5 Fidelity funds

• Fidelity U.S. Bond Index Fund (FXNAX) 
• Fidelity Total International Index Fund (FTIHX)
• Fidelity Zero Total Market Index Fund (FZROX) 
• Fidelity Total Market Index Fund (FSKAX)
• Fidelity 500 Index Fund (FXAIX)
  

Tax Free investment

• Tax-Free Long-Term Capital Gains (below certain income threshold, up to 20% tax rate)
• Tax-Free Municipal Bonds (e.g. VTEAX)
• Tax-Free Treasury Securities (e.g. Bills/Notes/Bonds)
• Tax-Free Roth IRA (after tax contribution)
• Tax-Free Roth 401K (after tax contribution)
  
• Tax-Free Life Insurance (IUL - loan with interest rates)
• Tax-Free HSA (triple tax benefits) 
• Real Estate Can Be Tax-Free (Deprecations non-cash expense)
• Tax-Free Business (if expense is more than income)
  

 

FDIC insurance per account limit

SVB crash in 2023 triggered me to research how FDIC insurance works. 

Federal Deposit Insurance Corporation (FDIC), a body that underwrites most private bank deposits. Federal deposit insurance goes to the heart of the FDIC’s mission: to promote confidence and stability in the nation’s financial system. FDIC deposit insurance enables consumers to confidently place their money at thousands of FDIC-insured banks across the country, and is backed by the full faith and credit of the United States government. Since the founding of the Federal Deposit Insurance Corporation in 1933 no depositor has lost a penny of FDIC-insured funds.

The standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.

The following ownership categories are covered by the FDIC:

1. Single accounts
2. Joint accounts
3. Certain retirement accounts, including IRAs
4. Revocable trust accounts
5. Irrevocable trust accounts
6. Corporation, partnership, and unincorporated association accounts
7. Employee benefit plan accounts
8. Government accounts

FDIC insurance allows account holders to designate up to six beneficiaries who will each receive equal shares upon the account holder's passing. Each beneficiary is eligible for up to $250,000 in FDIC coverage per account owner. By setting up beneficiaries on an account, the account holder can increase their FDIC coverage. Qualifying beneficiaries for FDIC coverage include the account owner’s spouse, children, grandchildren, parents, and siblings. (This requirement might have changed)

The owner names five unique eligible beneficiaries and the total deposit(s) allocated to all beneficiaries combined is $1,250,000.

Two ways to do this:

1) Instead of equally dividing the money between beneficiaries in that bank account, you can choose a custom allocation. For example, you can leave 99.6% to one beneficiary and 0.1% to each of four beneficiaries. Those other four beneficiaries could be friends or charities.

2) Sets up 5 accounts (CDs for example) at the bank. The first CD has a balance of $1,249,600 with his wife as a beneficiary. The other 4 CDs have balances of only $100 each, and each has a separate beneficiary. The output of the EDIE calculator which shows that all $1.25 million is insured.

读书笔记 - Rich Dad, Poor Dad

 TBD

AMT 101

Why AMT?
Under the tax law, certain tax benefits can significantly reduce a taxpayer's regular tax amount. The alternative minimum tax (AMT) applies to taxpayers with high economic income by setting a limit on those benefits. It helps to ensure that those taxpayers pay at least a minimum amount of tax. In a nutshell, AMT was designed to keep wealthy taxpayers from using loopholes to avoid paying taxes.

What triggers AMT?
The three main triggers of AMT are having high household income with a significant number of deductions, realizing a large capital gain, or most commonly exercising stock options. 

How to calculate AMT?
When calculated AMT, your taxes are calculated in two ways: 1) Standard Tax and 2) Alternative Minimum Tax - if your Alternative Minimum Tax calculation is higher than the Standard Tax version, you will owe AMT. Again, one of the most likely scenarios where your AMT exceeds your Standard Tax is after ISO exercise. No AMT adjustment is required if you dispose of the stock in the same year you exercise the option.

How to get AMT credit?
If you're not liable for AMT this year, but you paid AMT in one or more previous years, you may be eligible to take a special minimum tax credit against your regular tax this year.

