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Archive for January, 2012

Auto insurance is mandatory for anyone driving a vehicle in the US and there’s no way going around it. No matter whether it’s your first car or you’ve already retired and have decades of experience behind the wheel you will still need auto insurance for your car since the law tells so. Besides the legal framework of auto insurance there’s also simple common sense involved in its mandatory nature. Auto insurance covers your costs in case of an accidents, which can be substantial assuming current repair and medical bills. Having your car insured is cheaper in terms of such costs than driving around without insurance. However, for a particular group of drivers this benefit may seem not to be that obvious.

We are talking about students and teens in general. This group of drivers usually faces the highest auto insurance rates possible simply because of their age. But before you claim that it’s discriminatory, let’s consider the logic behind such a decision taken by all insurance companies at once. As you know, insurance companies are all about managing their risks and the only way they can hedge their risks is putting rates that will cover their costs and earn them income. So if teen drivers are charged with higher rates they somehow seem to pose a higher risk to insurers. And according to statistics that’s exactly how things are. Drivers aged under 25 usually have little driving experience and produce more accidents with higher costs than drivers of other age groups. Of course, this doesn’t mean that all young drivers are bad drivers, but the overall tendency is exactly as described and that’s the situation where one good driver will pay for the rest of worse drivers.

So how can you deal with the situation being a student in high school or in college and having to pay rates that can be twice as higher as your parents pay for the same amount of auto insurance coverage? There are several solutions that can be combined for a better effect and if applied correctly they can reduce your rates considerably.

First of all, talk to your parents about being included to their insurance policy as a written driver if you live with them. This will raise their premiums a bit but it will still be cheaper than having a separate policy. Note that if you don’t file any claims this doesn’t reflect in your premiums as you will have to carry a separate policy in order to accumulate a no-claims discount.

Another tip is buying a cheaper car. Of course, you will always want to drive a Mercedes or BMW because it will impress your peers but such cars will always give a headache in terms of auto insurance. So it’s better to start off with something simple, cheap and even used until you accumulate enough driving experience and make your share of hits and scratches that won’t reflect much in your insurance costs.

And if you’ve ever considered becoming a good student now there’s an additional reasons for doing so. Most insurance companies offer a discount to students whose average is B and higher. This will require you to provide a copy of your grade report on a periodic basis but the discount is definitely worth it.

Taxation issues that could arise from any compromise agreement could be complex. More often, employees are full of questions about the kind of taxation schemes that could apply to any termination payment they receive from an employer. Is the payment from a compromise agreement taxable? If so, how much tax should be implemented?

The national rules over taxation of termination payments and redundancy packages as part of compromise agreements have been around for numerous years now. However, the HM Resources and Customs or HMRC is still receiving countless inquiries about taxation of these payments. Before you consider any compromise agreement offer from your employer, it would be appropriate if you would first know more about basic taxation rules applied on such documents.

In general, termination payments, whether a part of a compromise agreement or not, are free from any tax imposition if it is equal to or less than £30,000. Any amount that exceeds £30,000 would be subject to appropriate taxation, as mandated by the law. The policy covers contractual and statutory redundancy payments as well as termination payouts stated in the agreement. In a package, non-cash benefits provided to an employee as part of the compromise agreement (like a company car) would be computed using a cash value and would be subjected as well to taxation when applicable.

A payment made in lieu of notice is provided when appropriate termination notice has not been provided to compensate an employee for wages and benefits he/she could have received during the usual or normal notice period. If the employer pays notice payment in lieu or if the payment in lieu is contractual, it is considered taxable. If the employer agrees to pay you gross, he/she would logically insist to include a clause in the agreement that states your responsibility to shoulder any tax payable.

If overall value of a termination payout exceeds £30,000, you may ask for the tax relief on contributions for pension to be paid into your own occupational pension scheme, that is, if you have one. Check with your pension fund trustees if such a scheme is possible. You may also seek sound financial advice whether doing so would be appropriate in your own circumstance.

If taxation is properly imposed, the employer has the right to decide whether to deduct the amount directly from your termination payment before you receive it. It is the standard and usual practice. Thus, you need to know how much taxation to expect from your package. It is advisable that you ascertain this long before you sign any agreement offer from the employer.

