Dictionary - Retirement
# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

401(k) Plan

A 401(k) plan is a tax-deferred salary savings plan that companies can offer their employees as a retirement account. A 401(k) plan meets the tax-deferral requirements of Section 401(k) of the IRS tax code, hence its name. Read more

403(b) Retirement Plan

A 403(b), commonly referred to as a Tax-Deferred Annuity (TDA) or Tax-Sheltered Annuity (TSA) plan, is a retirement savings plan available to employees of certain public education organizations, non-profit employers and cooperative hospital service organizations, as well as to self-employed ministers.  Organizations offer 403(b) tax-deferred retirement plans to eligible employees to allow for long-term investment growth, similar to a 401(k) plan. Read more

AARP (American Association of Retired Persons)

AARP stands for the American Association of Retired Persons.It is a nonprofit organization that advocates and promotes the well-being of Americans 50 years of age or older. Read more

Annuitant

An annuitant is the person whose age and life expectancy affect the size of the monthly payments to the owner of an annuity. An annuity is similar to a life insurance product, but there are important differences between the two. Read more

Annuitization

Annuitization is the act of triggering a series of payments, usually from an annuity. An annuity is a contract whereby an investor makes a lump-sum payment to an insurance company, bank or other financial institution that in return agrees to give the investor either a higher lump-sum payment in the future or a series of guaranteed payments. Read more

Annuitize

To annuitize is to choose to receive a series of payments, usually from an annuity. An annuity is a contract whereby an investor makes a lump-sum payment to an insurance company, bank, or other financial institution that in return agrees to give the investor either a higher lump-sum payment in the future or a series of guaranteed payments. Read more

Annuity

An annuity is a financial contract written by an insurance company that provides for a series of guaranteed payments, either for a specific period of time or for the lifetime of one or more individuals. An annuity is similar to a life insurance product, but there are important differences between the two. Read more

Assumed Interest Rate

An assumed interest rate is used to calculate an annuity's periodic income payments. To understand how the assumed interest rate works, one must first remember how an annuity works. Read more

Beneficiary

A beneficiary is any person or organization that receives assets from a person after that person’s death. For example, let's say John Smith dies and his will indicates that his two children, Sally and Joe, are listed as his beneficiaries. John's assets would go to both children, in whatever proportion he chooses. Read more

Blackout Period

A blackout period is a time period of roughly 60 days during which a company's employees are unable to make changes to their savings or retirement plans. Nearly every organization offers employees non-taxable retirement savings option. Read more

Board Certified In Estate Planning (BCE)

The Board Certified in Estate Planning (BCE) certification is earned by brokers, advisors and financial planners who have demonstrated expertise in dealing with estate planning. In order to earn the BCE certification, you must first pass the BCE Credentialing Program offered by the Institute of Business & Finance (IBF). Read more

Bypass Trust

A bypass trust, also called a "credit shelter trust", is a method of passing assets to beneficiaries without subjecting those assets to estate taxes. Let's say John Doe owns a horse farm worth $11 million. Read more

CalPERS

CalPERS is the abbreviation for the California Public Employees' Retirement System.It is the nation's largest pension fund. Read more

Chartered Trust and Estate Planner (CTEP)

The Chartered Trust and Estate Planner (CTEP) accreditation is issued by the American Academy of Financial Management (AAFM) for financial professionals who have demonstrated expertise in dealing with trusts and estate planning. In order to be considered for CTEP certification, you must have the following prerequisites: Minimum three years experience with trusts and estate planning, Completion of graduate or undergraduate studies in finance, tax, accounting, and law or Obtain a CPA, MBA or MS from an accredited university If the higher education prerequisites are not met, the candidate will be required to complete five courses designated by the AAFM in addition to passing a comprehensive examination and completing 15 hours of continuing education each year. Read more

Decedent

In legal terms, a decedent is a dead person.  Let's say John Doe dies this year. Read more

Deferred Stock Purchase Plan

A deferred stock purchase plan is an uncapped stock contribution with an employer matching the contribution that vests as the employee provides additional service during a deferral period.  In a deferred stock purchase plan, employees purchase company restricted stock on a pre-tax basis using income that would otherwise be paid as taxable salary or a bonus.These stock purchases would be fully vested, but their delivery and taxation would be delayed until a pre-established date in the future. Read more