If you pay AMT after exercising ISOs, you will receive an AMT credit that can be used to lower your future tax bills. In order to claim your AMT credit, you will need to file IRS form 8801. You are only able to claim AMT Credits based on the difference between your Standard Tax and Alternative Minimum Tax in any given year.

For current tax year, first, there must be regular capital gains. Second, regular tax must be higher than AMT tax. Create a bigger gap between regular and AMT simply because the top rates for regular and AMT are 37% and 28% respectively. See below example:

Let's say you exercised ISOs in 2020 and your AMT exceeded your Standard Tax by 50,000, meaning you owed $50,000 in AMT in April 2021 (for tax year 2020). If your 2021 Standard tax exceeds your 2021 AMT by $30,000 you will be able to claim $30,000 in AMT Credit for 2021, leaving the remainder for 2022 and on.

Reference
https://www.irs.gov/taxtopics/tc556
https://www.ftb.ca.gov/forms/misc/1004.html
https://www.esofund.com/blog/amt-tax
https://www.esofund.com/blog/amt-credit-iso

Interest crediting methods

Indexed annuity or insurance (IUL) has many variations of crediting methods, it can be difficult to figure out which is best to choose when purchasing an indexed product. There are several crediting rates and crediting methods that work together to generate the interest income yield for any given contract.

However, no matter which crediting method you choose, it protects your account during market downside. If the final result is negative, no indexed interest would be credited and your contract value would remain unchanged (minus fees and cost).

Annual Point-to-Point
This is the simplest of the crediting methods. It may be a good choice if you want to maximize the effects of mid-year market volatility.

• On your contract anniversary, the beginning index value is compared to the ending index value.
• The percentage of change in the index is calculated.
• If the ending index value is higher than the beginning index value, a participation rate, a cap, or a spread is applied to determine the amount of indexed interest you will receive. 

Monthly sum (Monthly point-to-point)
Monthly sum is the most volatility-sensitive crediting method. It can provide interest in steady "up" markets, but it can be adversely affected by large monthly decreases.

• Calculate twelve monthly percentage changes in selected stock market index.
• Apply the product’s cap rate to each of the twelve monthly percentage changes.
• Add the twelve monthly capped percentage changes together to determine the annual interest amount to be credited. If the final sum is positive, you'll receive that amount as indexed interest.

Monthly average
Monthly average can help reduce volatility by averaging monthly highs and lows over the course of the year. It may be a good choice in turbulent markets.

• The index values at the end of each month are tracked for one year.
• At the end of the year, those index values are added together and then divided by 12 to determine the monthly average.
• The starting index value is subtracted from the monthly average, and the result is divided by the starting index value.
• If the final result is positive, a participation rate, a cap, or a spread is applied to determine the amount of indexed interest you will receive.

Trigger
Trigger is conservative crediting method, better than fixed rate.

Trigger has a fixed rate and when certain criteria met, it will trigger to use the fixed rate to calculate the interest. For example, if annual point-to-point index value is positive (no matter 0.5% increase or 15% increase), it will trigger to use the fixed rate (say 6%) to calculate annual interest amount to be credited.

Indexed products have certain components (crediting rates) that help determine how much indexed interest you can receive in a given year.

• Cap: If the return of the index you select exceeds the cap, the cap is used to calculate your interest.
• Participation Rate:  a participation rate determines what percentage of the index increase will be used to calculate your indexed interest.
• Spread: The spread or margin rate are synonymous terms that refer to the first portion of gain that would not be credited to your account. The indexed interest rate credited is determined by subtracting a spread from an index's gain during a specified period.
  

Finance websites

http://www.taolifeagent.com/chinese (One of the best blog in Chinese I have read)
http://theinsuranceproblog.com/ (Very informative, with podcast)

http://www.ladymoneymanager.com/cn/
https://houfinancial.wordpress.com/

allianz-222-annuity
http://www.annuitygator.com/independent-objective-review-of-the-allianz-222-annuity/
http://blog.runnymede.com/an-impartial-review-of-the-allianz-222-annuity