Financial Glossary
Everyday language for financial planning terms
A concise reference — from annuities to yield — written in plain English so you can make informed decisions with confidence.
4
- 401(k)
- A qualified employer-sponsored retirement plan that allows employees to defer a portion of their salary on a pre-tax (or Roth) basis. Employers may match contributions.
- 403(b)
- A tax-deferred retirement plan similar to a 401(k), available to employees of public schools, nonprofits, and certain religious organizations.
A
- Annuity
- A contract with an insurance company designed to provide a stream of income, often in retirement, in exchange for a lump-sum or series of premium payments.
- Asset Allocation
- The process of dividing an investment portfolio among asset categories such as stocks, bonds, and cash to balance risk and reward according to goals and time horizon.
B
- Beneficiary
- The person or entity designated to receive assets from an account, insurance policy, trust, or will upon the owner's death.
- Bond
- A debt security in which an investor loans money to an issuer (corporate or government) for a defined period at a fixed or variable interest rate.
C
- Capital Gain
- The profit from selling an asset for more than its purchase price. Long-term gains (held over one year) are generally taxed at lower rates than short-term gains.
- CD (Certificate of Deposit)
- A time deposit at a bank paying a fixed interest rate over a set term, with penalties for early withdrawal. FDIC-insured up to applicable limits.
- ChFC®
- Chartered Financial Consultant — a professional designation for financial planners administered by The American College of Financial Services.
- CLU®
- Chartered Life Underwriter — an advanced designation focused on life insurance, estate planning, and risk management.
D
- Diversification
- Spreading investments across various assets or sectors to reduce exposure to any single risk. Diversification does not guarantee against loss.
- Dividend
- A distribution of a portion of a company's earnings, decided by its board of directors, paid to shareholders.
E
- Estate Planning
- The process of arranging for the management and disposal of a person's estate during life and after death, using wills, trusts, and beneficiary designations.
- ETF (Exchange-Traded Fund)
- An investment fund traded on stock exchanges, holding a basket of assets such as stocks, bonds, or commodities.
F
- Fixed Annuity
- An annuity contract that pays a guaranteed rate of interest for a set period, backed by the claims-paying ability of the issuing insurer.
I
- Index Fund
- A mutual fund or ETF designed to track the performance of a specific market index, such as the S&P 500.
- IRA (Individual Retirement Account)
- A tax-advantaged retirement account. Traditional IRAs may offer tax-deductible contributions; Roth IRAs offer tax-free qualified withdrawals.
L
- Long-Term Care Insurance
- Coverage designed to pay for care not typically covered by health insurance or Medicare, including assistance with activities of daily living.
M
- Medicare
- The federal health insurance program primarily for people age 65 and older, and for some younger people with disabilities.
- Medicare Supplement (Medigap)
- Private insurance that helps pay for out-of-pocket costs Original Medicare does not cover, such as copays, coinsurance, and deductibles.
- Mutual Fund
- A professionally managed pool of money from many investors used to purchase a diversified portfolio of securities.
- Municipal Bond
- A bond issued by a state or local government. Interest is often exempt from federal (and sometimes state) income tax.
R
- Required Minimum Distribution (RMD)
- The minimum amount that must be withdrawn each year from most tax-deferred retirement accounts starting at age 73 under current law.
- Rollover
- The movement of retirement plan assets from one qualified account to another, generally without triggering current taxes if handled correctly.
- Roth IRA
- An individual retirement account funded with after-tax dollars where qualified withdrawals — including earnings — are federally tax-free.
S
- SEP IRA
- A Simplified Employee Pension IRA — a retirement plan primarily used by self-employed individuals and small business owners.
- SIMPLE IRA
- A retirement savings plan for small businesses (100 or fewer employees) with employer matching or non-elective contributions.
- Social Security
- A federal program providing retirement, disability, and survivor benefits, funded through payroll taxes.
T
- Term Life Insurance
- Life insurance that provides coverage for a specific period. If the insured dies during the term, a death benefit is paid to beneficiaries.
W
- Whole Life Insurance
- Permanent life insurance offering a fixed premium, guaranteed death benefit, and cash value that grows on a tax-deferred basis.
Y
- Yield
- The income return on an investment, typically expressed as an annual percentage based on cost, current market value, or face value.
Definitions are provided for general education. They are not a substitute for personalized advice. Contact us to discuss how any of these concepts may apply to your situation.
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