REITs, Commodities, & Retirement and Estate Planning

Metals Commodities

Iron ore, tin, copper, aluminum, zinc

Downside to REITs

Leverage magnifies losses if property price too low

IRA Criteria

Must earn income

Traditional IRA

Must take out RMD (Required Minimum Distributions at age 70.5

Most REITs are traded on this exchange

NYSE

Roth IRA

No age restrictions for contributions

Expect to be in a higher tax bracket at retirement

Roth IRA

tax deferred

Taxes on the principal and/or earnings are delayed until the funds are withdrawn

probate

The legal procedure of proving a valid or invalid will. Can be expensive and SLOW!

Foreclosure

The seizure of property from borrowers who are unable to repay their loans

Expect to be in a lower tax bracket at retirement

Traditional IRA

Commodities investing

Trying to predict future price movement

raw materials

Unprocessed natural products used in production

REITs (Real Estate Investment Trusts)

Usually invest in large commercial projects. Congress created these to expose average investors to a larger asset class

durable power of attorney

a legal agreement that allows an agent or representative of the patient to act on behalf of the person's financial assets

executor

a person appointed by a testator to carry out the terms of the will

Individual Retirement Account (IRA)

a retirement savings plan that has special tax benefits but is not employer-sponsored

Private Mortgage Insurance (PMI)

a special policy that protects the lender in case the buyer cannot make payments or cannot make them on time

living trust

a trust that takes effect while the grantor is still alive

margin call

demand by a broker that investors pay back loans made for stocks purchased on credit

REITS distribute their profits to shareholders

dividends

With an Roth IRA, contributions are not tax deductible, but _____ accumulate tax free.

earnings

Put and take account

emergency fund. an account you put money into and take out as you need to pay your bills, to cover short-term needs and unexpected expenses. 3-6 months' net pay in it.

An employer pension plan usually involves contributions by you and your _____.

employer

A(n) _____ includes everything you own.

estate

Short position

expects price to drop

Long position

expects price to increase

precious metals

gold, silver, platinum

speculative

high risk

Building of an estate is done through savings, _____, and insurance.

investments

Collectibles

items that are relatively rare that people collect in hopes that they will increase in value

Energy commodities

natural gas, crude oil, sweet crude

portfolio diversification

strategy of holding different investments to protect against risk

call option

the option to buy shares of stock at a specified time in the future

put option

the option to sell shares of stock at a specified time in the future

asset allocation

the process of spreading your assets among several different types of investments to spread risk

Long Futures

the purchase of a futures contract

Short Futures

the sale of a futures contract

agricultural commodities

wheat, barley, and other grains

Minimum contribution to buy an IRA

$1,000

Maximum annual contribution for an IRA (2022)

$20,500

In 2022, IRA annual limit

$6,000

Buy and Hold Strategy

- Involves buying stock and holding it for a period of years. • Avoids timing the market

Upside to REITs

-Real estate appreciates -Acts like a mutual fund, trades like a stock

Dollar Cost Averaging (DCA)

-investing the same amount at regular intervals regardless of the share price - Investor makes money if the price per share is higher than the cost per share

disadvantages of home ownership

-large downpayment -asset is illiquid -property taxes

advantages of home ownership

-pride of ownership -financial benefits -lifestyle flexibility

estate planning

A definite plan for passing on one's assets during one's lifetime and at one's death.

codicil

A document that allows changes to an existing will.

living will

A document that enables an individual, while well, to express the intention that life be allowed to end if he or she becomes terminally ill.

trust

A legal arrangement through which one's assets are held by a trustee.

power of attorney

A legal document authorizing someone to act on one's behalf.

Will

A legal document that gives explicit directions on how to divide a person's financial assets once he or she passes.

Fiduciary Duty

A legal obligation of one party to act in the best interest of another.

mortgage

A loan to purchase a home or other real estate

401(k) plan

A pension plan which employers can provide to their employees

guardian

A person who assumes responsibility for providing children with personal care and managing the deceased's estate for them. Minors - under age 18

Roth IRA

A personal savings plan; contributions are not tax-deductible; earnings are tax-free

individual retirement account (IRA)

A special account in which the employee sets aside a portion of his or her income; taxes are not paid on the principal or interest until money is withdrawn from the account.

futures contract

An agreement to buy or sell a specific commodity or currency at a set price on a set date in the future

Examples of REITS

Apt Bldgs, Shopping malls, Hotels, Hospitals, Offices

Livestock Commodities

Cattle and hogs

Roth IRA

Contributions can be withdrawn at anytime without taxes or penalties

intestate

Dying without a will or without heirs

Downside of a 401(k)

Employer picks the funds

Leverage

Essential element of a futures contract

A person must work 20 years to be eligible for Social Security retirement benefits.

False

Contrarian Investing

Going the opposite direction of the "herd"

A handwritten will is known as a(n)

Holographic will.