A viatical settlement is the sale of a life insurance policy by the policy owner before the policy matures. Such a sale, at a price discounted from the face amount of the policy but usually in excess of the premiums paid or current cash surrender value, provides the seller an immediate cash settlement. Similar to reverse mortgages, viatical settlements involve insured individuals with a life expectancy of less than five years. In countries with high health care costs (such as the United States), this is a practical way to pay extremely high health insurance premiums and other senior care expenses that severely ill people face. Some people are also familiar with life settlements, which are similar transactions but involve insureds with longer life expectancies (two to fifteen years). - From Wikipedia and other sources 5/2007Individual Retirement Account
The Individual Retirement Account (IRA) is an exclusive retirement plan account or a retirement tool formulated for the benefit of US citizens. Citizens can opt for a retirement with either an Individual Retirement Account (IRA) or can opt for an Individual Retirement Annuity.
Speaking on a legal basis, amendments were made to the Internal Revenue Code of 1954 (as per the Employee Retirement Income Security Act, 1974) in the US. In this amendment, retirement vehicles and arrangements were created for the benefit of US citizens who wished to retire. The new Internal Revenue Code Sections 219 and 408 were enacted that dealt specifically with the IRA.
The IRAs are of many types:
SIMPLE IRAs Traditional IRAs Roth IRAs SEP IRAs. Self Directed IRAs
The Simple and SEP Individual Retirement Accounts are otherwise called as ?Individual Retirement Arrangements? and are created by the employers for their employees. The contributions made by the individuals go into the Simple and SEP Individual Retirement Accounts.
The Traditional and Roth Individual Retirement Accounts are applicable for self-employed citizens and partners. The taxpayers can contribute up to 100% compensation till a preset amount of dollars.
For people under the age of 50 in the year 2006-2007, the maximum level of contribution was set as 100% of the earned income of an individual, or $4,000, which ever may be lesser. However for people 50 or more years of age this limit is increased to 100% of earned or $ 5,000, which ever may be lesser. This applies to the Roth and Traditional IRAs or any of their combinations. Depending on the individual?s income, status the tax-payer, the taxes may be deducted. However, it may be noted that the Roth IRA is non-tax-deductible.
In case of the Self Directed IRA, the account holder can invest on the retirement plan?s behalf. Apart from these, formerly there were two other types of Individual Retirement Accounts called as the Rollover IRA and the Conduit IRA. These IRAs are not currently applicable. However, if any of the former contributors have still extended these IRAs, they may be applicable for them. Another type of IRA that was formerly known as the Educational IRA has been now modified as the Coverdell Educational Savings Account.
Withdrawal from the IRA will come under the taxable income category. However, since while a person retires, the income is bound to reduce. Hence the tax rate in this case will be lower. The point to be noted is that the IRA can be deposited only with cash or its equivalents. Deposits in the form of assets are not permissible. The IRA beneficiary can permit the custodian to invest in securities and any other non-financial instruments.
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