Alternate name: Personal retirement annuity The annuity is issued in your name, and only you or your beneficiaries can receive the payments. You can’t transfer any portion of the individual retirement annuity to anyone except the issuer. You also can’t make more than the annual contribution for an individual retirement account. Money in an individual retirement annuity can grow tax deferred, then you take the required minimum distribution by April 1 following the year you turn 72....

A popular example of owning investment property, especially for beginners, is house hacking. This strategy involves purchasing a duplex, living in one side, and renting out the other to help offset your mortgage payment. While one side of the duplex serves as your residence, the other side is an investment property. Many people who begin investing using house hacking go on to own other investment properties or move out of the duplex to rent out both sides....

Alternate name: IRA rollover The most straightforward type of retirement account transfer is from trustee to trustee, which is simply a direct transfer of an account from one financial institution to another. For example, you could move an old 401(k) into a new 401(k) account or a traditional IRA to another traditional IRA, just with a different bank. Other types of transfers include: Direct rollover: Moving funds from one type of retirement account to another, like a 401(k) to an IRA Indirect rollover: Receiving the funds directly and reinvesting them into another qualified plan Roth conversion: Converting a traditional IRA to a Roth IRA...

Both the standard deduction and the total of your itemized deductions reduce the amount of income on which you must pay federal income tax. You can claim the standard deduction, or you can itemize individual deductions that you qualify to claim—line by line by line—but you can’t do both. It only makes sense to choose the one that reduces your taxable income more. The standard deduction is the simpler solution: a set amount based on your filing status, (e....

When you sell an option to someone, you’re selling them the right to make you engage in a future transaction. For example, if you sell someone a put option, you’re promising to buy a stock at a set price any time between when the transaction happens and the expiration date of the option. If the holder of the option doesn’t do anything with the option by the expiration date, the option expires....

Bitcoin is probably the most widely known application of blockchain, however that’s just the beginning. Blockchain technology can be used to reduce costs, speed up transactions, and improve data security for financial institutions, health care providers, businesses, and more. That’s good news for consumers and investors. Although blockchain technology hasn’t yet been widely adopted, it has the potential to dramatically change the way we do business by offering a trusted, cryptographic system for exchanging information....

The term “dollarization” is also shorthand for the use of any foreign currency by another country. An example of a country that has adopted the U.S. dollar as legal tender is Panama. It dollarized in 1904, although a national currency, the balboa, is used for small transactions. Panama’s decision to use the dollar as its official currency was based on strong political and economic ties to the U.S. Also, Panama has a unique location on a narrow strip of land between North and South America, which is a key trade route....

Learn more about when you’d want to exercise options early and how it can impact your taxes. Definition and Examples of Early Exercise of Options Options grant the holder the right, but not the obligation, to buy or sell a stock at a strike price by the maturity date. The right to buy a stock is called a call option, and the right to sell is called a put option....

In certain areas of your life, you may already practice risk management. For example, buying car insurance is a form of risk management because you’re reducing the financial impact if you get in an accident. Insurance companies practice risk management by charging premiums based on the probability that they will have to pay one or more claims. They also insure large numbers of people, thereby making losses relatively predictable. Plus, each insured person usually retains a portion of the risk through co-pays, coinsurance, and deductibles, depending on the type of policy....

For example, The Citadel (a military college in South Carolina) offers its employees group banking through Wells Fargo. When an employee enrolls in the program, they get access to two perks: loan benefits and no monthly service fees on checking accounts with direct deposit. How Does Group Banking Work? Group banking is a type of workplace perk—similar to 401(k) company matches and paid time off. The idea behind group banking is simple: Employers want to attract and retain the best talent....

Definition and Examples of Insolvency Insolvency refers to situations in which a debtor can’t repay the debts he or she owes. For example, a business may become insolvent if it’s unable to keep up loan payments or money owed to vendor invoices. The IRS offers another definition of insolvency: “A taxpayer is insolvent when his or her total liabilities exceed his or her total assets.” The IRS uses this insolvency definition when determining whether canceled debts should be included as income on your taxes....

You may need to undergo medical writing when applying for life insurance, long-term care insurance, disability income insurance, critical illness insurance, and some health insurance policies that fall outside the purview of the Affordable Care Act (ACA). The insurance company evaluates the medical information you provide on your application and other health-related information it collects about you, such as your age, whether you smoke, your current health, health history, family medical history, and prescriptions....

How Does MSCI EAFE Work? The holdings in MSCI EAFE are weighted according to market capitalization. In other words, larger companies receive a higher percentage of fund investment. The MSCI EAFE index is widely used in the investment management community as the standard for judging the performance of foreign mutual funds and pension accounts. Managers of these funds compare their own performance to the MSCI EAFE to determine whether they are providing value to clients or not....

The pre-market trading offers investors flexibility, but it has additional risks and limitations to consider. Learn how pre-market trading compares to trading in the regular trading session. Definition and Examples of Pre-Market Trading Pre-market trading is when investors make trades before the opening bell, which in the U.S. is 9:30 a.m. EST for major exchanges. The duration of pre-market trading hours varies between markets and trading venues. Alternate name: Extended-hours trading...

Definition and Examples of Regulation V The Fair Credit Reporting Act (FCRA) is a legal document that states you are allowed to see whatever information a credit reporting agency (CRA) has about you. Anytime the CRA submits new information to your file, you are entitled to know about it. Regulation V is the portion of the FRCA that implements those allowances and entitlements for the consumer. You also have the right to object to information on your report if it is inaccurate....

Definition and Example of Rule 10b5-1 Rule 10b5-1 helps create passive investment schemes that companies and corporate insiders use to avoid violations of insider trading rules when buying or selling shares in the company. It was introduced in 2000 and clarifies Section 10(b) of the Exchange Act of 1934 and Rule 10b-5, which addresses securities fraud through insider trading. Company executives are privy to a lot of inside business information that may be construed as MNPI....

The SEC Form S-1 includes critical information that investors can use when deciding whether to invest in a company. Learn what SEC Form S-1 includes and how you can use it as an investor. Definition and Examples of SEC Form S-1 SEC Form S-1 is a registration that companies must file with the SEC before they can go public (in other words, before they can issue publicly traded securities). The form is required under the Securities Act of 1933 and is what companies use to provide investors with critical information about the company....

Short-term capital gains are taxed differently from capital gains made on assets held for longer than one year. Learn more about capital gains and how they may impact your investing decisions. Definition and Example of Short-Term Gain The amount of any capital gain, whether short or long term, is determined by first finding the difference between what you paid from the day you acquired the asset and the sale price on the day you sold the asset....

A basket of goods and services in the U.S. will often look different from what you can find in other parts of the world. McDonald’s has stores in 118 countries, which means its Big Mac sandwich can provide a useful control variable. Alternate names: Big Mac PPP, Burgernomics In theory, the price of a Big Mac is the result of many local economic factors, such as the price of the ingredients, local wages, or how much it costs to put up billboards and buy TV ads....

Here’s how to save on interest with the debt avalanche method. Take inventory. Gather a list of everything you owe. List the debts in order of the interest rate on each loan or credit card. Start with the highest rate, and work down to the lowest. Pay your minimums. Keep making minimum payments on all your loans or credit card balances. You’ll focus on one balance at a time. But it’s important to stay current on all of them to avoid fees and damage to your credit score....