Source: http://legendgrouprochester.com/glossary
Timestamp: 2019-04-21 00:47:49+00:00

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If you work for a governmental agency, your employer may have adopted a §401(a) defined contribution plan for your benefit. As a plan participant, tax-deferred contributions may be made by your employer for your benefit, either on a matching basis with your contributions to the employer’s §403(b) and/or §457(b) plan(s), or on a non-elective basis.
How do §401(a) Governmental plans operate?
Your employer establishes the plan and selects which investment options will be available. Your employer then decides how much to contribute and how often the contributions will be made. Usually, you will be able to decide how your contributions will be allocated among the available investment options. The Legend Group establishes the plan in accordance with your employer’s instructions and directs your contributions to the appropriate investments. When you are eligible to begin withdrawing from your account, Legend distributes your funds as you advise.
If you are employed by an educational institution, hospital, or certain other not-for-profit organizations, you may have the opportunity to invest in a tax-advantaged retirement program known as a §403(b) plan. By making regular contributions to a §403(b)/TSA account, you have a convenient means to enhance your retirement savings as you work toward building your financial future.
Your employer determines the provisions of the plan, including investment options and optional plan features such as the ability to defer to a Roth §403(b) or take a loan. You will decide how much you wish to invest each pay period, how your contributions will be allocated among the available investment options, and later, how your assets will be distributed. The Legend Group establishes the plan in accordance with your employer’s instructions and directs your contributions to the appropriate investments. Once you are eligible to begin withdrawing from your account, Legend distributes your funds as you advise.
What is the difference between Traditional 403(b) accounts and Roth 403(b) accounts?
With a traditional §403(b), contributions are made via pre-tax payroll deductions, and both contributions and investment earnings are treated as tax-deferred until withdrawal.1 Roth §403(b) accounts provide participants with the option to build tax-free retirement income. While Roth §403(b)s are funded with after-tax dollars, these accounts may grow tax-free, and all qualified withdrawals are tax-free.2 Contributions may be made to a Roth §403(b) account in addition to, or in place of a traditional §403(b) account, and your maximum annual contribution limit may be divided between the two accounts in any manner you wish.
1Distributions from a traditional retirement account are subject to ordinary income taxes in the year distributed. Distributions prior to age 59½ may incur an additional 10% penalty.
2In order for the Roth §403(b) account to be distributed tax-free, it must be funded for a minimum of five years and the account holder must have attained age 59½. A participant would also qualify for tax-free distributions if the account was held for five years and the account owner became disabled (under the strict definition of disability of §72(p) of the IRS code). Furthermore, in the event of the account holder’s death, beneficiaries would receive tax-free distributions if the account was held for at least five years. Otherwise, the distribution would be treated as part return of principal and part taxable earnings. A 10% premature withdrawal penalty may apply to the earnings.
Traditional governmental §457(b) plans are tax-advantaged deferred compensation arrangements designed for employees of public educational institutions and governmental agencies. By regularly deferring a portion of your compensation to a §457(b) account, you have a convenient means to lower your current taxable income while you work toward building your financial future.
Since governmental §457(b) accounts are not subject to a 10% premature withdrawal penalty, early retirees may have more flexibility to bridge the income gap between the time they retire and the time they are eligible for social security benefits.
Plus, if you work for a school, hospital or library, you may have the opportunity to contribute to a §457(b) account in addition to a §403(b) account. This means you may contribute the maximum dollar amount to your §457 plan and your §403(b) plan in the same year – twice the limit if you were to contribute to only one plan!
How do §457(b) Governmental plans work?
Your employer determines the features of the plan, including investment options and optional plan features such as the ability to take hardship distributions or loans and making contributions to a Roth §457 account. You decide how much you wish to invest each pay period, how your contributions will be allocated among the available investment options, and later, how your assets will be distributed. The Legend Group establishes the plan in accordance with your employer’s instructions and directs your contributions to the appropriate investments. Once you decide to begin withdrawing from your account, Legend distributes your funds as you advise. You may transfer your account to another §457(b) Governmental plan maintained by another employer after your termination from service with your current employer. You also can roll your account to a qualified plan (i.e. §401(k), money purchase, profit sharing plan, etc.) that will accept such rollovers. After you separate from service, you may also roll your account to an IRA.
Distributions from a traditional retirement account are subject to ordinary income taxes in the year distributed.
Defaulting on a loan from a retirement plan constitutes a distribution from that plan. Loans may affect cash values and death benefits.
If you are a highly compensated top decision-maker in a tax exempt organization, you may have access to this retirement savings opportunity. A §457(f) Deferred Compensation Top Hat Plan provides top executives with a means to supplement their retirement savings. As a plan participant, you may fund your account with pre-tax payroll deductions and/or tax-deferred contributions may be made by your employer for your benefit.
However, with §457(f) plans, the deferred compensation is considered to be an asset of your employer until it is paid out to you upon separation of service, when ordinary income and FICA taxes will apply. Taxes are deferred as long as a substantial risk of forfeiture is present. The IRS considers assets to be at a substantial risk of forfeiture as long as they remain available to the general creditors of the organization and will not vest unless you remain with your employer for your full contract period.
While the substantial risk of forfeiture can be a major drawback, its presence allows for unlimited contributions to be made to your §457(f) account each year.
You may also make the maximum contribution allowed to another employer-sponsored retirement plan [i.e. §401(k) / §403(b) / §457(b)], in addition to deferring as much of your income as you wish to your §457(f) account.
How do §457(f) plans operate?
Your employer establishes the plan and selects which investment options will be available. You will be able to decide how much you wish to invest each pay period and how your contributions will be allocated among the available investment options. The Legend Group establishes the plan in accordance with your employer’s instructions and directs your contributions to the appropriate investments. When the substantial risk of forfeiture no longer exists, the assets in the plan will become taxable to you.
What should I keep in mind when considering a §457(f) Deferred Compensation Top Hat plan?
Unlike other most other employer-sponsored retirement plans, your deferred compensation is not set aside in a trust for your benefit. Instead, it remains an asset of your employer until it is distributed to you. This means that your deferred compensation will be exposed to your employer’s general creditors until distribution.
Participants are eligible to take distributions only upon the completion of the terms of their contracts, i.e. when the substantial risk of forfeiture no longer exists.
When the substantial risk of forfeiture no longer exists, the assets in the plan will become taxable to you.
§457(f) accounts may not be rolled into another type of tax-deferred retirement plan, nor to an IRA – even after separation from service.
Legend Equities Corporation and its affiliates do not provide tax or legal information or advice.
Named after the section of federal tax code that governs them, §529 College Savings Plans can provide a tax efficient means for meeting the expenses associated with higher education. Since §529 plans may be operated by individual states and educational institutions, the features and benefits can differ from plan to plan. Your Legend Group Financial Professional can guide you in selecting an appropriate option.
Participation in a 529 College Savings Plan (529 Plan) does not guarantee that contributions and investment return on contributions, if any, will be adequate to cover future tuition and other higher education expenses or that a beneficiary will be admitted to or permitted to continue to attend an institution of higher education. Contributors to the program assume all investment risk, including potential loss of principal and liability for penalties such as those levied for non-educational withdrawals.
Depending upon the laws of the home state of the customer or designated beneficiary, favorable state tax treatment or other benefits offered by such home state for investing in 529 college savings plans may be available only if the customer invests in the home state's 529 college savings plan. Consult with your financial, tax or other adviser to learn more about how state-based benefits (including any limitations) would apply to your specific circumstances. You may also wish to contact your home state or any other 529 college savings plan to learn more about the features, benefits and limitations of that state's 529 college savings plan.
Furthermore, the Tax Cuts and Jobs Act that was signed into law on December 22, 2017 allows for up to $10,000 a year per beneficiary in tax free distributions from a 529 Plan if used for tuition incurred for enrollment or attendance at a public, private, or religious elementary or secondary school. Check with your state's guidelines prior to withdrawing the funds.