Sound and reliable advice and guidance from an independent employment solicitor would truly be of great help. If you have taxation concerns related to a compromise agreement, you could also ask your solicitor about the appropriate and applicable tax schemes in the agreement as mandated by the law. This is why it is very important for you to hire only the best and most reliable solicitor for the purpose of providing you advice about the compromise agreement.

The finance industry is concerned with how individuals and institutions handle their financial resources — how they raise their money, where they allocate it and how they use it — and assesses the risks involved in these activities as well as recommends ways to manage these risks.

There are a number of exciting and rewarding jobs in the field of finance. What follows are just a few examples.

The commercial banking sector employs more people than any other facet of the financial services industry. Banks offer individuals the opportunity to interact with a broad spectrum of people and the chance to develop a clientele. People in banking usually start out as tellers and shift to other bank services such as leasing, credit card banking, trade credit and international finance.

As the name indicates, a career in corporate finance means you will work in a corporation and are mainly concerned with sourcing money for the company — money that will be used to develop the business, make acquisitions and ensure the company’s future. In a corporation, you are likely to start as a financial officer.

As a financial planner, you may also work for a corporation but will mainly be concerned with only one aspect of finances — planning for the future. You have to have a firm grasp of investments, estate planning as well as taxes. Or you may serve as a consultant who provides financial planning for individuals, e.g., planning their retirement needs or how they can put their kids through college.

With annual revenues surpassing the trillion-dollar mark, the insurance industry looms as one of the most attractive areas for a career in finance. In 2005, there were an estimated 2.5 million people in the US who were employed in the insurance field, which is mainly considered with the business of managing risk and anticipating problem areas. Possible jobs in insurance include working as an underwriter, sales representative, customer service rep, asset manager or an actuary.

A career in investment banking means you will be concerned with issuing securing and helping investors buy, manage or trade financial assets. As a bonus, you get the chance to work on Wall Street in a leading investment banks such as Merrill Lynch, Salomon Smith Barney, Morgan Stanley Dean Witter and Goldman Sachs.

Using a cell phone while driving can drive up cheap car insurance costs in two different ways. First, any involvement in an accident will inflate premiums. Secondly, a traffic violation will similarly increase premiums. It’s important to understand the different kinds of bans that are out there so you can be a safe driver and a safe cell phone user.

Handheld Bans

A handheld ban means that driving while talking on the phone is allowed, as long as the driver is using a hands-free device such as Bluetooth or speakerphone. States which have total handheld bans for all drivers include:

• California
• Connecticut
• Delaware
• Maryland
• Nevada
• New Jersey
• New York
• Oregon
• Washington D.C.

Other states ban handheld cell phone use only for minor or novice drivers, or under specific circumstances. These states include:

• Arkansas (banned for drivers age 18-20 only)
• Hawaii (banned in some counties only)
• Illinois (banned in school zones and construction zones only)
• Louisiana (banned for those with learning licenses)
• New Mexico (banned for use in state vehicles only)
• Oklahoma (banned for those with learning licenses)

All Cell Phone Ban

This ban is in effect for some states which allow no phone use of any kind, including utilizing a hands-free device, although there are not any states which completely ban all cell phone use for all drivers. States which enforce an all cell phone ban for school bus drivers and/or minors under 18 and novice or learning drivers include:

• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• Georgia
• Illinois
• Indiana
• Iowa
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Nebraska
• New Jersey
• New Mexico
• North Carolina
• North Dakota
• Oklahoma
• Oregon
• Rhode Island
• Tennessee
• Texas
• Vermont
• Virginia
• Washington
• West Virginia
• Washington DC

Text Messaging Ban

The majority of states have laws banning any text messaging while driving. Of the 35 states which make texting while driving illegal, 32 of them list texting as a primary offense. This means the driver can be pulled over and cited for texting while driving even if they’re doing nothing else wrong. Only seven states have no provision regarding texting while driving:

• Arizona
• Florida
• Hawaii
• Idaho
• Montana
• Ohio
• South Dakota

It’s easy to see how important it is to stay safe on the roads while using a cell phone, in order to keep yourself and other drivers safe, and also hang onto your cheap car insurance.

An annuity is both a contract with an insurance company and an investment. Your contributions (often called premium payments) to it are invested to produce earnings. This article explains when and what is taxed as income under annuitization, withdrawals, and gifts of your annuity.

