INTRO DUCTION:
Annuity is known as the set of equal series of payments, which is made each year. Previously, people used to pay a specific amount to the governments and in return the government used to give benefits to those people. There are several characteristics of annuity such as it is considered as a viable investment driver, which is only considered as the only suitable option in commercial investments because of the nondeductible nature of the annuity. In addition to this, there is no limit as well and annuity holder could invest unlimited funds in an investment and contribution plan.
Annuity works in different ways such as in straight life, joint life and etc. Moreover, it works in DCF model. Through annuity, we can determine the value
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In an annuity, the advantage which an investor gets is that if he receives an amount more than the original payment, then it is considered as a gain. Annuities can be used as tax shelters by the wealthy and as sources of guaranteed income by the risk-averse. There are two primary types of annuities; the first type is tax deferred annuity and the second is income annuity.
Deferred annuity takes place after some time when the final premium is paid. Income annuity is purchased at a specific amount by people who are about to retire.
The purpose of choosing annuity is to provide significant knowledge regarding the final decision which would be made by the investor. As this is a long term investment, therefore this method will give an idea to invest it or not. The final decision can be seen by the result of the net present value and the discounted cash flow. After these calculations, the investor will be in a position to make decisions. Examples include mortgage payment, pension payments, Insurance payments, etc. It can be done monthly, quarterly, semi-annually and yearly. Two types of revenues need to be calculated for the final decision; the first is ordinary annuity and the second is annuity due but not paid. (Scott,
This paper explores the characteristics of traditional and Roth IRAs, as well as the similarities and differences between both. The main characteristic of both IRAs is that both are considered tax shelters—a way for individuals to receive reduced tax liability by decreasing one’s taxable income. Traditional IRA’s are called “deductible” because contributions made with earned income, up to specified limits, are fully or partially deductible from income depending upon factors such as adjusted gross income and filing status. Upon withdrawal, the money is then taxed as ordinary income. Roth IRAs are the antithesis—the money that you contribute here is already taxed at your marginal tax rate and the withdrawals are generally not taxed. Only money that is considered investment income is taxed. Because of the income limits of Roth IRAs, some individuals choose first to contribute to traditional IRAs or employer-sponsored programs and subsequently convert to a Roth IRA. For younger individuals with lower incomes, Roth IRAs seem to be the better choice based on the below research. The money is taxed at a lower rate and then contributed. As one ages, tax rates are probable to rise and the cost of contributing increases as a result. Saving in full measure, below the legal limit and beginning this process at a young age seems the best option for a enjoyable retirement in years to come.
Through the years, people age and become less productive. For these reasons, they have to prepare some plans that help them secure their own future. But, there are instances that lead an individual to an early retirement. Some lack motivation and enthusiasm in their work. Others are not capable of working anymore as well because of the health issues that they are facing. Regardless of the reason, it is important that one has to work so that by the time they retire, they will not end up broke. Having this in mind, many people are already investing in a simple IRA.
Time value of money (TVM) is a monetary concept that is very important to all parts of the financial world. This concept basically says that $100 today is worth more than $100 a year from now (or anytime in the future). Also, an individual should earn some value of compensation for not spending their money. This compensation is essentially called the interest that will be earned on the initial cash. What about when an individual opts to receive money in the future rather than today? That can lead to problems. This is because they are taking a gamble by loaning money- since there is almost always risk in loaning money. A couple of these risks include inflation and default risk. Default risk means that the person who borrowed the money does not repay the money to the person that loaned it. Inflation means that the general prices of products will rise. How does all this work? In theory the person that gets the $100 today could invest it, even at a very low annual percentage rate (APR), and still come out ahead. If they invest it at 2% APR, they would have $102 at the end of one year. Th...
Pension provides an income when people have stopped working. Also, it provides important forms of insurance against long life, prices, relative benefit drops and savings shocks. As well as it is an important benefactor to the financial security of a majority of Australian men and women of retirement age, with about 70 per cent of people of pension age receiving the Age Pension (Australia and Treasury, 2015). The government can provide this type of insurance for less than it costs individuals to insure themselves by sharing long life risk, and hedging the
In this case we are considering the time value of money in terms of growth where industry standards typically expect rates to be stated in annual terms.
pension plan A pension plan is a retirement plan that requires an employer to make contributions into a pool of funds set aside for a worker's future benefit. The pool of funds is invested on the employee's behalf, and the earnings on the investments generate income to the worker upon retirement. pension fund A pension fund, also known as a superannuation fund in some countries, is any plan, fund, or scheme which provides retirement income.
However, in the last several years, tax incentives, rising medical expenses, and other factors have led insurers to develop new types of insurance products to better meet the needs of their customers. Installment Payments Life insurance benefits can also be paid out in installments to the beneficiary. This is a popular option for the customer who needs a policy to guarantee income replacement over a period of years for a spouse or children. Annuities Payments Another option, known as an annuities payment option, allow the beneficiary to receive installment payments of both the death benefits and its accrued interest, often over the lifetime of the
What do you understand by the phrase “stakeholder analysis”? Attempt a stakeholder analysis of an organisation that you are closely associated with.
These costs occur whether or not your investments return a profit in a given year. Over the course of your working life, this
Take note that other types of life coverage, such as term life insurance, have no cash value and offer cheap premium rates, which are lower than those of variable universal life insurance. However, the latter is more affordable than other forms of permanent coverage. Also, it combines an insurance policy with an investment vehicle, and its price reflects the dual nature of the policy. So, if you are looking for a good means to grow a financial asset or build a nest egg for retirement, universal life may be your best
One might know that time is one of the most valuable assets in our lives. In the financial world the value of money is linked to time, primarily because investors expect progressive returns on their cash over periods of time, and they always compare the return from certain investments with the going or average returns in the market. Inflation on other hand erodes the purchasing power of money causing future value of one dollar to be less than the present value of a dollar. This paper will examine time value of money and the applications that determine successes or failures. An examination of the different vehicles that can be used to generate financial security for corporations and individuals will be provided. After defining the applications that generalize time value of money, an explanation will be offered regarding the components of interest rates by expanding on the concept that interest rate equates the future value of money with present value.
The difference between investing in an annuity and socking the money into a savings account is that your investment will grow and earn income, as well as the benefit that the investment money is tax-free until you withdraw it. Once you retire you can receive payments, at this point the money is considered income and will be taxed only as that instead of a capital gain. Once you begin receiving payments from the life annuity, you will have a steady income to depend on throughout your retirement to supplement the social security and assist in paying the medical expenses that Medicare does not cover. If you are preparing for retirement and have a lump sum of money saved up, you can also purchase a life annuity with a one-time payment instead of paying in over the years.
will provide us with a monthly check at this point. What we do not realize,
... IRA. The retirement account is rolled over to an allocated gold account. This is a wise move to secure retirement earnings because the funds cannot be touched by employers in case the investor decides to leave his or her job.
1 Introduction2 OptionsAn option is a contract between a buyer and a seller that gives the right (butnot the obligation) to buy or sell the underlying asset for an agreed price ata later date. The agreed price in the contract is known as theStrike price.The date in the contract is known as theexpiration date. There are twobasic types of options; Call options and Put options. Most options are eitherEuropean or American options. But there are other options such as, Asianoptions or Look back options [1]. Options are said to have been around formany years even centuries, in various forms. For instances in Roman times,clauses in marine cargo contracts are now considered as options. to show youwhy it has such a wide spread use. lets say