For more complete information, including a description of fees, expenses and risks, see the offering statement or program description.
Rule 72(t) allows you to take advantage of your retirement savings before the age of 59.5, when there is otherwise a 10% penalty on early withdrawal. The withdrawals, however, are still taxed at your income rate. The drawback to taking advantage of Rule 72(t) is that you may deplete your retirement accounts well before the end of your life expectancy.
Class A shares typically charge a front-end sales charge. When you buy Class A shares with a front-end sales charge, a portion of the dollars you pay is not invested. Class A shares may impose an asset-based sales charge, but it generally is lower than the asset-based sales charge imposed by the other classes. The fee table in the mutual fund’s prospectus will explain the precise amount of the mutual fund’s fees and expenses.
A measure of income used to determine how much of your income is taxable. Adjusted gross income (AGI) is calculated as your gross income from taxable sources minus allowable deductions, such as unreimbursed business expenses, medical expenses, alimony and deductible retirement plan contributions.
Investment advice provided in exchange for a fee.
Acts as an agent for FTC (Fiduciary Trust Company) of New Hampshire Bank. ADSERV does all of the clerical duties and tax reporting for FTC custodial accounts.
1. The paying off of debt in regular installments over a period of time. 2. The deduction of capital expenses over a specific period of time (usually over the asset's life). More specifically, this method measures the consumption of the value of intangible assets, such as a patent or a copyright.
A person who receives the distributions of an annuity contract.
Creating a reliable retirement income stream can be difficult given the many factors that can influence your strategy, such as market volatility, inflation, tax rates, and how long you will live. In order to help mitigate some of the risks, many people include annuities in their investment plans. An annuity can help protect your retirement lifestyle by providing guaranteed income that can last as long as you need it.1 You may choose to receive periodic payments for a certain number of years, or for the rest of your life (or the life of your spouse or any other person you designate).
An annuity is a contract between you and an insurance company, under which the insurer agrees to make periodic payments to you, beginning either immediately or at some future date. You purchase an annuity contract by making either a single purchase payment or a series of purchase payments.
In purchasing an annuity, many individuals supply funds to the issuing insurance company, creating a pool of assets from which the insurance company can draw to make income payments. As lifetimes vary, the assets contributed by those with shorter lifetimes can be used to sustain income payments for those who live longer than anticipated.
While annuities may be purchased within retirement account, many investors don't see the need to pay for a benefit (tax-deferral) that they may already be receiving. After-tax annuities can provide investors with an opportunity to supplement their retirement savings on a tax-deferred basis. This benefit can be particularly attractive because there are no limits on contributions as there are with IRAs and employer-sponsored retirement plans.
Some annuities include a death benefit that guarantees your beneficiary will receive a certain amount (typically at least the amount of your purchase payments) in the event you pass away before the insurer has started making payments to you.1 If you die, your beneficiary will receive the greater of: all the money in your account, or some guaranteed minimum (such as all purchase payments minus prior withdrawals).
Deferred annuities – are designed to help you accumulate retirement savings on a tax-deferred basis. While interest earnings are not taxed until they are withdrawn, withdrawals taken prior to the end of the annuity's surrender period and/or prior to the owner attaining age 59½ are subject to penalties.
Immediate annuities – are used to generate retirement income. They enable you to turn a portion of your retirement savings (typically a lump sum) into a steady stream of income payments. This is known as annuitization.
With a fixed annuity, you provide the insurance company with a series of purchase payments or a lump sum and the insurer agrees to pay a fixed interest rate over a specified period of time. The insurer takes the majority of the risk, and pooled assets are invested in fixed income securities at the insurer's discretion. While a fixed annuity may provide more security of principal than a variable annuity, the upside potential may be limited.
As with fixed annuities, you provide the insurance company with a lump sum or a series of purchase payments, and the insurer agrees to pay interest for a specified period of time. However, with a variable annuity, the interest payout has the potential to increase or decrease in line with the performance of the annuity's underlying subaccount investments. Variable annuity owners may choose from a selection of available investment options, typically mutual funds that invest in stocks, bonds, money market instruments, or some combination of the three.
It's important to note that when you take your money out of a variable annuity, ordinary income taxes — as opposed to lower capital gains tax rates — will apply. In general, the benefits of tax deferral may outweigh the costs of a variable annuity only if you hold it as a long-term investment for retirement and other long-range goals.
1Payments of guaranteed income in regards to living and death benefits offered by annuity contracts are subject to the claims-paying ability of the issuing insurance company.
If you are investing in a variable annuity through a tax-advantaged retirement plan (such as a §401(k), §403(b) or IRA), you will get no additional tax advantage from the variable annuity. Under these circumstances, consider buying a variable annuity only if it makes sense because of the annuity's other features, such as lifetime income payments and death benefit protection.
Early withdrawals prior to age 59½ may be subject to surrender charges and a 10% tax penalty.
Lincoln Investment and its affiliates do not provide tax information or advice.
Before investing in a variable annuity, consider its investment objectives, risks, charges and expenses carefully. The prospectus contains this and other information. Prospectuses for both the variable annuity contract and the underlying funds can be obtained by contacting Lincoln Investment. Please read the prospectus carefully before you invest or send money.
The process of converting an annuity investment into a series of periodic income payments. Annuities may be annuitized regularly, over a long or short time period, or in some cases, in one single payment.
To change an annuity from the accumulation period to the distribution of funds.
A contract between an insurance company and an individual; generally guarantees lifetime income to the individual on whose life the contract is based in return for either a lump sum or periodic payment to the insurance company. The contract holders' objective is usually retirement income.
Anything that an individual or corporation owns.
Legend Advisory Corporation’s sophisticated tool AANN (Asset Allocation Neural Network) is a type of artificial intelligence technology used in the investment management process. AANN analyzes global economic data, which the investment committee uses to make decisions about clients’ investment portfolios.
Class B shares typically do not charge a front-end sales charge, but they do impose asset-based sales charges that may be higher than those that you would incur if you purchased Class A shares. Class B shares also normally impose a contingent deferred sales charge (CDSC), which you pay when you sell your shares. For this reason, these should not be referred to as “no-load” shares. The CDSC normally declines and eventually is eliminated the longer you hold your shares. Once the CDSC is eliminated, Class B shares often then “convert” into Class A shares. When they convert, they will begin to charge the same asset-based sales charge as the Class A shares. The fee table in the mutual fund’s prospectus will explain the precise amount of the mutual fund’s fees and expenses.
Anybody who gains an advantage and/or profits from something. In the financial world, a beneficiary typically refers to someone who is eligible to receive distributions from a trust, will or life insurance policy. Beneficiaries are either named specifically in these documents or they have met the stipulations that make them eligible for whatever distribution is specified. A Beneficiary can also be any person or entity the owner chooses to receive the benefits of a retirement account or an IRA after he or she dies.
A mutual fund may offer you discounts, called Breakpoints, on the front-end sales charge if you: (1) want to make a large purchase; (2) already hold other mutual funds offered by the same fund family; or (3) commit to regularly purchasing the mutual fund’s shares.
A person or firm in the business of buying and selling securities, operating as both a broker and a dealer, depending on the transaction. The term broker-dealer is used in U.S. securities regulation parlance to describe stock brokerages, because most of them act as both agents and principals. A brokerage acts as a broker (or agent) when it executes orders on behalf of clients, whereas it acts as a dealer (or principal) when it trades for its own account.
A day on which the NYSE is open for business (trading).
Class C shares usually do not impose a front-end sales charge on the purchase, so the full dollar amount that you pay is immediately invested. Often Class C shares impose a small charge if you sell your shares within a short time of purchase, usually one year. Class C shares typically impose higher asset-based sales charges than Class A shares, and since their shares generally do not convert into Class A shares, their asset-based sales charge will not be reduced over time. In most cases your expense ratio would be higher than Class A shares, and even than Class B shares if you hold for a long time.
