DE LAS FALTAS DISCIPLINARIAS

A pension is an employer plan that’s designed to provide retirement income to employees who have vested—or worked enough years to qualify for the income.

These defined benefit plans promise a fixed income, usually paid for the employee’s lifetime or the combined lifetimes of the employee and his or her spouse.

The employer contributes to the plan, invests the assets, and pays out the benefit, which is typically based on a formula that includes final salary and years on the job.

You pay federal income tax on your pension at your regular rate, so a percent- age is withheld from each check. If the state where you live taxes income, those taxes are withheld too. However, you’re not subject to Social Security or Medicare withholding on pension income.

In contrast, the retirement income you receive from a defined contribution plan depends on the amounts that were added to the plan, the way the assets were in- vested, and their investment performance.

The way a particular plan is structured determines if you, your employer, or both you and your employer contribute and what the ceiling on that contribution is.

Pension Benefit Guaranty Corporation (PBGC)

The PBGC was created to ensure that participants in defined benefit pension plans under its jurisdiction will receive at least a basic pension if the plans are terminated because they’re underfunded and so unable to meet their obligations.

The maximum benefit is adjusted each year for plans terminated in that year to reflect increases in Social Security.

Covered plans, which include those with 25 or more participants, must pay annual premiums to the PBGC to help fund this federal corporation.

The PBGC also tries to find people who participated in, and are due benefits from, plans that are no longer operating.

Pension maximization

Pension maximization is a strategy that begins with selecting a single life annuity for income to be paid from your retirement plan, rather than a joint and survivor annuity.

Pension maximization

PBGC

The next step involves using some of your annuity income to buy a life insurance policy. At your death, the annuity income ends and the life insurance death benefit is paid to your beneficiary, often your surviving spouse.

You do receive more income from a single life annuity than from a joint and survivor annuity, which translates to a larger pension while you’re alive.

However, pension max, as this approach is sometimes called, has some potentially serious drawbacks. These include the cost of the insurance premiums, including sales charges, and an increased burden on your beneficiary for turning the death benefit into a source of lifetime income.

Per capita

Per capita is the legal term for one of the ways that assets being transferred by your will can be distributed to the beneficiaries of your estate.

Under a per capita distribution, each person named as beneficiary receives an equal share. However, the way your will is drawn up and the laws of the state where the will is probated may produce different results if one of those beneficiaries has died.

For example, if you specify that your children inherit your estate per capita, in some states only those children who survive you would inherit. In other states your surviving children and the surviving descendants of your deceased children would receive equal shares. That could result in your estate being split among more heirs than if all your children outlive you.

Per stirpes

Per stirpes is the legal term for transfer- ring the assets of your estate to your children and their descendants.

With a per stirpes distribution, each of your children who is named as a beneficiary is entitled to an equal share. If one of your children is no longer alive, that person’s children or children’s children divide his or her share.

For example, if you had two children each of whom had two children and one of your children died before you did, under a per stirpes bequest, your surviving child would receive 50% of your estate and the children of your deceased child would each receive 25%.

Periodic interest rate

The periodic interest rate, sometimes called the nominal rate, is the interest

rate a lender charges on the amount you borrow.

Lenders are also required to tell you what a loan will actually cost per year, expressed as an annual percentage rate (APR).

The APR combines any fees the lender may charge with a year of interest charges to give you the true annual interest rate. That allows you to compare loans on equal terms.

For example, suppose you take a $10,000 loan at 10% interest. You pay an origination fee of $350, so you actually borrow $9,650. Since you are getting a smaller loan, but repaying the full $10,000 with interest, the APR is closer to 10.35%.

The periodic rate is also the interest rate a bank or other financial institution pays on amounts you deposit. If you’re earning compound interest, the periodic rate will be lower than the annual percentage yield (APY).

Permanent insurance

Permanent insurance is a life insurance policy that provides a death benefit as long as you live, or in some cases until you turn 100, provided you continue to pay the required premiums.

With this type of policy, a portion of your premium pays for the insurance and the rest goes into a tax-deferred account in your name.

With many permanent life policies, you can borrow against the cash value that has accumulated in the tax-deferred account. Any amount that you’ve bor- rowed and have not repaid at the time of your death reduces the death benefit.

If you terminate the policy, you get the cash surrender value back. Cash surrender value is the cash value minus fees and expenses.

Permanent life insurance, also known as cash value insurance, is available in several varieties, including conventional policies known as straight life or whole life, as well as universal life and variable universal life.

Personal identification number (PIN)

A personal identification number is a combination of numbers, letters, or both that you use to access your checking and savings accounts, credit card accounts, or investment accounts electronically.

You also need a PIN to authorize certain debit card purchases as well as for identification in other situations, such as accessing cell phone messages.

A PIN is one way to help protect your accounts against unauthorized use since

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other person would know the four- to six-letter code you have chosen. PINs are not foolproof, however, if you don’t take steps to ensure that your code remains private.

Phantom gains

Phantom gains are capital gains on which you owe tax even if your actual return on the investment is negative.

For instance, if a mutual fund sells stock that has increased in price, you, as a fund shareholder, are liable for taxes on the portion of the gain the fund distributes to you.

The rule applies even if you bought shares of the fund after the stock price increased, and didn’t benefit from the stock’s rising value. You also owe the tax if you purchase shares in the fund after the stock has been sold but before the fund has made its distribution.

Phantom gains can also occur in a falling market, when a mutual fund may sell investments to raise cash to repur- chase shares from shareholders who are leaving the fund.

If you’re still an owner of the fund at the time any gains from those sales are distributed, you’ll owe tax even though the value of your investment has decreased.

Phishing

Phishing is one way that identity thieves use the Internet to retrieve your personal information, such as passwords and account numbers.

The thieves’ techniques include send- ing hoax emails claiming to originate from

legitimate businesses and establishing phony websites designed to capture your personal information.

For example, you may receive an urgent email claiming to come from your bank and directing you to a website where you’re asked to update or verify your ac- count number or password. By responding you give identity thieves an opportunity to steal your confidential information.

Phishing is difficult to detect because the fraudulent emails and websites are often indistinguishable from legitimate ones and the perpetrators change identities regularly.

Piggyback

A broker who piggybacks acts illegally by buying or selling a security for his or her own account after—and presumably because—a client has authorized that same transaction.

One speculation is that a broker in this situation thinks the client is acting on information that the broker doesn’t have.

Pink Sheets

Pink Sheets LLC is a centralized financial information network.

It provides current prices and other information in both print and electronic formats to the over-the-counter (OTC) securities markets.

Its Electronic Quotation Service reports real-time OTC equity and bond quotations to market makers and brokers,