FAQ'S

 

How is my fee paid?

Our fee is allocated over the course of a year and is charged to the client's account monthly. For example, if you are paying an average fee of 1% we will be charging 1% divided by 12 each month. For example, if you have an account worth $100,000 here at VPI with a 1% fee we will charge $83.33 each month (100,000*.01/12).  


Common Terms

The following terminology is meant to help explain common financial accounts and plans. Many of the provided definitions are simplified. For more information, visit irs.gov. 

 

Roth IRA

Roth IRAs are qualified retirement plan accounts that are subject to tax benefits. Roth IRAs are named after Delaware Senator William Roth and were established in 1997.  IRA stands for Individual Retirement Account. Roth IRAs grow tax free and qualified distributions are tax free during retirement.

 

Traditional IRA

Traditional IRAs are qualified retirement plan accounts that are subject to tax benefits. Traditional IRAs reduce your taxable income in the year in which you contribute and grow tax free and are taxable upon qualified distributions during retirement. “Traditional” has been added to Traditional IRA solely to differentiate it from a Roth IRA and a Traditional IRA may also be called an “IRA”, “Contributory IRA” or “Rollover IRA”.

 

Simple IRA

SIMPLE IRAs are accounts that are established under a SIMPLE plan. SIMPLE plans act the same as 401(k)s but are meant for small businesses, are simple to implement, and are far less customizable than a 401(k), and should be used for at least 2 years if implemented. SIMPLE IRA accounts work the same as a traditional IRA. SIMPLE IRAs reduce your taxable income in the year in which you contribute and grow tax free, and are taxable upon qualified distributions during retirement. SIMPLE IRAs have either a 3% match from employers or a non-elective 2% contribution from employers.

 

rollover IRA

Rollover IRAs are IRAs that have specifically been transferred from an employer plan, such as a 401k. Keeping these IRAs separated from contributory IRAs had been prudent in the past as they may have had more divorce or bankruptcy protection. However, these protections in excess of those of a Traditional IRA are now believed to be eliminated (though debatable in court) and are now essentially the same as Traditional IRAs.

 

SEP IRA

SEP IRA or Simplified Employee Pension (SEP) IRA, is an IRA whose contributed by employers using the same percentage of salary across all employees. A SEP-IRA account is a traditional IRA and follows the same investment, distribution, and rollover rules as traditional IRAs

 

401(k)

401(k) is a qualified employer plan which eligible employees may make salary deferral contributions on a pre-tax basis. Employer’s may customize their plan and may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Salary deferral contributions lower your taxable income in the year in which they are contributed. Investments within a 401(k) grow tax deferred, and are taxable upon qualified distributions during retirement.

 

Roth 401(k)

Roth 401(k) is a qualified employer plan which eligible employees may make salary deferral contributions on a post-tax basis. Employer’s may customize their plan and may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan (these employer contributions will likely be pre-tax contributions and are not likely to be available as post-tax contributions). Salary deferrals to a Roth 401(k) grow tax deferred, and qualified distribution are tax free during retirement.

 

403(b)

403(b), also known as a Tax-Sheltered Annuity (TSA), is a non-qualified retirement plan for certain tax-exempt organizations. Employees may make salary deferral contributions on a pre-tax basis. Employer’s may customize their plan and may make matching contributions to the plan on behalf of eligible. Salary deferral contributions lower your taxable income in the year in which they are contributed. Investments within a 403(b) grow tax deferred, and are taxable upon qualified distributions during retirement. Individual accounts in a 403(b) plan can be an annuity contract with an insurance company, a custodial account invested in mutual funds, or a retirement account.

 

457(b)

457(b) is a non-qualified deferred compensation. Salary deferral contributions lower your taxable income in the year in which they are contributed. Investments within a 457(b) grow tax deferred, and are taxable upon qualified distributions during retirement. 

 

Brokerage Account

Brokerage Account, also known as a taxable account, is an arrangement between an investor and a licensed brokerage firm, such as Charles Schwab & Co. Inc., “Schwab” permitting the investor to deposit funds with the firm and place investment orders through the brokerage. VanderPol Investments uses these accounts for clients to create individual accounts, joint tenants with rights of survivorship (JTWROS), tenants in common, custodial accounts, etc. This does not mean that VPI will be charging commissions. Schwab will still charge commissions on stock, mutual funds, or ETF purchases traded by VPI or the client (See How Fees are Charged). Brokerage accounts have no tax advantages and have no penalties for withdrawing at any time or any contribution limits. Brokerage accounts may hold investments that produce a 1099 or K1 each taxable year, and will likely produce long-term capital gains, short term capital gains, dividends, and interest that are included on the K1 and 1099 reported for each taxable year. Brokerage accounts can invest in the same things as IRAs or 401(k)s. They may invest in individual stocks, ETFs, mutual funds, calls, puts, derivatives, individual bonds, preferred stock, etc. Schwab calls their brokerage accounts, “Schwab One®” accounts. 

 

Donor-Advised Funds

Donor-Advised Funds (DAFs) are registered 501(c)3 organizations that are funded with cash, or securities that have appreciated in value. VanderPol Investments uses Schwab Charitable as our DAF of choice and may act as the accounts Investment Advisor if donations exceed $250,000. DAFs allow clients to donate appreciated assets, thereby avoiding paying taxes on gains, to an account that is dedicated to charitable organizations. Donor’s are able to take a current tax deduction for contributions made to the fund and may choose to hold the money in the account until they choose the disperse the funds to a charity. Schwab Charitable accepts most assets and will even accept Bitcoin.

 

SIIP Account

SIIP Account is not official terminology, but rather, a nickname frequently used at VanderPol Investments. Schwab provides a service called, Institutional Intelligent Portfolios (SIIP), that VanderPol Investments frequently uses for clients as it eliminates transaction fees from Schwab (VanderPol Investments pays to use this platform) but is limited to only ETFs. Eliminated transaction fees allows VanderPol Investments to invest in ETFs that otherwise would be prohibitive due to transaction fees and allows for more frequent rebalancing without concern of transaction fees, making it an ideal platform for many VanderPol Investments clients. SIIP is only an internal descriptor here at VanderPol Investments that your account is held on that platform and a SIIP account may be an IRA, brokerage account, or any other type of account. 

 

Pension Plans

Pension Plans come in 4 types: Defined benefit pension plans, cash balance pension plans, money purchase pension plans, and target benefit pension plans. Each type of plan is complex and can achieve vastly different goals for employers. Due to their complexity a plan summary is needed for in depth discussions, or a comprehensive analysis of your goals is needed for setting up a plan.

 

Profit Sharing Plans

Profit Sharing Plans come in 7 types: Profit sharing plans, stock bonus plans, employee stock ownership plans (ESOPs), 401(k) plans, thrift plans, new comparability plans, and age-based profit sharing plans. Each type of plan is complex and can achieve vastly different goals for employers. Due to their complexity a plan summary is needed for in depth discussions, or a comprehensive analysis of your goals are needed for setting up a plan.