The specific taxes assessed on investment capital gains as determined by the U.S. Tax Code. When a stock is sold for a profit, the portion of the proceeds over and above the purchase value (or cost basis) is known as capital gains. Capital gains tax is broken down into two categories: short-term capital gains and long-term capital gains. Stocks held longer than one year are considered long term for the treatment of any capital gains, and are taxed a maximum of 15% depending on the investor's tax bracket. Stocks held less than one year are subject to short-term capital gains at a maximum rate of 35% depending again on the investor's tax bracket.
A type of retirement savings contribution that allows people over 50 to make additional contributions to their 401(k) and/or individual retirement accounts. The catch-up contribution provision was created by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), so that older individuals would be able to set aside enough savings for retirement.
Property or other assets that a borrower offers a lender to secure a loan. If the borrower stops making the promised loan payments, the lender can seize the collateral to recoup its losses. Because collateral offers some security to the lender in case the borrower fails to pay back the loan, loans that are secured by collateral typically have lower interest rates than unsecured loans. A lender's claim to a borrower's collateral is called a lien.
A tax-advantaged method of saving for future college expenses that is authorized by Section 529 of the Internal Revenue Code. The plan allows an account holder to establish a college savings account for a beneficiary and use the money to pay for tuition, room and board, mandatory fees and required books and computers. The money contributed to the account can be invested in stock or bond mutual funds or in money market funds, and the earnings are not subject to federal tax (or state tax, in most cases) as long as the money is used only for qualified college expenses. The plans are open to both adults and children.
A traditional IRA that holds only assets that were distributed from a qualified plan. Typically, the intention of using this type of plan is to store assets until they can be rolled into a new employer's qualified plan.
A written statement a broker issues after a trade spelling out what exactly transpired, including the price, commissions, applicable fees, and the terms of trade.Confirmations are sometimes sent out immediately, but often within a week of the transaction.
A Contingent Beneficiary stands second-in-line to inherit assets such as a life insurance policy, a retirement plan or an annuity.
This fee is charged when you sell your mutual fund shares. For example, if you redeem shares valued at $1,000, and the mutual fund imposes a CDSC of 1 percent, you would receive $990. This CDSC normally declines the longer the shares are held and eventually is eliminated after a number of years, often in the seventh year that you own the shares.
The exchange of a convertible type of asset into another type of asset, usually at a predetermined price, on or before a predetermined date. The conversion feature is a financial derivative instrument that is valued separately from the underlying security. Therefore, an embedded conversion feature adds to the overall value of the security.
Many employees have the opportunity to invest in a tax-advantaged retirement program known as a §401(k) plan. By making regular contributions to a §401(k) account, you have a convenient means to enhance your retirement savings as you work toward building your financial future.
How do 401(k) plans operate?
Your employer determines the provisions of the plan, including investment options and optional plan features such as a matching or non-elective employer contributions and the ability to defer to a Roth 401(k) or take a loan.
You decide how much you wish to invest each pay period and how your contributions will be allocated among the available investment options.
The Legend Group establishes the plan in accordance with your employer’s instructions in conjunction with an experienced plan administrator that directs your contributions to the appropriate investments.
What is the difference between a Traditional 401(k) account and a Roth 401(k) account?
Contributions may be made to a Roth 401(k) account in addition to, or in place of a traditional §401(k) account, and your maximum annual contribution limit may be divided between the two accounts in any manner you wish.
2In order for the Roth 401(k) account to be distributed tax-free, it must be funded for a minimum of five years and the account holder must have attained age 59½. A participant would also qualify for tax-free distributions if the account was held for five years and the account owner became disabled (under the strict definition of disability of 72(p) of the IRS code). Furthermore, in the event of the account holder’s death, beneficiaries would receive tax-free distributions if the account was held for at least five years. Otherwise, the distribution would be treated as part return of principal and part taxable earnings. A 10% premature withdrawal penalty may apply to the earnings.
Contributions may be made to a Roth 401(k) account in addition to, or in place of a traditional 401(k) account, and your maximum annual contribution limit may be divided between the two accounts in any manner you wish.
1. The original value of an asset for tax purposes (usually the purchase price), adjusted for stock splits, dividends and return of capital distributions. This value is used to determine the capital gain, which is equal to the difference between the asset's cost basis and the current market value. Also known as "tax basis". 2. The difference between the cash price and the futures price of a given commodity.
An adjustment made to Social Security and supplemental security income in order to adjust benefits to counteract the effects of inflation. COLAs are generally equal to the percentage increase in the consumer price index for urban wage earners and clerical workers (CPI-W) for a specific period.
Formerly known as the Education IRA, Coverdell Education Savings Accounts (Coverdell ESAs) allow investors to contribute up to $2,000 annually per beneficiary to a specially designated investment trust account. The designated beneficiary must be a child under the age of 18, and contributions must be ceased when the beneficiary attains age 18. While contributions are non-deductible, any account growth is free from federal income taxes and account withdrawals for qualified education expenses are tax-free as well. The account must be fully withdrawn by the time the beneficiary reaches age 30, or else it may be subject to tax and penalties. Certain additional requirements must be met in the years that contributions and withdrawals are made.
A savings plan for higher education. Parents and guardians are allowed to make nondeductible contributions to an education IRA for a child under the age of 18. The education IRA is now referred to as the Coverdell ESA.
A class of securities, created by the National Securities Market Improvement Act, that enjoys federally imposed exemptions from state restrictions and regulations. Most stocks trading in the U.S. are covered securities.
ID number given to code all securities.
1. An account created at a bank, brokerage firm or mutual fund company that is managed by an adult for a minor that is under the age of 18 to 21 (depending on state legislation). 2. A Retirement account managed for eligible employees by a custodian.
A financial institution that holds customers' securities for safekeeping so as to minimize the risk of their theft or loss. A custodian holds securities and other assets in electronic or physical form. Since they are responsible for the safety of assets and securities that may be worth hundreds of millions or even billions of dollars, custodians generally tend to be large and reputable firms.
This distribution allows a one-time withdrawal of your account while still employed by your participating employer if you have not contributed for at least two years and your account balance is $5,000 or less. If you use this provision, you will not be able to contribute to OSGP for at least six months following the distribution. Federal and state taxes may apply, and a Form 1099R will be sent to you in January of the year following the distribution.
1. The failure to promptly pay interest or principal when due. Default occurs when a debtor is unable to meet the legal obligation of debt repayment. Borrowers may default when they are unable to make the required payment or are unwilling to honor the debt. 2. The failure to perform on a futures contract as required by an exchange.
A distribution of eligible rollover assets from a qualified plan, 403(b) plan, or a governmental 457 plan to a Traditional IRA, qualified plan, 403(b) plan, or a governmental 457 plan; or a distribution from an IRA to a qualified plan, 403(b) plan or a governmental 457 plan.
A program managed by the Social Security Administration that insures a worker in case of a mishap. Disability insurance offers income protection to individuals who become disabled for a long period of time, and as a result can no longer work during that time period. Employees who've paid the Federal Insurance Contributions Act (FICA) tax for a certain amount of time, are eligible to receive the Social Security disability income insurance.
Elimination period: Typically you may choose a 30, 60, 90 or 180 day elimination period (the amount of time that will elapse before benefits are paid out).
Income term: benefits are generally paid out for a set number of years or until you reach retirement age. Benefits usually do not extend beyond retirement age because it is assumed your income would cease to be based on employment earnings in retirement.
Disability definition: Different policies categorize injuries and illnesses differently. Some injuries and illnesses may be covered while others may not.
You may also wish to purchase a policy that is non-cancelable (one the insurer can never cancel) and guaranteed renewable at the same price as long as your premiums are paid on time.
