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With the increase in globalization and ease with which investors can borrow money in one market and invest in another new forms of arbitrage are coming up every day.
The Yen Carry Trade is one such example of a form of arbitrage where investors are borrowing cheap yen and then investing it in US Treasury bills to generate a higher rate of return.
Following is an example of how this would work:
Suppose an investor borrows USD 900 worth of yen at 0.5% rate of interest from Tokyo and converts them into USD at an exchange rate of 120 yen per dollar. The investor adds his own 100 dollars and then buys US T-Bills which give a return of 4.5%. So on an investment of 1000 USD or 120,000 yen the investors get an interest of 45 dollars. On the amount that they have borrowed in yen they have to pay an interest of 4.5 dollars so effectively they stand to make $40.50 on $100 worth of their own money.  This is a really cool 40% return on their initial investment.
However this is not completely risk free because of exchange rate fluctuations. This is because the interest on the loan and the actual repayment has to be made in yen and not dollars, so if the exchange rate changes from 1 USD = 120 yen to 1 USD = 100 yen, at the end of the year the investor would get back 1040 dollars, but in yen terms they would amount to just 104,000. So while the investor at the beginning of the transaction started off with 120,000 yen at the end of it despite the interest ends up with a smaller amount.
This is what is known as Yen Carry Trade and the reason why this has become noticeable in the recent times is that the price of they Yen has moved up thereby making a few such transactions unprofitable which in turn have triggered a cycle wherein more and more people are selling off their dollar assets and buying back yen which in turn in again causing the price of the yen to go up and cause more unwinding of positions.

Glass Hollow Wares
Glass hollow wares are used as packaging used for beverages, medicines, chemicals, food and cosmetics. Because they are used to package consumables and medicines special formulae are used in their preparation to avoid spoilage.

Glass Wares
Glass wares are kitchenware i.e. bowls cups, saucers, glass tumblers, mugs, jugs, plates and handicrafts, like candles, cut and crinkle, flower pots and paper weights.

Float Glass
Float Glass is used mainly in windows and also in mirrors as well as room furniture. By virtue of this float glass is mainly made in the form of flat sheets however when required to be used in cars as windshields or some other form where it has to be curved float glass is then molded after re heating.

Roth IRA is one of the most favorite retirement plans taken by most American employers. Its tax saving benefits has made it one of the popular plans in United States.

In spite of the popularity, not many people know the intricacies of the plan. Often the general mass has fewer facts and more misconceptions about the plan.

Misconception 1 – Roth IRA is the best IRA for everyone

This assumption can prove to be your biggest pit fall. It probably springs from another misconception that people often have. People think that it’s always monetarily beneficiary to pay tax later than now. The truth is that you can’t escape taxes. The belief that in future taxes will be minimal is nothing more then a figment of imagination that should be strongly thrown out of mind. Any IRA plan, Roth, Simple, Education, SEP or Traditional is good only if it suits your needs. Roth IRA withdrawals are tax free but not contributions. Hence, a Roth IRA account grows at a faster rate compared to a traditional IRA. However, in Traditional IRA the contributions are tax free. Hence, it’s incorrect to say that Roth IRA is the best retirement plan.

Misconception 2 – If you have little savings opt for Roth IRA

This is another misrepresentation of facts. Under Roth IRA, the contributions grow tax free. Hence, irrespective of the fact that whatever be the amount of contribution the tax free growth is for all who have Roth IRA. In fact, if people have higher contributions then they would have higher balance in Roth IRA. Such a class of people can also plan how to pass on the plan benefits to their children.

Misconception 3 – If you are taking Roth IRA, you should hold it for at least 10 years to maximize your gains

This is a popular notion people have in their minds about Roth IRA. There is no scientific proof that Roth IRA is beneficial only for specific term. It all depends on the contribution amount, withdrawals, age of the account owner, etc.

Misconception 4 – Traditional IRA and Roth IRA are nearly the same

Again nothing is same for the same person. The benefits vary as per your needs and use of the plan. Comparing both the schemes requires that you keep all the other parameters such as tax rates, withdrawals, age of account owner, etc. exactly same. This seldom happens in real world. So don’t buy a Traditional IRA just because you’re friend or relative has bought it.

Misconception 5 – Taxes will be low in future

No one of us is expert enough to take a sure prediction at the future. Hence, it’s wise not to make such bold decisions. Such thinking can often prove wrong resulting in huge monetary losses when you need it the most.

For any financial instrument, before taking it, read the policy documents clearly. You don’t have to rush through it especially with your IRA plan. Talk to your family and friends to get a more accurate assessment of your current financial condition and future needs. Take an IRA plan based on facts and not misconceptions other wise your future might hit you hard.

