Retirement Planning Glossary
A 401(k) is a savings plan that is sponsored by an employer where you are able to set aside money out of your paycheck to go towards a retirement account.
A 403(b) is a type of retirement savings plan available to employees of public school systems and tax-exempt organizations.
Adjusted gross income (AGI) is the starting point for calculating how much income tax you owe to the IRS.
Appreciation is the growth of an asset’s value over time and can happen in several different ways, depending on the investment.
A back-end load is a type of sales charge that is assessed when an investment is sold, rather than when it is purchased.
Basis – often referred to as a cost basis or tax basis – represents the purchase price of an investment, adjusted for stock splits and dividends.
A benchmark is a standard against which the performance of an investment – such as a stock, bond, or mutual fund – can be compared.
A beneficiary is a person selected by the owner of a particular financial to assume ownership of the asset in the event of the owner’s death.
A bond is a type of fixed-rate investment that governments and corporations issue to raise capital.
Capital is money someone invests and the value of those investments as their market value rises or falls.
A capital gain occurs when an asset is sold for a higher amount than it was purchased for.
A capital gains distribution occurs when the fund manager sells shares of the fund’s underlying assets at an appreciated value.
A certificate of deposit (CD) is a type of investment issued by commercial bank that pays a fixed rate of interest.
The Chartered Financial Analyst (CFA) is a professional designation that signifies an advanced level of competence and integrity in financial analysis.
A certified financial planner (CFP) is a financial planning professional who meets a rigorous series of work experience, educational and examination requirements.
A contribution refers to funds that you deposit into an investment account.
A convertible bond is a type of debt security that can be converted into equity by exchanging the bond for a fixed number of company stock shares.
Diversification is an investment risk management tool that involves allocating portions of a portfolio among different assets or asset classes.
The Employee Retirement Income Security Act (ERISA) is a piece of legislation protects the assets of qualified retirement plans in the U.S. from misuse by plan administrators.
A fiduciary is a person authorized to act on behalf of another party and is legally required to act in the principal’s best interest.
The Financial Industry Regulatory Authority (FINRA) is the self-regulatory agency that oversees the securities industry in the United States.
Fitch Ratings is an international financial rating agency that rates the credit quality of bonds, issuers of securities, national governments and individuals.
A fixed annuity is a type of annuity that earns money at a fixed rate of interest.
A fixed income fund is a type of fund that pools money from many investors and invests it in fixed-income securities such as bonds.
A fixed period payout (also known as a period certain annuity) pays out an annuity’s value over a certain number of years, rather than a lifetime.
A fixed return investment is a type of investment that grows at a guaranteed rate of interest.
A front-end load is a type of sales charge on an investment that is paid at the time the investment is made.
In a mutual fund or exchange-traded fund (ETF), fund assets are the sum of all of the fund’s holdings and cash, minus any debts.
A traditional IRA is a popular vehicle for retirement planning and investing thanks to tax-deductible contributions and tax-deferred growth.
A joint and survivor annuity is a type of annuity that is based on the lives of two annuitants rather than one.
Liquidity refers to the ability of an asset to be sold quickly at the asset’s market price, without affecting the price of the asset.
A lump-sum distribution is the entire amount of an investment being withdrawn from the account in which it is held.
A mortality table shows the probability that a person of a certain age will die before his or her next birthday.
A municipal bond is a type of debt security issued by a state, county, or other local government.
A mutual fund is a type of investment that pools money from many investors and invests it according to the fund’s objective.
A period certain annuity is a type of annuity that makes payments to the annuity owner for a certain period of years.
A pre-tax contribution refers to a contribution to an investment account using money that has not already been taxed.
Premium is the money paid to an insurance company to purchase insurance coverage.
A prospectus is a complex legal document that must accompany the sale or solicitation of the initial offering of a security that is registered with the SEC.
Rollover is the reinvestment of funds from a maturing security into a new one, or the transfer of assets from a qualified retirement account to another.
A Roth IRA is a type of investment account used for retirement planning with tax-free withdrawals.
Serial bonds are bonds issued at the same time but with different maturity dates.
Standard & Poor’s is an American financial services company that provides research on stocks, bonds, and commodities.
A withdrawal penalty is a charge assessed if money is taken out of an investment account prior to maturity.