A refusal to accept property that meets with provisions set forth in the Internal Revenue Code Tax Reform Act of 1976 allowing for the property or interest in property to be treated as an entity that has never been received. These types of refusals can be used to avoid federal estate tax and gift tax, and to create legal inter-generational transfers which avoid taxation, provided they meet the following set of requirements: 1. The disclaimer must be made in writing and signed by the disclaiming party. 2. The disclaimer must identify the property, or interest in property that is being disclaimed. 3. The disclaimer must be delivered, in writing, to the person or entity charged with the obligation of transferring assets from the giver to the receiver(s). 4. The disclaimer must be written less than nine months after the date the property was transferred. In the case of a disclaimant aged under 21, the disclaimer must be written less than nine months after the disclaimant reaches 21.
The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high. Available on the GPS Platform.
A feature available to clients who wish to receive statements and correspondence electronically, instead of in paper form.
A contribution arrangement of an employer-sponsored retirement plan under which participants can choose to set aside part of their pretax compensation as a contribution to the plan. Also known as "salary-deferral" or "salary-reduction contributions."
A federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.
Any person who: exercises or has authority to exercise discretionary authority or control over management of a covered plan; exercises or has authority to manage or buy and sell the assets of a covered plan; renders investment advice, or has authority to render investment advice, to a covered plan for a fee; or has discretionary authority or responsibility in the administration of a covered plan.
A standard of care under the Employee Retirement Income Security Act (ERISA) which states that a fiduciary under ERISA will: act solely in the interest of plan participants and beneficiaries and defray reasonable expenses of the plan; act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; diversify the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and always act in accordance with the documents and instruments governing an ERISA plan insofar as such documents and instruments are consistent with ERISA.
A U.S. law requiring a deduction from paychecks and income that goes toward the Social Security program and Medicare. Both employees and employers are responsible for sharing the FICA payments.
Standard of care under the Investment Advisers Act of 1940 which states that Investment Advisers and IARs must always act in the best interests of clients and put the clients’ interests above their own.
A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's regulation committee. The Financial Industry Regulatory Authority is responsible for governing business between brokers, dealers and the investing public. By consolidating these two regulators, FINRA aims to eliminate regulatory overlap and cost inefficiencies.
The process of determining whether and how an individual can meet life goals through the proper management of financial resources.
An asset-management and valuation method in which the assets produced or acquired first are sold, used or disposed of first. FIFO may be used by a individual or a corporation.
An insurance contract in which the insurance company makes fixed dollar payments to the annuitant for the term of the contract, usually until the annuitant dies. The insurance company guarantees both earnings and principal.
A form issued by a broker or barter exchange that summarizes the proceeds of all stock transactions. The sale of a stock will be accompanied by a gain or loss, which must be reported to the IRS when you file your taxes. Specifically, figures from form 1099-B are used on IRS Form 1040, Schedule D.
A form sent to investors by investment fund companies. The form is a record of all taxable capital gains and dividends paid to an investor, including those that have been re-invested in a given taxation year. The amounts stated on the form represent the amounts that fund companies are attributing to each investor's investment return for the year and reporting to the IRS. Investors use Form 1099-DIV to help report income received from investments on their tax return each year.
The form issued by all payers of interest income to investors at year's end. Form 1099-INT breaks down all types of interest income and related expenses. Payers must issue Form 1099-INTs for any party to whom they paid at least $10 of interest during the year.
An IRS form that an individual who receives distributions from a Coverdell Education Savings Account (ESA) receives from his or her respective investment company. The form is used by the individual to fill out both federal and state tax returns.
A tax form distributed by the Internal Revenue Service (IRS) that notifies a shareholder of undistributed long-term capital gains, unrecaptured section 1250 gains and small business stock (section 1202) gains. Form 2439 is completed by a real estate investment trust (REIT) or a regulated investment company (RIC).
A tax form distributed by the Internal Revenue Service (IRS) and used by filers who make nondeductible contributions to an IRA. A separate form should be filed for each tax year that nondeductible contributions are made. Form 8606 is also required whenever: 1) a taxpayer converts a Traditional or SEP IRA into a Roth IRA, or 2) receives an IRA distribution that is attributable to previous nondeductible contributions. If 8606 is not filed in a distribution year, the taxpayer is likely to be forced to pay income taxes (and possibly penalties) on what could be tax-free monies.
Form ADV discloses, among other information, Legend Advisory Corporation’s services and fee structure, investment methodologies and strategies and potential conflicts of interests.
Contains information about Investment Adviser Representatives, including education, employment background and certain disciplinary events. Form ADV must be delivered to clients and prospective advisory clients before or at the time they enter into an investment advisory contract with Legend Advisory Corporation.
Set of funds with different investment objectives offered by one management company. In many cases, investors may move their assets from one fund to another within the family at little or no cost.
Group life and disability insurance can be used to replace income due to a disabling accident, health issue or mental incapacity.
Custodian of a minor. A person who manages a gift of securities to a minor under the Uniform Gift to Minors Act (UGMA); also a person who takes charge of an incompetent's affairs.
A retirement plan may, but is not required to, provide for hardship distributions. Many plans that provide for elective deferrals provide for hardship distributions. Thus, 401(k) plans, 403(b) plans, and 457(b) plans may permit hardship distributions. If a 401(k) plan provides for hardship distributions, it must provide the specific criteria used to make the determination of hardship. Thus, for example, a plan may provide that a distribution can be made only for medical or funeral expenses, but not for the purchase of a principal residence or for payment of tuition and education expenses. In determining the existence of a need and of the amount necessary to meet the need, the plan must specify and apply nondiscriminatory and objective standards. (Reg. §1.401(k)-1(d)(3)(i)). The rules for hardship distributions from 403(b) plans are similar to those for hardship distributions from 401(k) plans. If a 457(b) plan provides for hardship distributions, it must contain specific language defining what constitutes a distribution on account of an "unforeseeable emergency" (Reg. § 1.457-6(c)(2)).
Used to propose transactions to generate a specified realized short-term or long-term gains or losses.
Employer-funded plans that reimburse employees for incurred medical expenses that are not covered by the company's standard insurance plan. Because the employer funds the plan, any distributions are considered tax deductible (to the employer). Reimbursement dollars received by the employee are generally tax free.
An account created for individuals who are covered under high-deductible health plans (HDHPs) to save for medical expenses that HDHPs do not cover. Contributions are made into the account by the individual or the individual's employer and are limited to a maximum amount each year. The contributions are invested over time and can be used to pay for qualified medical expenses, which include most medical care such as dental, vision and over-the-counter drugs.
To help ensure that companies extend their plans to low-paid employees, an IRS rule limits the maximum deferral by the company's "highly compensated" employees, based on the average deferral by the company's non-highly compensated employees. If the rank and file saves more for retirement, then the executives are allowed to save more for retirement. This provision is enforced via "non-discrimination testing". Non-discrimination testing takes the deferral rates of "highly compensated employees" (HCEs) and compares them to non-highly compensated employees (NHCEs).
A program that is designed to reasonably safeguard clients’ accounts from identity theft. The program includes internal controls and procedures to detect the warning signs — or "red flags" — of identity theft.
Under an information sharing agreement, the employer and the unapproved vendor agree to provide each other from time to time with the information that is needed to ensure the plan’s compliance with the requirements of the IRC and final regulations. The information that needs to be shared includes such things as a participant’s employment status, eligibility for hardship distributions and plan loan limits. The regulations make it clear that vendors no longer will be able to rely on the participant for information in the way permitted currently. Approved vendors (those with "payroll slots") do not have to enter into separate information sharing agreements because the regulations assume that these vendors and the employers already are sharing information. Keep in mind that you will not need a separate information sharing agreement if your plan already limits transfers to only approved vendors.
Trading in a security on the basis of material non-public information in violation of a duty to the marketplace, the issuer, the person’s employer or client or the like. Passing material non-public information to another person in violation of such a duty may also be treated as Insider Trading. It is illegal under the securities laws to trade or recommend trades in a security based on or even, in some cases, while merely possessing Material Non-Public Information about a security or its issuer.