This is a qualified plan provided by the employer to eligible employees of their organisations. The contributions to this plan are made by the employee on a salary deferral or salary reduction basis. It means that the employee’s pre-tax salary, matching his contribution to the Plan, is deducted and paid into his 401(K) account directly by the employer. The employer too sometimes makes a matching contribution into the employees 401(K) account. Sometimes the employer adds a profit sharing feature to the 401(K) plans as there is a provision in the plan which enables him to do so if it is in the interest of the employees.  However it must be understood that all the earnings in this account are tax-deferred, meaning tax has to be paid at the time of withdrawal. There are, of course, limitations placed by the IRS on the contributions to the plan.

The salary reductions which are available to you will depend on your place of work. Many organisations whether privately or publicly held, offer the 401(K) salary reduction plans. However, some non-profit organizations like schools, colleges, museums and hospitals can also offer this plan, though many prefer the 403 (b) plans. The 401(k) plans first introduced in 1981 became so popular that by 2004 they had about 43 million participants. These numbers have steadily been increasing over the years because this plan offers you a choice to take your full salary home or contribute to a qualified plan and not only save for the future but also to save tax not only on your contribution but also on it earnings.  The amount of tax that is to be paid can only be known at the time of withdrawal of the monies from the account. However your income being less after retirement there is bound to be a tax benefit at the time.
 You can opt for this plan provided you are eligible and to be eligible you have to be employed for 365 days starting with the first day on the job.  You can also be eligible if you have put in 1000 working hours during the year. It is also a good to know what you are getting into when you enrol and become a part of the plan. Like your contribution, your employers matching contribution, the decisions you may have to take to direct the growth of your investments and other benefits that make your retired life better.

However, being a part of plan 401(K) provides a good start to your retirement plans. Therefore it is better to start contributing earlier as an early start provides you with a greater chance to save a substantial amount in your retirement account.   This plan works for you even if you are self employed and have not yet incorporated your business. The only difference is that you can add only 20% of your compensation over and above your salary deduction. One of the benefits of this plan is that you can transfer your account to the similar one with your new employer in case you plan to join another organisation.
 

If you are taking a savings retirement plan, then Plan 401(K) definitely deserves a serious consideration.

 

 

SEP (Simplified Employee Pension) IRA is established by employers, including self employed individuals like sole proprietors or partnership firms. If you are running a company with say 20 employees, then you can open a SEP IRA for each of your employees. All contributions to the SEP IRA plan are tax deductible. This means if you are contributing say an annual total amount of $50,000 to IRA. You can deduct the same from your annual taxable income and save taxes. Employees too don’t have to pay taxes on contributions. However, if an employee withdraws money from the plan, then he or she will have to pay the tax applicable at that time. If the applicable tax at time of withdrawal is lower then the tax rate during the time of contribution, then your whole investment idea could be considered profitable. Establishing a Simplified Employee Pension Individual Retirement Account is not a difficult task. The US government and its agencies like the IRS have simplified things substantially for you. Moreover you can easily hire finance professional or any finance company to assist you in setting up the plan. There are various flavours of SEP IRA plan. IRS model, 5305 SEP IRA, etc. are some of the popular types of SEP IRA. Irrespective of which type of IRA you opt for your company employees, you will need some basic information. You will need to decide criteria on which an employee can join the plan. Then you will have to arrive at a formula to calculate your contribution. Plus, you will be required to include your basic company details. 

The financial institution that you contact for establishing the plan has a critical role to play in the entire plan life cycle. Once the plan is established, they act as a Trustee for the whole plan. They manage the funds received by the plan. They then invest the funds in to suitable instruments thereby ensuring growth of the funds. They also do various administrative functions like providing yearly statements to the members of the plan. As per government guidelines, the employees should receive the statement by end of January each year. Statement shows how much contribution has the employer made in the previous year. Usually reputed mutual funds, banks and insurance companies act as Trustees for any SEP IRA plan. The model that you use for establishing the plan is also a very critical step in the whole process. Most employers opt for the IRS model. The plan acts like a contract or policy document which specifies all terms and conditions for all participants. If you have a need to change anything in the plan, you are free to do so anytime during the life of plan. However, you will have to inform all the participants at least 30 days prior to putting the change in effect. Generally, employee communication is critical to avoid any legal action from government or any of its agencies. 

Once established, a SEP IRA plan is simple to operate and maintain as majority of the tasks are carried out by the financial institution. Also your employees will be happy with a good plan. A well established SEP IRA can make notable difference in your employee satisfaction levels and ultimately will help your company bottom line.  