Defined Benefit Plan

A defined benefit plan is a qualified retirement account that contractually agrees to pay a specified benefit at the plan holder's age of retirement.This type of qualified plan clearly defines the amount of retirement income to be paid to the account owner.  The defined benefit is calculated using a formula stated in the plan document; common factors incorporated in the formula are the employee's pay, years of employment, and age at retirement. Read more

Defined Contribution Plan

In general, a defined contribution plan is a tax-deferred savings plan that people fund with their own money (rather than an employer) and use to save for retirement.It is the opposite of a defined benefit plan, which is typically a pension plan funded by the employer or an entity other than the person who will directly benefit from the plan. Read more

Employee Benefits Security Administration (EBSA)

The Employee Benefits Security Administration (EBSA) is the branch of the United States Department of Labor responsible for overseeing the administration and planning of employee pension funds by company investment managers. The United States Department of Labor ensures that the American workforce is treated fairly and is compensated in accordance with the law. Read more

Employee Contribution Plan

An employee contribution plan is an employer-sponsored retirement plan where employees deposit (contribute) their own money to a special account. Employee contribution plans are usually funded by contributions that are automatically deducted automatically from an employee's paycheck. Read more

Employee Retirement Income Security Act of 1974 (ERISA)

Th Employee Retirement Income Security Act of 1974 (ERISA) is an American federal statute that protects the retirement assets of Americans by establishing a set of rules that must be followed by fiduciaries to prevent misuse of plan assets. Title I of ERISA deals with protecting employee benefit rights. Read more

Estate

An estate is all of an individual’s property and financial assets and liabilities at the time of his or her death. An estate might include a home and other real estate owned by an individual, as well as valuables such as jewelry and artwork, and financial assets such as stocks and bonds. Read more

Estate Freeze

An estate freeze is an estate planning strategy used by an owner to lock in an asset's value and avoid future tax liability when the asset is transferred to a beneficiary. An estate freeze is commonly used for: Transfer of control of a privately-owned business between generations Division of income among family members Protection from creditors  Tax deferment from shares sold of the privately-owned business In most cases, an estate freeze is used when ownership of a company is passed from one generation to the next. Read more

Estate Planning

Estate planning is the act of preparing for the transfer of a person's wealth and assets after his or her death.Assets, life insurance, pensions, real estate, cars, personal belongings, and debts are all part of one's estate. Read more

Fiduciary

A fiduciary is a person or entity responsible for managing a qualified retirement plan in accordance with the Employee Retirement Income Security Act (ERISA).In a broader sense, a fiduciary is a person or entity responsible for acting in the best interests of others -- typically an investment client, a company's shareholders or a beneficiary. Read more

First-Time Homebuyer

A first-time homebuyer an individual or couple purchasing a home for the first time.The IRS also considers someone who has not owned a home in the past two years to be a first-time homebuyer. Read more

Fixed Annuity

A fixed annuity offers a fixed rate of return, and all its future payments are equal amounts. Assume you'd like to invest in a vehicle that will provide you with guaranteed monthly payments of $1,167 every month for as long as you live after you retire. Read more

Gifted Stock

Gifted stock is stock that one person gives to another person or entity. Let's say John Doe bought 200 shares of Company XYZ a long time ago when it was trading at $1 a share. Read more

Gifting Phase

A gifting phase is when a person begins planning for or actively begins giving away wealth as part of his or her estate planning. Let's say Jane Smith is 87 and has accumulated about $3 million over a lifetime of saving and investing. Read more

Golden Boot

A golden boot is a financial package meant to encourage an employee to retire early. For example, assume that John is 60 years old and has been working at Company XYZ for 30 years. Read more

Golden Handshake

A golden handshake is essentially a severance agreement between an employee and employer. A golden handshake is similar to a golden boot, which is an incentive package sometimes offered to older workers.  A golden handshake is usually offered to a director, senior executive or consultant who is let go before his or her contract has expired. Read more