A contract detailing an insurance policy and outlining what risks are insured, what insurance premiums are to be paid by the policyholder, what deductibles prevail, and all the details associated with a policy.
Payments calculated by the insurance company based on risk factors that must be made by the insured to guarantee protection of property loss under an insurance policy.
A toll-free number that clients and advisors can call to request distributions on-demand from Traditional IRA's, Simplified Employee Pension (SEP) IRA's, and Roth IRAs.
Rule 203A-3(a) of the Advisers Act defines an Investment Adviser Representative (IAR) as a Supervised Person of Legend Advisory Corporation who has more than five clients who are natural persons and more than 10 percent of whose clients are natural persons (other than qualified clients, as defined under the Advisers Act). IARs must be registered in the state(s) in which they have a place of business prior to conducting investment advisory activities, unless such state(s) do not have registration requirements.
The federal statute administered by the SEC that regulates the registration, conduct and reporting requirements of investment advisers.
A company engaged in the business of pooling investors' money and trading in securities for them.
An individual retirement account (IRA) that allows individuals to direct pretax income, up to specific annual limits, toward investments that can grow tax-deferred (no capital gains or dividend income is taxed). Individual taxpayers are allowed to contribute 100% of compensation up to a specified maximum dollar amount to their Traditional IRA. Contributions to the Traditional IRA may be tax-deductible depending on the taxpayer's income, tax-filing status and other factors.
The reinvestment of assets that an individual receives as a distribution from a qualified tax-deferred retirement plan into an individual retirement account within 60 days of receiving the distribution. The individual may reinvest either the entire sum or a portion o the sum, although any portion not reinvested is taxes as ordinary income.
The direct movement and reinvestment of assets as a distribution from the custodian of one individual retirement account to the custodian of another IRA. IRA transfers differ from IRA rollovers in that the account owner never takes possession of the cash securities received from the account.
An account in which two or more individuals possess some form of control over the account and may transact business in the account.
A form of joint ownership of an account whereby a deceased tenant's fractional interest in the account passes to the surviving tenant(s). Husbands and wives use it almost exclusively.
A Letter of Intent is a statement you sign that expresses your intent to invest an amount over the breakpoint within a given period of time specified by the fund. Many fund companies permit you to include purchases completed within 90 days before the LOI is signed and within 13 months after the LOI is signed in reaching the dollar amount of the breakpoint threshold.
Life insurance can help provide the funds your family or business may need to meet immediate and ongoing expenses in the event of an untimely death, such as: final expenses, estate taxes, survivor’s daily living expenses, mortgages and other loan obligations, and tuition payments. By purchasing a life insurance policy, you can help ensure that those you care about will not be burdened by debt that could necessitate the sale of assets to pay bills or taxes. Your beneficiaries will not have to pay federal income tax on the benefits they receive, and since the payment process bypasses probate, it can save time and money. In addition to serving as a tool for financial protection, life insurance can be used for accumulation strategies to meet other goals, including education, retirement, tax minimization, wealth transfer and legacy planning.
When should I consider purchasing Life Insurance?
Replacement of income and your personal situation and preferences will influence the decisions you make. Many different types of insurance are available, each designed to meet different objectives. The type that you purchase may depend on how much coverage you require.
While the amount of life insurance you may need will ultimately depend on your unique situation, some experts recommend a benefit equal to several times your annual income1. You may need more if you have a young family, large salary and a sizeable mortgage, or less if your children are grown or you have other assets that can be utilized. Life insurance costs vary based on your age, health status and the type of policy you wish to buy, among other factors.
There are two main types of life insurance: term and permanent. Both categories include different products designed to fulfill various needs.
Whole Life – Whole Life Insurance provides coverage for the insured’s lifetime combined with a savings component. Policies generally offer fixed premiums, guaranteed death benefits and the potential to build cash value.
Universal Life – is similar to Whole Life Insurance but features added flexibility and potentially greater returns on the savings component. Premiums and the face amount may be adjusted as your needs change, and cash values may be withdrawn. While cash values are influenced by interest rate changes, Universal Life policies usually offer a guaranteed minimum return. However premiums may increase when interest rates decline.
Variable Life – offers fixed premiums, the ability to choose investment options and the potential for the cash value and death benefit to increase or decrease in conjunction with the performance of the underlying investments. While most policies guarantee that the death benefit will not fall below a specified minimum, there is usually no guarantee for cash values. Earnings are not taxed until the policy is surrendered and earned investment interest can be applied to pay the premiums. However the cash value may not be withdrawn during the policyholder’s lifetime.
Variable Universal Life – blends the features of Variable Life and Universal Life in a more aggressive policy. Premiums and death benefits may be adjusted as your needs change. In addition, Variable Universal Life policies include the ability to choose investment options and the potential for the cash value and death benefit to increase or decrease in conjunction with the performance of the underlying investments. No guarantees are offered beyond the original face value death benefit.
2Surrender charges may apply on withdrawals of cash value. Should a withdrawal exceed the policy basis, ordinary income taxes may apply to any amount above and beyond the policy basis. Interest charges may apply on loans. Loans may affect cash values and death benefits.
Guarantees are subject to the claims-paying ability of the issuing insurance company.
Lincoln Investment and its affiliates do not provide legal, tax or estate planning information or advice.
Before investing in a variable universal life or variable life insurance policy, consider the policy and its underlying funds’ investment objectives, risks, charges and expenses carefully. Both the policy prospectus and the underlying funds' prospectuses, which contain this and other information, can be obtained by contacting Lincoln Investment. Please read the prospectus carefully before you invest or send money.
To convert assets into cash or equivalents by selling them on the open market.
Long-term care insurance can help preserve the assets you've worked so hard to build by planning for the costs associated with long-term care. As the baby boomer generation ages, statistics indicate a growing need for long-term care. A majority of people who attain retirement age will require long-term care at some point in their lives. But the need is not limited to retirees. Many individuals receiving long-term care services are working age adults, as a result of chronic illnesses, injury or disability.
In addition, many Americans are currently dealing with the emotional and financial impact of providing for the long-term care needs of a family member. In many cases, in-home care is often provided by a relative who may be burdened with both childrearing as well as elder care responsibilities. And while the services of a home health aide may be enlisted, the average annual cost of home care is growing, along with nursing home care.
Have I saved enough to pay for these types of expenses?
Even if you did, would you want to spend your savings on long-term care?
Unfortunately, some people believe that their health insurance, Medicare or Medicaid will foot the bill for long-term care. But most health insurance plans normally cover only acute care that is required for a short period of time. Medicare offers limited benefits for those who receive care in a skilled nursing facility following a hospital stay. Generally, Medicare recipients are disabled or have reached full-retirement age as defined by the Social Security Administration. Medicaid is a government program designed to help those in dire financial need. In most cases, almost all of your assets and your spouse's assets must be depleted before benefits will be paid, and even then Medicaid will not cover most home care, which is the setting many people prefer.
That's why many people seek to protect their assets by purchasing long-term care insurance. With long-term care coverage, you may be able to defray the expenses of extended care without placing your income, retirement nest egg and other investments at risk. In addition, long-term care insurance can provide for increased control over your care choices. Insurance can cover expenses associated with care received in a nursing home, assisted living facility, adult care center and at home.
The amount of income that determines how much of an individual's IRA contribution is deductible. The modified adjusted gross income is found by taking the individual's adjusted gross income and adding back certain items such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
An investment company that continuously offers new equity shares in an actively managed portfolio of securities. All shareholders participate in the gains and losses of the fund. The shares are redeemable on any business day at the net asset value. Each mutual fund's portfolio is invested to match the objective stated in the prospectus.
Net Asset Value is a mutual fund's price per share or exchange-traded fund's (ETF) per-share value. In both cases, the per-share dollar amount of the fund is calculated by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding.