An annuity has two phases: accumulation and annuitization. During accumulation – called a deferred annuity – both your contributions (i.e. premium payments) and their earnings accumulate within the contract. During annuitization (i.e. payout stage) you receive monthly payments while money remaining in the contract creates more earnings.

Most annuities are nonqualified. You can make unlimited after-tax contributions to them and their earnings grow tax-deferred. Only the tax-deferred earnings are eventually subject to income tax; your contributions come out tax-free as a return of your basis in the contract.

A qualified annuity is one regulated under government rules as a retirement plan. All contributions to them are deductible from income but, of course, must come from working income.

Annual contributions are limited like IRA contributions. Since they have no after-tax contributions, your tax basis in the contract is zero; so all withdrawals will be subjected to income tax.

Like all qualified plans, any withdrawal you make before reaching age 591/2, will have a 10% penalty tax imposed on it in addition to income tax. After reaching 701/2, you’re required to make minimum required distributions – just like IRAs.

Income taxation is imposed on:

* Annuitization

* Accumulation withdrawals

* Gifts of an annuity, and

* Beneficiary’s withdrawals

Let’s see how nonqualified annuities are taxed:

Taxation on annuitization payments:

Your monthly payouts are considered as made up of a contribution part and an earnings part. Only the earnings part is taxed as income. It’s a specific fraction of your payment equal to total earnings divided by the contracts total value – i.e. earnings plus contributions. After you’ve received all your contributions back in payouts, all future payouts are fully taxed as income.

Taxation on withdrawal from your deferred annuity accumulation:

Taking money out of your deferred annuity is a withdrawal. But earnings are considered to come out first. So anything you withdraw is taxed as income until all the earnings are out. Any withdrawal beyond earnings is a tax free return of basis.

Until you’ve turned 59 years old, the IRS imposes a 10% penalty tax on what you take out of your nonqualified annuity too.

This withdrawals taxation also includes cashing out your deferred annuity altogether. An early cash out may trigger an additional fee from the annuity company.

Taxation on a gift of your deferred annuity:

Gifting your deferred annuity to a person, charity or a charitable remainder trust, triggers income tax on the annuity’s earnings; that includes any 10% penalty tax too.

For gifting to a government-approved charity, your deduction is limited to your basis in the contract – i.e. the sum of your contributions.

Qualified annuities are taxed as above accept they have no basis – i.e. basis equals zero.

Taxation on beneficiaries and survivors:

Annuities that go to beneficiaries and survivors are considered as ‘income in respect of a decedent’ – and not as an investment. So an annuity – unlike an investment – doesn’t get a stepped-up basis.

So, any annuity payout to survivors and beneficiaries is subject to income tax – but only to the extent that money paid out to them exceeds the annuity’s basis -i.e. the original owner’s annuity contributions. So a portion of each payout will be attributed to the deferred tax on the earnings of those contributions and a portion will be return of basis.

As it was for the original owner, when the basis has been completely recovered through payments to the beneficiary, all further payments will be fully taxed as income.

Finance is the general term applied to the commercial service of providing funds and capital. This is part of the area of economics that focuses on the strategies and methods of looking after money and other financial assets. A more general and accepted definition is the control of business plus public sector assets and money. People that look after or manage the arranging of finance are called finance managers.

Managing this involves dealing with the optimization and allocation of funds to various areas either by borrowing or by using those available from internal resources. The term optimization is used to explain the procedure whereby finance is maximized by reducing costs and increasing the return. Poor finance management is caused when managers neglect the rules and a deterioration occurs affecting markets around the world. It is for this very reason that finance managers are very careful with finance they agree too and where it is funded from.

Finance managers can be very short sighted, only looking at the initial cost involved and not the future return capability of the project. Finance managers are people who always like to see where they have been and do not look towards the future in the same way that a sales manager does. Many small business owners forget that the business loan they have arranged is not for personal use; a distinction which gets blurred regularly. Managers are rarely impressed with this situation as they believe they have aright to know what their money is being used for.

This may cause some concern amongst small business owners but they should train themselves to be more focused on their business which should in turn create a better frame of mind for the future. An important area for businesses to receive finance is their own bank or failing that good friends or even relatives. The simple trick is for finance managers to arrange loans using outside lenders thereby protecting their own assets whilst maximizing their own profit simultaneously. Bob Hope once said that you can only get a loan from a bank if you can prove to them you have absolutely no need for it; advice which could not be more true.