Mortgage and education financial optimization

• US 8,788,392 B2
• Filed: 02/16/2012
• Issued: 07/22/2014
• Est. Priority Date: 12/24/1998
• Status: Expired due to Fees

• Current Assignee: Glenn E. Frank
• Original Assignee: Glenn E. Frank
• Inventors: Frank, Glenn E.
• Primary Examiner(s): OYEBISI, OJO O
• Application Number:
  US13/398,261
• Publication Number:
  US 20120150769A1
• Time in Patent Office: 887 Days
• Field of Search: 705/35, 705/37, 705/36.T, 705/36.R
• US Class Current: 705/36.T
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/10 Tax strategies

Abstract

The invention relates to systems and methods for optimizing investments in view of anticipated education or mortgage expenses. One an allocation of assets among investments is determined, and education or mortgage costs are to be considered, systems and methods of the invention assist in optimizing a tax treatment by allocating the chosen investments from accounts based on the tax treatment of those accounts. The invention includes a computer system and methods of the invention run on a computer system.

Claims

1. A computer system for determining an investment strategy for an entity with assets in a taxable account, assets in a tax-free account, and a mortgage, the system comprising interface components, a database, and an optimizer system, wherein the system is configured to:

accept into the database information regarding;

a total asset amount, an amount of assets in a tax free account, an amount of assets in a taxable account, a mortgage, a plurality of investments, an indicated percentage of the total assets to invest in each of the plurality of investments, and a time horizon;

select, using the optimizer system, amounts to invest from the taxable and tax-free accounts randomly or using Genetic Algorithms (GA), such that the amounts substantially match the indicated percentage of total assets to invest in each of the plurality of investments;

select, using the optimizer system, a value for a mortgage variable; and

calculate, using the optimizer system, a return on investment for the entity based on the selected amounts to invest, the selected value for the mortgage variable, and the mortgage being paid out of the total asset amount;

thereby determining an amount from the taxable and tax-free accounts to invest in each of the plurality of investments and a value for the mortgage variable that produce a maximal after-tax accumulation for said entity at the time horizon.

2. The computer system of claim 1 further configured to select values for three mortgage variables, wherein:

the first value is one of fixed or variable;

the second value is one of points or no points; and

the third value is one of 15-year or 30-year.

3. The computer system of claim 1 further configured to:

(a) select the amounts from the taxable and tax-free accounts randomly, and

(b) calculate an after-tax accumulation for the entity based on the randomly selected amounts.

4. The system of claim 3 further configured to perform steps (a) and (b) a plurality of times, and output the selected amounts that produce a maximal return.

5. The system of claim 1 further configured to select amounts from the taxable and tax-free accounts using Genetic Algorithms (GA) to produce a maximal return on investment for the entity at the time horizon.

6. The system of claim 5 wherein the GA includes a chromosome structure, wherein the chromosome structure includes a plurality of values, each value being an indication of an amount from the tax-free accounts to invest in a selected one of the plurality of investments, and wherein the system is further configured to calculate an after-tax accumulation for the entity based on the values in the chromosome structure.

7. A method of determining an investment strategy for assets of an entity, comprising:

receiving into a computer database in a computer system information regarding;

a plurality of investments available in a taxable account as well as a tax-free account;

a total amount of available assets available to invest; and

, for each investment, a corresponding percentage of the total to be invested;

receiving into the computer database information regarding a time horizon and information regarding a mortgage including at least one mortgage variable;

defining within an optimizer system in the computer system an effectiveness of an investment strategy as its calculated yield at the time horizon after deducting a mortgage amount;

where a chromosome is defined as a string of numbers comprising, for each investment, an allocation of the corresponding percentage of the total between the taxable and the tax-free accounts and a value for the mortgage variable,

selecting, using the optimizer system, a sample chromosome and calculating a first effectiveness;

selecting, using the optimizer system, an additional chromosome and calculating a second effectiveness;

for N generations, N>

2;

selecting, using the optimizer system, an Nth chromosome;

calculating, using the optimizer system, an Nth effectiveness of the Nth chromosome; and

choosing, using the optimizer system, the investment strategy yielding the highest effectiveness.

8. The method of claim 7, wherein selecting the Nth chromosome comprises combining values from two previously selected chromosomes to produce the Nth chromosome as one complete chromosome.

9. The method of claim 8, wherein the two previously selected chromosomes are chosen from among all previously selected chromosomes based on their calculated effectiveness.

10. The method of claim 7, wherein a chromosome is further defined to include values for three mortgage variables, wherein:

the first value is one of fixed or variable;

the second value is one of points or no points; and

the third value is one of 15-year or 30-year.

11. The method of claim 7, further comprising using a Monte Carlo technique to select the sample chromosome or the additional chromosome.

12. A computer system for determining an investment strategy for an entity with assets in a taxable and a tax-free account, the system comprising interface components, a database, and an optimizer system, wherein the system is configured to:

accept into the database information regarding;

a total asset amount, an amount of assets in the tax free account, an amount of assets in the taxable account, a plurality of investments, an indicated percentage of the total assets to invest in each of the plurality of investments, a time horizon and an education time horizon; and

select, using the optimizer system, amounts to invest from the taxable and tax-free accounts randomly or using Genetic Algorithms (GA), such that the amounts substantially match the indicated percentage of total assets to invest in each of the plurality of investments;

such that the determinations will produce a substantially maximal after-tax accumulation for the entity at the time horizon, after producing a pre-determined accumulation for the entity at the education time horizon.

13. The system of claim 12, wherein the pre-determined accumulation for the entity at the education time horizon corresponds to a child'"'"'s future cost of education.

14. The system of claim 12, further configured to:

accept into the database information regarding an amount of assets in an education account; and

select, using the optimizer system, amounts to invest from the education account randomly or using Genetic Algorithms (GA), such that the determinations will produce a substantially maximal after-tax accumulation for the entity at the time horizon, after producing a pre-determined accumulation for the entity at the education time horizon.

15. The computer system of claim 14 further configured to:

perform sampling steps a plurality of times, the sampling steps comprising;

randomly selecting amounts from the tax-free account to invest in each of the plurality of investments;

randomly selecting amounts from the education account to invest in each of the plurality of investments;

determining appropriate amounts from the taxable account so that the selected percentage amounts for each of plurality of investments is satisfied; and

determining a result if the amounts were invested as selected and determined for the time horizon and the education time horizon.

16. The computer system of claim 14 further configured to:

create a plurality of GA chromosome structures, each GA chromosome structure including a value for each of the plurality of investments, each value being an indication of an amount from the tax-free account to invest in the corresponding investment;

set the values in the plurality of GA chromosome structures to initial settings;

evaluate fitness of the plurality of GA chromosome structures;

select at least one of the GA chromosome structures with an optimal fitness; and

use the values from the selected GA chromosome structure as amounts from the tax-free account to invest in the corresponding investment for the substantially maximal accumulation.

17. The computer system of claim 12 further configured to calculate tax consequences over the time horizon and the education time horizon for the entity based on the selected amounts to invest.