The difference in value between the average cost basis of shares and the current market value of the shares held in a tax-deferred account.
A mutual fund whose shares are sold without a sales charge added to the net asset value.
A distribution from a Roth IRA that occurs before the Roth IRA owner meets certain requirements (see definition for qualified distributions). 2. A distribution from an education savings account that exceeds the amount used for qualified education expenses.
Includes nonpublic personally identifiable financial information, plus any list, description or grouping of customers that is derived from nonpublic personally identifiable financial information. This includes the following client information: names, addresses, contact details or information the identifies a person as a customer; social security numbers or tax identification numbers; assets, net worth, income or other information provided on a financial product application; bank account information; consumer report information; occupation; information acquired through an Internet “cookie”; and other information regarding clients not available to the public.
An annuity is a contract between you and an insurance company, under which the insurer agrees to make periodic payments to you, beginning either immediately or at some future date. You may purchase an annuity contract by making either a single purchase payment or a series of purchase payments.
Deferred – A deferred annuity can help you build your retirement nest egg on a tax-deferred basis, to tap for income at a later date.
Immediate – An immediate annuity is appropriate when you wish to create a continuing stream of income from your assets.
Fixed Annuities – During the savings accumulation phase, fixed annuities are guaranteed to earn a predetermined interest rate. During the annuitization phase, a fixed annuity guarantees2 a set income payment at regular intervals until the contract terminates, usually at the death of the annuitant and/or survivor.
Variable Annuities – offer a range of investment options, and the value of your investment as a variable annuity owner will vary depending on the performance of the options you choose. Variable annuity owners may select from available investment subaccount options that invest in equity, debt and money market instruments, or some combination of the three.
At the end of the accumulation phase, a minimum payment is guaranteed2 by the insurance company. Additional income payments vary along with the performance of the annuity’s underlying investments.
1If you are investing in an annuity through a tax-advantaged retirement plan (such as a §401(k), §403(b) or IRA), you will get no additional tax advantage from the annuity. Under these circumstances, consider buying a annuity only if it makes sense because of the annuity's other features, such as lifetime income payments and death benefit protection.
2Payments of guaranteed income are contingent upon the claims-paying ability of the issuing insurance company. Duration of guarantee time period may be limited by tax law restrictions.
Annuity contracts may contain surrender charges, exclusions, limitations and terms for keeping them in force.
Before investing in a variable annuity, consider its investment objectives, risks, charges and expenses carefully. The prospectus contains this and other information. Prospectuses for both the variable annuity contract and the underlying funds can be obtained by contacting Legend Equities Corporation. Please read the prospectuses carefully before you invest or send money.
In addition to our extensive qualified retirement account options, Legend offers non-qualified (taxable) investments to facilitate the achievement of your investment goals. Through our relationship with Pershing, a subsidiary of The Bank of New York Mellon Corporation, you can hold a variety of investment types including stocks, bonds, mutual funds, annuities and money market instruments in a non-qualified brokerage account.
In addition, Legend investors with Pershing accounts can utilize Pershing’s ProCash Plus. ProCash Plus offers investors the ability to deposit funds from various income sources, write checks, access cash and make purchases with a debit card and pay bills from a single account.
Any type of tax-deferred, employer-sponsored retirement plan that falls outside of employee retirement income security act (ERISA) guidelines. Non-qualified plans are designed to meet specialized retirement needs for key executives and other select employees. These plans also are exempt from the discriminatory and top-heavy testing that qualified plans are subject to.
Payroll deductions are amounts withheld from an employee's payroll check, and these amounts are withheld by their employer. Among these deductions are insurance pension contributions, wage assignments, child support payments, taxes, and union and uniform dues.
A Latin term that translates into "by head," basically meaning "average per person." Per capita can take the place of saying "per person" in any number of statistical observances. In most cases the term is used in relation to economic data or reporting, but can also be used in most any other occurrence of population description.
A stipulation that, should a beneficiary predecease the testator, the beneficiary's share of the inheritance will go to his or her heirs.
Offers clients the opportunity to pick their own account allocations and percentages to invest in with a choice of rebalancing every 3 months, 6 months or 12 months.
The organization The Legend Group has partnered with to handle the execution, confirmation, settlement and delivery of transactions, fulfilling the main obligation of ensuring transactions are executed in a prompt and efficient manner. Pershing is also referred to as Legend's "clearing firm."
Legend’s Personal §401(k) plan was designed to provide self-employed individuals and their spouses who work in the business with the opportunity to invest in a tax-advantaged retirement program. The plan is available to sole proprietors and partnerships that do not have any common law (non-spousal) employees, including C Corporations, S Corporations and sole proprietorships. By making regular contributions to a Personal §401(k) account, you have a convenient means to enhance your retirement savings as you work toward building your financial future.
How do Legend Personal §401(k) plans operate?
You determine the investment options available in the plan, how much you wish to invest each pay period, how your contributions will be allocated among the available investment options, and later, how your assets will be distributed. The Legend Group® will establish the plan in accordance with your instructions and directs your contributions to the appropriate investments. When you are eligible to begin withdrawing from your account, Legend distributes your funds as you advise.
What is the difference between a Traditional §401(k) account and a Roth §401(k) account?
Contributions may be made to a Roth §401(k) account in addition to, or in place of a traditional §401(k) account, and your maximum annual contribution limit may be divided between the two accounts in any manner you wish.
2In order for the Roth §401(k) account to be distributed tax-free, it must be funded for a minimum of five years and the account holder must have attained age 59½. A participant would also qualify for tax-free distributions if the account was held for five years and the account owner became disabled (under the strict definition of disability of §72(p) of the IRS code). Furthermore, in the event of the account holder’s death, beneficiaries would receive tax-free distributions if the account was held for at least five years. Otherwise, the distribution would be treated as part return of principal and part taxable earnings. A 10% premature withdrawal penalty may apply to the earnings.
An employee's ability or right to retain certain benefits when switching employers. Benefits such as certain pension plans and health insurance have portability. Most 401(k) plans have portability of benefits, as well as health savings accounts (HSAs).
A beneficiary in a will, trust or insurance policy that is first in line to receive named benefits. Primary beneficiaries are contrasted with contingent beneficiaries, who will only receive benefits if the primary beneficiary has died. There can be more than one primary beneficiary.
A program that is designed to provide safeguards for: maintaining the security and confidentiality of nonpublic person information collected from our clients; protecting against anticipated threats and hazards to the security or integrity of nonpublic person information; protecting against unauthorized access to our use of nonpublic personal information in manner that creates a substantial risk of identity theft or fraud; and disposing of nonpublic personal information in a secure manner. Nonpublic personal information entrusted to the firm by clients must be maintained and preserved in a confidential manner.
A document prepared by the sponsor of a new investment project, or the management of an existing firm, for prospective investors and/or lenders. It details the nature of the project or business, its history (if any), growth potential, objectives and the amount of finance required to realize them.
This is the price to investors for mutual fund shares, equal to the NAV plus the sales charge.
Distributions made from a Roth IRA that are tax and penalty free. In order to be a qualified distribution, the following two requirements must be met: 1. It must occur at least five years after the ROTH IRA owner established and funded his/her first ROTH IRA. 2. At least one of the following requirements must be met: a) The Roth IRA hold must be at least age 59.5 when the distribution occurs. b) Distributed assets limited to $10,000 are used towards the purchase or rebuilding of a first home for the holder or a qualified family member. c) Distributions occurs after the holder becomes disabled. d) assets are distributed to a beneficiary of the holder after his/her death.
A type of court order typically found in a divorce agreement that recognizes that the ex-spouse is entitled to receive a predefined portion of the individual's retirement plan. In most cases, the qualified domestic relations order (QDRO) allots 50% of the value of the assets gained from the beginning of the marriage to the time of the divorce to the ex-spouse.
