can decide not to contribute that year

Money purchase plan

·       Employers must put in each year

·       Contributions based on %age of salary

 

401k plan

·       Employers can match employee contribution

·       Employee can defer taxes on contributions up to limit for year

·       CONTRIBUTION AMOUNT NOT ON TEST

Employee stock ownership plan

·       Co. has employees buy co. stock at a discount

·       Co. stock given to employees as a bonus

 

 

 

 

investment company outline

Hedge funds

·        Investment pool

·        Not advertised to the public

·        Professional money managers

·        Wealthy individuals invest

·        Institutions with much cash invest

Hedge fund advantages

·        Trades on any market worldwide

·        Unlimited short selling

·        Unlimited use of derivatives

·        Unlimited use of leverage

·        NO Investment Company Act of 1940, Do NOT have to be registered with the SEC

Hedge fund requirements

• must not need access to money immediately/ASAP
• sophisticated investor
• earned income of $200,000 in last two years
• expected income of $200,000 in next year
• minimum $1,000,000 net worth
• trust with assets of $5,000,000

Hedge fund fees

• 1-4% asset based fee
• performance based fee of 20%
• redemption fee if early withdraw
• buy and redeem at net asset value

Webstar Griffin Tarpley, Princeton educated writer warns

1. lack transparency
2. few disclosure documents
3. hard to assess diversification strategies
4. lack regulation
5. not regulated by any entity
6. large amounts of borrowed money/high leverage

Business Development company

• 1940 Investment company act says BDC-regulated investment company
• pass through 90% of investment income to investors
• 70% of assets invested in private/thinly traded public corporations
• can NOT invest in foreign companies
• give assistance to managers of companies they invest in
• make loans to corporations-use some of $ to get an equity position in company
• more of a tax advantage when pass through 98%
• make loans of $2-$50 million
• borrow for lending institutions OR get more investors
• pay out large amount of income and capital gains, >=98%
• trade on exchange
• trade on NASDAQ
• can trade on OTC market

requirements BDC:

• do NOT have to be high net worth
• able to handle risk
• risk comes with higher yields>normal
• yields not growth
• good in tax deferred investments-IRA, defined contribution plan, tax deferred situation