Graduated Vesting

Graduated vesting occurs when a financial instrument or account becomes wholly owned by an investor over time. Let's assume John Doe is eligible to participate in his company's 401(k) plan. Read more

Guaranteed Death Benefit

A guaranteed death benefit is a portion of an annuity that allows the investor's beneficiaries to receive a minimum amount of death benefits.  Let's say Jane Doe bought an annuity for $500,000 that has a guaranteed death benefit. Read more

Hardship Withdrawal

A hardship withdrawal is a premature withdrawal of money from a retirement account on account of special circumstances. Retirement plans -- for example, 401(k)s and IRAs -- have special tax treatments that encourage individuals to save. Read more

Immediate Payment Annuity

Immediate payment annuities (also called single-premium immediate annuities or SPIAs) are annuities that begin making payments to the owner immediately (within one year of purchase). An annuity is a contract whereby an investor makes a lump-sum payment to an insurance company, bank or other financial institution that in return agrees to give the investor either a higher lump-sum payment in the future or a series of guaranteed payments. Read more

Index Annuity

An index annuity is an annuity that pays a rate of return corresponding to a particular index, such as the S&P 500 Index. An annuity is a contract whereby an investor makes a lump-sum payment to an insurance company, bank or other financial institution that in return agrees to give the investor either a higher lump-sum payment in the future or a series of guaranteed payments. Read more

Indexed Annuity

An indexed annuity is an annuity that pays a rate of return corresponding to a particular index, such as the S&P 500 Index. An annuity is a contract whereby an investor makes a lump-sum payment to an insurance company, bank or other financial institution that in return agrees to give the investor either a higher lump-sum payment in the future or a series of guaranteed payments. Read more

Individual Retirement Account (IRA)

An Individual Retirement Account (IRA) is a government sponsored, tax-deferred personal retirement plan.  An IRA can also be referred to as a Traditional IRA.In order to open an IRA, an individual must first establish an account with a bank, brokerage firm or mutual fund company. Read more

Inheritance

An inheritance includes those assets of an estate that are bequeathed, in whole or in part, to specific heirs. The assets that comprise an estate are customarily transferred to individuals specified by name or relationship (e.g. Read more

Inheritance Tax

An inheritance tax, also called an estate tax, is a tax assessed on all or a portion of an inherited estate.Life insurance, pensions, real estate, cars, belongings and debts are all part of one's estate. Read more

Intestate

Intestate means dying without a will. For example, let’s assume that John Doe dies without a will. Read more

Joint and Survivor Annuity

A joint and survivor annuity is an annuity with two named beneficiaries.The annuity provides both beneficiaries with recurring income for life. Read more

Joint Life with Last Survivor Annuity

A joint life with last survivor annuity is an annuity that provides spouses with income until both spouses have died.The annuity also gives the holder the option to give a portion of the remaining income to a third-party beneficiary until the surviving spouse's death. Read more

Joint Tenants in Common (JTIC)

Joint tenants in common (JTIC) is a type of ownership wherein two or more individuals jointly own a property or portfolio of assets.If one owner dies, his or her portion of the property or portfolio remains in his or her name. Read more

Joint Tenants with Right of Survivorship (JTWROS)

Joint tenants with right of survivorship (JTWROS) is a type of ownership in which all joint owners have equal portions of ownership that are immediately allocated to remaining owners if one owner dies. Also called tenancy by entirety, property owned jointly with the right of survivorship is wholly owned by all living owners. Read more

Joint-Life Payout

A joint-life payout is a retirement-benefit payout method whereby a retiree receives benefits from the retirement plan until he or she dies, and the retiree's spouse or partner then receives benefits from the same plan until he or she dies too.  Let's say John Doe buys an annuity with a joint-life payout. Read more

Keogh Plan

A Keogh Plan is a tax-deferred retirement plan available to self-employed individuals or unincorporated businesses.Congress passed legislation called the Self Employed Individuals Tax Retirement Act of 1962, which established Keogh (pronounced KEY-oh) plans. Read more

KSOP

Because a KSOP is a combination plan, it has features of both ESOPs and 401(k)s.Companies can match contributions and reduce the expenses involved in running separate ESOPs and 401(k)s. Read more