 

The plan 401(K) is gaining popularity with more and more employees taking part and contributing a part of their salary towards securing their future after retirement. This plan also provides you with a chance to make use of these funds and contribute to their growth by directing your own investments. If you want to direct your own investments, you will have to plan your objectives, learn to weigh the risk and judge the performance of the investment options available so that you may be able to take sound decisions.

The factors that might generally affect the returns on your investment are the fees and expenses.  They will also have an impact on your retirement income. Therefore it is necessary for you to study your investment options carefully keeping in mind the fact that cheaper investment options may not necessarily be better options. You must compare the total cost and all available services not forgetting the fees involved in the transactions.
Fees will have to be considered because while your contributions and earnings on the investments provide the required growth to your account, expenses and fees contribute to substantial reduction to that growth. Let us take for example that you have 35 years left for retirement and at present you have $ 25,000 in your 401(K) account. If your investment growth during this period is pegged at 7% with the fees and expenses at 0.5%; your account balance with no further contributions to your account, will have grown to   $ 227,000. However, if your fees and expenses increase by 1% and are now at 1.5% then your account will have only $ 163,000.  The 1% increase in fees and expenses will have reduced your retirement account balance by 28%. Therefore, of the many investment options now being offered under plan 401(k) with the promise of excellent services to be provided, it will be better to consider the cumulative cost of fees and expenses on your retirement savings, before opting to invest in them.

The 401(k) plan fees and expenses are of three types. a)  Plan Administration Fees consist of day to day expenses that are needed to for administering the whole plan. These include accounting, legal services, electronic access to plan information and other such expenses   b) Investment Fees are by far the largest component of expenses that are required to manage the Plan investments Therefore you must pay special attention to this aspect as they are charged on percentage basis on investment. They are also deducted directly from your investment returns. As these fees are not specifically shown on the in investment statements, they are not easily apparent   c) Individual Service Fees consist of fees charged to a participant for taking a loan or for executing the investment directions given by the participant.
 To keep a check and save you from making risky or expensive investments the employers have been given the task of keeping an eye on all investments. They are required to comply with the IRS rules. The sole aim is to protect the interest of the participants and their beneficiaries.

IRA or the Individual Retirement Account provides double benefits to the customer. In the first instance it provides Compound Interest and the additional benefit is that there is no tax on this income. This mode of saving is really good if you have the money and can afford to keep it in the account for a longer period. The benefit of compound interest, without the additional burden of tax on this amount, is a powerful incentive to contribute in the Individual Retirement Account or IRA as it is commonly known.

 

The IRA account is for everyone who looks forward to some relaxation and enjoyment. At being able to do the things during their twilight years which they could not do during their earning years; things like, going on a cruise, spending some romantic moments with your loved ones,  in a place which you long dreamed off, playing golf or buying gifts for your near and dear ones. IRA contributions definitely play an important part in helping you to fulfil your long cherished dreams.

 

Then there is the Simple IRA Plan which is for employers employing one hundred or less workers. Here, the employee contributes a percentage from each salary cheque and the employer matches the amount with the company’s contribution up to three percent or makes a fixed contribution of two percent to each employee plan. The contribution of every eligible employee is deducted from his/her payroll. The amount so deducted is then contributed to the Simple IRA plan of the employee including the employer’s contribution which is then placed with a financial institution. The financial institution can be chosen by the employee or the employer. The employer can also choose to maintain the Simple IRA investments of all the eligible employees in a single financial institution. The Simple IRA plan is also beneficial because it involves minimum paper work and saves administrative costs.

 

Therefore this is one plan that has. : a) Salary reduction facility (the contributions to Simple IRA are directly deducted from the salary)         b) Little or no administrative costs involved for maintaining the Plan. c) Can be started by any employer who does not presently maintain any IRA related accounts and has on his payroll less than 100 workers e) the facility where the employee can not only decide how and where to invest the money but also can transfer his/her Simple IRA plan if and when he/she leaves the present workplace and joins another organisation.

 

If you are an eligible employee and are about to contribute to any of the IRA plans, it helps to know some of the terms and what they mean to any IRA account holder. Most IRA plans have Annual Contribution Limits which simply means that there is a limit to your annual contribution to your IRA account. Then there are the Withdrawals or Distributions which relate to the amounts withdrawn from the account. These amounts generally consist of your additional contributions or earnings in the IRA account.  The Simple IRA account helps you to take that first step, which of course is a step in the right direction.