A tax-advantaged fiduciary relationship between an employer and an employee in the form of a stock bonus, pension, or profit-sharing plan in which the underlying beneficiary may use his or her life expectancy to determine required minimum distribution amounts. Section 401(a) of the Internal Revenue Code authorizes and sets forth the requirements for a qualified trust.
Used to bring accounts back in-line with the target allocation.
The treatment of a contribution as being made to another type of IRA instead of the IRA to which the contribution was initially made.
A method used by individuals to minimize the tax burden of converting an IRA by recharacterizing Roth IRA-converted amounts back to a Traditional IRA and then converting these assets back to a Roth IRA again. Be aware that the IRS released regulations in 1999 placing limits on reconversions.
The date by which a qualified plan participant or IRA owner must begin receiving required minimum distributions from his or her retirement account.
The amount that Traditional, SEP and SIMPLE IRA owners and qualified plan participants must begin distributing from their retirement accounts by April 1 following the year they reach age 70.5. RMD amounts must then be distributed each subsequent year.
A Right of Accumulation (ROA) allows investors to aggregate their own holdings as well as the holdings of certain related parties, such as spouses and children, toward achieving the investment thresholds at which Breakpoint discounts become available. Thus, under a fund's ROA rules, an investor may aggregate holdings that he has in different accounts at the same broker-dealer, at different broker-dealers, or in different types of accounts, such as 401(k)s and 529 plans, as well as the holdings in the accounts of related parties toward achieving an investment threshold at which a Breakpoint discount is available.
A rollover is when you do the following: 1. Reinvest funds from a mature security into a new issue of the same or a similar security. 2. Transfer the holdings of one retirement plan to another without suffering tax consequences.
Roth IRAs are tax-advantaged retirement savings vehicles for individual investors. Anyone of any age who has earned income (or the non-working spouse of such an individual) can make a Roth IRA contribution provided their income does not exceed certain limits.
What do Roth IRA accounts provide?
Tax-free Growth Potential – While contributions are made with after-tax money in a Roth account, both contributions and any earnings may grow tax-free.
Tax Diversification in Retirement – Another advantage of Roth IRAs relates to the potential benefits of creating a diversified pool of both tax-deferred and tax-free1 sources of savings from which to generate retirement income.
A Hedge Against Future Tax Increases – Considering personal income tax rates and with the nation facing unprecedented financial challenges in the years ahead, a Roth IRA may provide valuable tax-hedging advantages.
Legacy Planning – If you are planning to leave a financial legacy, a Roth IRA can provide tax advantages as distributions are not required during the lives of the original IRA owner and his/her spouse.
Many Investment Options – A wide variety of investment options are available, including fixed and variable annuities and mutual funds.
Professional Investment Management – Legend Roth IRA account holders have the opportunity to participate in Legend Advisory Corporation’s Professional Portfolio Management. These programs offer diversified3 asset allocation portfolios that are managed by a team of investment professionals who monitor world markets in an effort to maximize returns while attempting to reduce risk.
1In order for the Roth IRA account to be distributed tax-free, it must be funded for a minimum of five years and the account holder must have attained age 59½. A participant would also qualify for tax-free distributions if the account was held for five years and the account owner became disabled (under the strict definition of disability of §72(p) of the IRS code). Furthermore, in the event of the account holder’s death, beneficiaries would receive tax-free distributions if the account was held for at least five years. Otherwise, the distribution would be treated as part return of principal and part taxable earnings. A 10% premature withdrawal penalty may apply to the earnings.
2Earnings on premature distributions are taxable at a taxpayer’s ordinary income rate and are generally subject to a 10% penalty unless an exemption exists. Exemptions are: substantially equal payments based on the life expectancy of the owner for at least five years or until age 59½, whichever is longer; medical care expenses in excess of 7.5% of AGI; higher education expenses of the IRA owner, spouse, child or grandchild; involuntary distributions due to an IRS levy; health insurance premiums for unemployed individuals under certain circumstances.
3Diversification does not assure a profit or protect against market loss.
Before investing in a mutual fund or variable annuity, consider its investment objectives, risks, charges and expenses carefully. The prospectus for a mutual fund or the policy prospectus and prospectuses for the underlying investments of a variable annuity, which contain this and other information, can be obtained by contacting Lincoln Investment. Please read the prospectus or prospectuses carefully before you invest or send money.
A voluntary reduction of ones salary BEFORE taxes are paid causing the client to be taxed in a lower tax bracket.
An agreement between the employee and employer on the amount to deduct (from the employees salary BEFORE taxes) and what firm to send the funds to for investing.
These are fees that you would not directly pay, but which are taken out of mutual fund’s assets to pay to market and distribute its shares. For example, asset-based sales charges could be used to compensate a broker/dealer for the sale of mutual fund shares, for advertisements, and to print copies of the prospectus. Asset-based sales charges include “Rule 12b-1” fees, which are dedicated to these types of distribution costs.
This fee is charged when you purchase mutual fund shares. For example, suppose you wish to spend $1,000 to purchase Class A shares, and the mutual fund imposes a front-end sales charge of 5 percent. You will be charged $50 on your purchase, and you will receive shares with a market value of $950. Depending on the size of your purchase, a Breakpoint discount can lower this sales charge.
Salary Reduction SEPs were replaced by SIMPLE IRAs when Congress enacted the Small Business Job Protection Act of 1996; therefore, new SARSEPs can no longer be adopted. However, any employer that had a SARSEP in place prior to 1996 can maintain its SARSEP if the employer still has fewer than 25 employees. Also, each year at least 50% of the eligible employees must choose to make elective deferrals. If fewer than 50% participate, all elective deferrals made by any employee are “disallowed.” Employee salary deferrals and employer contributions are deposited in an employee’s Traditional IRA.
What do SARSEP IRAs offer?
Pre-tax Savings – SARSEP IRA account contributions are tax deductible for eligible employees.
Tax-deferred Growth Potential – Taxes on SARSEP IRA investment earnings are deferred, meaning you need not pay taxes on anything that your SARSEP IRA earns until you retire or take a distribution.1 For many people, that time is years away, allowing for long-term investment growth. Withdrawals are taxed as ordinary income in the year distributed.
Distributions – SARSEP IRA assets can be withdrawn without penalty after age 59½.1 Upon withdrawal, ordinary income taxes will apply. Distributions must begin no later than April 1 of the calendar year following the calendar year in which you attain age 70½, even if you are still working.
The SEC oversees the key participants in the securities world, including securities exchanges, securities brokers and dealers, investment advisers, and mutual funds.
SEP is an acronym for Simplified Employee Pension. Since their introduction in 1978, SEPs have gained tremendous popularity, particularly as a plan for sole proprietors. This is due to the fact that the only contributions allowed under a SEP IRA are employer contributions. Employer SEP contributions are deposited into an employee’s Traditional IRA account.
What do SEP IRAs offer?
Pre-tax Savings – SEP IRA account contributions are tax deductible for the contributing employer.
Tax-deferred Growth Potential – Taxes on SEP IRA investment earnings are deferred, meaning you need not pay taxes on anything that your SEP IRA earns until you retire or take a distribution.1 For many people, that time is years away, allowing for long-term investment growth. Withdrawals are taxed as ordinary income in the year distributed.
Distributions – SEP IRA assets can be withdrawn without penalty after age 59½.1 Upon withdrawal, ordinary income taxes will apply. Distributions must begin no later than April 1 of the calendar year following the calendar year in which you attain age 70½, even if you are still working.
SIMPLE IRAs were introduced by the Small Business Job Protection Act of 1996. They first became effective in 1997, replacing the SARSEP plan. A SIMPLE IRA can be adopted by an employer with under 100 employees as long as no other retirement plan is maintained in the same calendar year (other than one for a union, which is subject to a collective bargaining agreement).
What do SIMPLE IRAs offer?
Pre-tax Savings – SIMPLE IRA account contributions are tax deductible for eligible employees.