Last Will

A will is a legal document that indicates how a person wants his or her estate (money and property) to be distributed after death.Wills must expressly state whom the will belongs to, and it must be signed, dated, and include the signatures of at least two witnesses. Read more

Last Will and Testament

A last will and testament is a legally-binding document in which an individual expresses his last wishes concerning the affairs and distribution of his estate. An individual creates a will while still alive. Read more

Life-Only Option

The life-only option, which is generally associated with annuities, describes the contractual arrangement whereby annuity payments cease upon the owner's death. To understand how this works, let's assume you'd like to invest in an annuity that, after you retire, will provide guaranteed monthly payments of $1,000 to you every month for as long as you live. Read more

Life-Plus-Five Option

The life-plus-five option, which is generally associated with annuities, describes the contractual arrangement whereby annuity payments are paid out to a beneficiary for five years after the owner's death. To understand how this works, let's assume you'd like to invest in an annuity that, after you retire, will provide guaranteed monthly payments of $1,000 to you every month for as long as you live. Read more

Life-Plus-Ten Option

The life-plus-ten option, which is generally associated with annuities, describes the contractual arrangement whereby annuity payments are paid out to a beneficiary for ten years after the owner's death. To understand how this works, let's assume you'd like to invest in an annuity that, after you retire, will provide guaranteed monthly payments of $1,000 to you every month for as long as you live. Read more

Matching Contribution

The term matching contribution refers to a matching dollar amount contributed by an employer to the retirement savings account of an employee who makes a similar contribution, usually to a 401(k) plan.These are contributions made by a company in addition to and conditional upon the salary deferral contributions made by the participating employee.  Matching contributions can be made to 401(k) plans including the SIMPLE, SIMPLE IRA'S, and the 403(b) plans.These contributions are generally based on a percentage of the participant's compensation. Read more

Medicaid

Medicaid is a U.S.government program that provides free or low-cost health insurance coverage for low-income people. Read more

Named Beneficiary

A named beneficiary is a person identified as the recipient of benefits from a pension plan, insurance policy, trust or other instrument. For example, let's say John Doe has a life insurance policy with a $1 million death benefit. Read more

Named Fiduciary

A named fiduciary is a person or entity responsible for managing a qualified retirement plan in accordance with the Employee Retirement Income Security Act (ERISA). For example, let's say Company XYZ gets a 401(k) plan. Read more

Non-Qualified Plan

A non-qualified plan is a retirement plan to which the IRS does not grant specific tax benefits. A non-qualified retirement plan is essentially whatever a qualified plan is not. Read more

Passive Trust

A passive trust, also called a "dry trust" or a "naked trust", is a trust into which a person transfers assets in order to pass them on to heirs or beneficiaries. For example, let's say John Doe is in a shaky marriage and wants to make sure $1 million of his money goes to his children rather than his second wife, whom he many divorce. Read more

Payable on Death (POD)

Payable on death (POD) is a bank account type or designation.It applies to accounts when the account owner designates a beneficiary or beneficiaries for the account. Read more

Pension Shortfall

A pension shortfall occurs when a company offering a pension plan for its employees does not have enough money set aside to meet the company's pension obligations. In a defined pension plan, where a company bears the risk of the investment of the pension pool and is obligated to provide the pension benefits to employees upon retirement, a poor investment performance by the investment pool may result in a pension shortfall. Read more

Pre-Tax Contribution

A pre-tax contribution is a payment made with money that has not been taxed.  Anybody can take a portion of their monthly pay and put it in a savings account. Read more

Qualified Annuity

Qualified annuities are annuities purchased with pre-tax dollars. An annuity is a contract whereby an investor makes a lump-sum payment to an insurance company, bank or other financial institution that, in return, agrees to give the investor either a higher lump-sum payment in the future or a series of guaranteed payments.  Annuities are either qualified or non-qualified based on the type of funds the investor uses to purchase the contract. Read more

Qualified Automatic Contribution Arrangement (QACA)

A qualified automatic contribution arrangement (QACA) is a way to automatically enroll employees in a defined contribution plan like a 401(k).  For example, assume that you get a new job with an employer that offers a 401(k) plan.If the employer has a QACA, you are automatically enrolled in the 401(k) plan and a certain percentage of your pay is automatically put into your retirement account each pay period. Read more