The Simplified Employee Pension or SEP is a retirement plan meant to encourage savings for a secure and relaxed life after retirement. The SEP though different in structure, serves the same purpose as the Individual Retirement Account (IRA). The SEP is designed for persons who are self-employed, sole proprietors, independent contractors, partnership or owner-employees of an incorporated business or trade. This plan can be applicable to any business. SEP is easy to provide, plan and execute without having to incur a lot of expense and is does not involve any complex administration work like many of the qualified retirement plans. SEP, in fact, can be established only in case of the employer having no other qualified retirement plan in force at the time.

 

The contributions from the employer to the Simplified Employee Pension or SEP are made at the employer’s discretion. These contributions should amount to $30,000 or 15% whichever is less and are must be deposited in the IRA account established in each and every eligible employee’s name. This is the reason why the arrangement is known as a SEP – IRA.  The employee now has the right to use the funds as these contributions are now owned by him or her. These funds can now be transferred or withdrawn by the employee at any time at his discretion. However as the SEP accounts are IRAs they are subject to all existing IRA rules and regulations governing the withdrawal, transfer and taxation.

 

In the traditional IRAs money can be withdrawn at any time but the withdrawals, either part or whole, will be taxed at the prevailing income tax rates. These withdrawals may also be penalized. If the withdrawals are made before attaining the age of 59 1/2 years they may attract an excise duty of 10% in addition to the income tax.  However, there are exceptions where the 10% penalty does not apply to IRA withdrawals. Those are:  A) the withdrawals made in case of the IRA owners death.   B) Due to the owners disability.     C) Medical expenses that are not reimbursed and which exceed 7 1/2% of adjusted gross income (AGI).   D)  “Substantially equal periodic payments” that are made over the life expectancy of the owner.   E) Payments made as costs of first time home purchase. These of course, are subject to a limit of $10,000.  F) Payments made as medical insurance premiums. This exception is only applicable to persons who have received unemployment compensations for over 12 weeks.  G) Payments made as back taxes in case of a levy placed against the IRA by the Internal Revenue Service and  H) Qualified expenses incurred for higher education for the IRA owner or the eligible members of the family.

 

It is compulsory in case of traditional IRAs, for the distributions to begin before the owner reaches the age of 70 1/2. In case the minimum required distributions are not made before this period, the balance undistributed amount will attract an excise tax of 50%. This however is not applicable to Roth (IRAs) as this IRA plan does not have any mandatory distribution requirement.

The Roth 401(k) plan is a combination of Roth IRAs and the traditional 401(k) plan. Commonly known as Roth 401(k) the plan also differs in some respect from the originals. The employer can offer the Roth 401(k) as well as the traditional plan 401(k) and the employee can contribute to both the plans but the total combined contributions to both plans are limited and should not exceed the limits set by the Internal Revenue Service for individual plans. For 2006 the limit set by the IRS is $ 15000 ($ 20,000 in case the employee is 50 years or older). However once you have decided to take part in both plans the decision will have to be final because you will not be able to switch money from one plan to another. But you have the option of choosing the amount that you want to contribute to each of your accounts. The Roth 401(k) provides you the roll over option to Roth IRA in case you move to another organisation. 

 

The employer is also entitled to provide a matching contribution to the Roth 401(k) plan and in case he does then two accounts have to be set up. One will contain the employee’s contribution which is deposited after deducting the relevant tax. The withdrawals from this account will be tax free. The second account will be the employer’s account where the deposit is made without any tax deduction. The withdrawals from this account are liable for tax deduction. These include the growth of investment over the period of time.

 

The some of the differences between the two plans Roth (k) and traditional 401(k) are: – a) the contributions by the employees to Roth 401(k), are made after deducting the taxes while in the traditional 401(k) plan the contributions are made pre-tax deductions   b) there is no further tax on the investment growth while growth in traditional 401 (k) plan is taxed only after withdrawal   c) the withdrawals of contributions and growth are tax free provided the account is held for at least 5 years and you are 59 1/2 years or older whereas in the traditional 401 (k) plan taxes are deducted by Federal and most State authorities on  withdrawals and investment growth.

 

You can make contributions to both Roth 401 (k) and the traditional pre-tax 401 (k) accounts in the same year but within the prescribed limits stated above. The catch-up contributions permitted in the Roth accounts for 50 years or older persons are also allowed in Roth 401 (k) plan.  

 

In case reporting or record keeping, you are not obliged to either report or keep a record as far as designated Roth contributions are concerned. However, if you are rolling over your account from Roth 401(k) to Roth IRA you are required to keep track of the account as per the instructions on form 8606.