Tax-deferred Growth Potential – Taxes on SIMPLE IRA investment earnings are deferred, meaning you need not pay taxes on anything that your SIMPLE IRA earns until you retire or take a distribution. For many people, that time is years away, allowing for long-term investment growth. Withdrawals are taxed as ordinary income in the year distributed.
Mandatory Employer Contributions: An employer must make a contribution to the SIMPLE IRA plan – either a 3% matching contribution or a 2% non-elective contribution. The most restrictive an employer can be in determining eligibility is requiring an employee to earn at least $5,000 with the employer in any two of the last five years and to be reasonably expected to make $5,000 in the current year.
Distributions – SIMPLE IRA assets can be withdrawn without penalty after age 59½.1 Upon withdrawal, ordinary income taxes will apply. Distributions must begin no later than April 1 of the calendar year following the calendar year in which you attain age 70½, even if you are still working.
Social Security is largely a pay-as-you-go program. This means that today's workers pay Social Security taxes into the program and money flows back out as monthly income to beneficiaries. As a pay-as-you-go system, Social Security differs from company pensions, which are “pre-funded.” In pre-funded retirement programs, the money is accumulated in advance so that it will be available to be paid out to today's workers when they retire. The private plans need to be funded in advance to protect employees in case the company enters bankruptcy or goes out of business.
A representative must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the client based on their investment profile.
A method of withdrawing funds from an annuity account by which the annuitant withdraws funds from the account in specified amounts for a specified payment frequency. The annuitant is not guaranteed lifelong payments as he or she is with the standard annuitization method. With the systematic withdrawal schedule, the annuitant chooses instead to withdraw funds from his or her account until it is emptied, bearing the risk that the funds become depleted before he or she dies.
This is an exchange done within the fund group from one account to another at no additional sales charge.
A retirement savings plan created by the Federal Employee's Retirement System Act of 1986 for current or retired employees of the federal civil service. The thrift savings plan is a defined-contribution plan designed to give federal employees the same retirement savings related benefits that workers in the private sector enjoy with 401(k) plans. Contributions to the plan are automatically deducted from each paycheck.
The date the fund group invested the money in the client's account.
While many people may think of Traditional and Roth IRAs as retirement savings vehicles, current tax law allows investors to tap these accounts for qualified higher education expenses. Any account earnings will be taxable when withdrawn if the accountholder is under age 59½, but withdrawals are exempt from the 10% penalty if used for qualified higher education expenses.
What’s more, the federal financial aid formula does not take retirement assets into account, meaning that the student may qualify for increased financial aid. However, the Traditional or Roth IRA distribution will affect the student’s eligibility for financial aid in the following year as it must be included in the parent’s income.
Traditional IRAs are tax-deferred retirement savings vehicles for individual investors. Anyone under the age of 70½ who has earned income (or the non-working spouse of such an individual) can make a Traditional IRA contribution. The only question is whether or not the contribution can be deducted. This hinges on whether the individual is an active participant in an employer-sponsored retirement plan or not. A Legend Group Financial Professional can help you determine whether you (or your non-working spouse) are eligible to deduct a Traditional IRA contribution. If you cannot deduct a contribution, it may make more sense to contribute to a Roth IRA if your adjusted gross income (AGI) is within the Roth eligibility limits.
What do Traditional IRA accounts provide?
Pre-tax Savings – Traditional IRA account contributions are tax deductible for eligible investors.
Tax-deferred Growth Potential – Taxes on IRA investment earnings are deferred, meaning you need not pay taxes on anything that your IRA earns until you retire or take a distribution. For many people, that time is years away, allowing for long-term investment growth. Withdrawals are taxed as ordinary income in the year distributed, which means that a traditional IRA may work best if your tax rate is higher today than you expect it to be in the future.
Distributions – IRA assets can be withdrawn without penalty after age 59½.1 Upon withdrawal, ordinary income taxes will apply. Distributions must begin no later than April 1 of the calendar year following the calendar year in which you attain age 70½.
Professional Investment Management – Legend IRA accountholders have the opportunity to participate in Legend Advisory's Portfolio Management. These programs offer diversified2 asset allocation portfolios that are managed by a team of investment professionals who monitor world markets in an effort to maximize returns while attempting to reduce risk.
2Diversification does not assure a profit or protect against market loss.
A change in ownership of an asset, or a movement of funds and/or assets from one account to another. A transfer may involve an exchange of funds when it involves a change in ownership, such as when an investor sells a real estate holding. In this case, there is a transfer of title from the seller to the buyer and a simultaneous transfer of funds, equal to the negotiated price, from the buyer to the seller. The term transfer may also refer to the movement of an account from one bank or brokerage to another.
Form used by accepting companies authorizing resigning companies to transfer/redeem monies as a non-taxable event and send the proceeds to the accepting firm.
A way of designating beneficiaries to receive your assets at the time of your death without having to go through probate. This designation also allows you to specify the percentage of assets each person or entity (your "TOD beneficiary") will receive. Your assets will then be automatically transferred to the designated beneficiaries upon your death.
A rebalance in which account positions are brought back as closely as possible to target weights within the constraints of minimum trade thresholds. There is a greater possibility that a True Rebalance could result in high or low cash. This can occur if there are recommended trades that do not get executed because they are below the platform’s minimum trade threshold and the trades happen to be mostly buys or mostly sells. Typically, a true rebalance will generate more trades than a soft rebalance.
Laws adopted by most states allowing an adult to contribute to a custodial account in a minor's name without having to establish a trust or name a legal guardian. Thus, minors can have securities bought and money invested in their names, but the custodian is responsible for managing the funds in the account. The custodian has fiduciary duty to manage the account prudently, but once the minor reaches the age of majority, he/she has complete rights to the funds in the account. The assets are the legal property of the minor, and the parent has no legal control over the uses of the proceeds of the account. All withdrawals from the account are taxed at the minor's rate.
The number of years that a participant is expected to live, as defined by regulations. Life expectancies are provided in the life-expectancy tables, which include the following: 1.1.The Single Life Table, which is used only by beneficiaries to calculate RMD amounts after the death of the participant. 2. 2.The Uniform Lifetime Table, which is used to calculate RMD amounts for the participant. This is used in all cases, except where the Joint and Last Survivor Table can be used. 3. 3.The Joint and Last Survivor Table, which is used to calculate RMD amounts for the participant, but only if the spouse of the participant is the sole primary beneficiary and is more than 1-years younger than the participant.
This table is the new life expectancy table to be used by all IRA owners to calculate lifetime distributions (unless your beneficiary is your spouse who is more than 10 years younger than you). In that case, you would not use this table, you would use the actual joint life expectancy of you and your spouse based on the regular joint life expectancy table. The Uniform Distribution Table is never used by IRA beneficiaries to compute required distributions on their inherited IRAs.
An extension of the Uniform Gifts to Minors Act allowing assets other than cash or securities to be considered gifts. Specifically, this extension was intended to allow gifts of property to persons under 18 or 21 (depending on the jurisdiction). Both acts allow for the giving of gifts to children up to so much in value without any tax consequences. These gifts are held in a custodianship until the child reaches the age of majority. The custodian is appointed by the donor (and is often the donor himself/herself). The UTMA was set up to allow these transfers to occur without a lawyer needing to set up a trust, a process that can be complicated and sometimes expensive. The National Conference of Commissioners on Uniform State Laws drafted the UTMA in 1986, and a version of it has been passed in most U.S. states.
If an employer allows one employee to defer salary into a 403(B) plan, you must offer it to all employees with certain exclusions allowed.
An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio.
Any individual policy that provides for life insurance, the amount or duration of which varies according to the investment experience of any separate account established and maintained by the insurer as to such policy.
An account where clients receive investment advisory, execution, clearing and custodial services in a bundled form. Clients pay an all-inclusive “wrap” fee determined as a percentage of the assets held in the account. Fees are not based upon transactions in the account.

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