Encumbered funds are monies that are intentionally set aside to pay for future obligated or planned expenses, according to the Business Dictionary. Although encumbered funds are not released until the payment for the future expenses is due, the funds cannot be used for anything other than their specified purposes, according to the State of New York's Office of the State Comptroller.Know More
The State of New York's Office of the State Comptroller lists monthly lease agreements, monthly maintenance agreements and capital construction costs as common types of encumbered funds.
The purpose of encumbered funds is to predict cash outflow and avoid organizational overspending, according to the University of California, Riverside. Encumbered funds are written in accounting ledger books but are not included in actual funds balances because the payments have not yet been physically transferred. Once the encumbered funds are paid to a business, entity or organization, the encumbrance is reversed, and the funds are deducted from the organization's actual fund balance.
UC Riverside states that the formula for determining organizational cash outflow entails subtracting the actual funds and encumbered funds from the organization's budget. Sometimes, encumbered funds are put into a separate trust fund account that is set up specifically to hold the funds until their release date, according to Cornell University Law School.Learn more about Financial Planning
Retired account holders age 59 1/2 and over can make withdrawals from IRA accounts without penalty, although the funds are subject to income tax, reports About.com. Working IRA account holders must consult account administrators before taking withdrawals. When IRA account holders reach 70 1/2, they must begin required minimum distributions.Full Answer >
There is no minimum age to withdraw funds from a traditional IRA, although there is a 10 percent early withdrawal penalty for individuals under the age of 59 1/2, according to Fidelity Investments. Withdrawals from Roth IRAs do not incur penalties as long as certain requirements are met.Full Answer >
Stretching an IRA refers to an estate planning concept that seeks to give the funds in an individual retirement account more time to compound tax-deferred. It is part of a strategy that allows the primary beneficiary of an IRA to distribute assets to the future generations of beneficiaries.Full Answer >
The biggest difference between a traditional IRA and a Roth IRA is when taxes are paid on the funds saved, states CNN. With a traditional IRA, income taxes are generally paid when money is withdrawn. A Roth IRA it is typically the opposite, as taxes are paid at the outset.Full Answer >