Qualified Disclaimer

A qualified disclaimer is a formal refusal to accept interest in property bequeathed in a will or similar document.  Section 2518 of the Internal Revenue Code permits the beneficiary of an estate or trust to make a qualified disclaimer so that for tax purposes it is as though the beneficiary had never received any interest in the property.Generally, a person can write a will in which he leaves his estate to a survivor, and that will can contain a special clause directing that if the survivor makes any qualified disclaimer in the estate, the disclaimed property will pass into a trust for the benefit of the survivor. Read more

Qualified Distribution

A qualified distribution refers to a tax and penalty-free withdrawal from a Roth IRA. A qualified distribution must meet two main requirements. Read more

Qualified Joint and Survivor Annuity (QJSA)

A qualified joint and survivor annuity (QJSA) gives a series of payments to a retirement plan participant’s spouse, child or dependent after the participant dies. QJSAs can be in defined benefit plans, other pension plans and even 401(k) plans. Read more

Qualified Pre-Retirement Survivor Annuity (QPSA)

A qualified pre-retirement survivor annuity (QPSA) is a company-sponsored death benefit that provides the employee's surviving spouse with an annuity payment should the employee die before receiving retirement benefits. For example, let's assume that John works at Company XYZ, which has a pension plan. Read more

Qualified Reservist

A qualified reservist is a member of the military reserves who is eligible to make an early withdrawal from an individual retirement account (IRA). For example, let's assume that John is a 28-year-old Air Force reservist. Read more

Qualified Retirement Plan

A qualified retirement plan is a plan to which the IRS grants specific tax benefits. The myriad of exact requirements for qualified retirement plans are in the Internal Revenue Code section 401(a) and the Employee Retirement Income Security Act of 1974 (ERISA). Read more

Qualified Terminable Interest Property (QTIP) Trust

A qualified terminable interest property (QTIP) trust allows a grantor to provide for a spouse after death but retain control of how the trust's assets are distributed after the spouse dies. For example, let's say John establishes a QTIP trust with $4,000,000 in it. Read more

Qualifying Investment

A qualifying investment is a contribution to a retirement plan made with pre-tax income. For example, let's assume that John participates in his company's 401(k) plan. Read more

Qualifying Relative

A qualifying relative is a person a taxpayer can claim as a dependent. For example, let's assume that John and Jane Doe took in Jane's mother because she ran out of retirement money and can no longer support herself. Read more

Quality of Life

Quality of life describes the happiness, independence and freedom available to an individual. For example, if John Doe hits a dog with his car one night, he may have to consider euthanizing the dog if the veterinarian determines that the dog's quality of life, should it survive, would be very low. Read more

Roth IRA

A Roth IRA is a type of Individual Retirement Account (IRA) for individuals who fall below certain income thresholds.One of the primary benefits to investing in a Roth IRA is that distributions are tax-free once withdrawals are made. Read more

Same Property Rule

The same property rule is an IRS rule stating that money taken from an Individual Retirement Account must be placed into a similar type of account if the account holder is less than 59.5 years old. Let's say John Doe has an IRA that he opened when he was 15. Read more

Saver's Tax Credit

The saver's tax credit, also called the savers credit, is a tax credit for making contributions to certain retirement accounts.  The savers credit gives taxpayers a tax credit of up to $1,000 ($2,000 if filing jointly) for contributions to IRAs, 401(k)s and certain other retirement plans. Read more

Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)

The Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) is a salary savings plan that small companies can offer their employees.The plan allows employers to match their employees' annual contributions or to infuse a smaller mandatory amount in the absence of employee contributions. Read more

Simplified Employee Pension (SEP) IRA

A simplified employee pension (SEP) is a type of individual retirement account (IRA) that can be opened by an employer on behalf of an employee or by a self-employed individual.It may also be known as a simplified employee pension individual retirement arrangement (or SEP IRA).  Once opened, the employer can make tax-deductible contributions into the account, which will grow (tax-deferred) until the employee retires. Read more

Social Security

Social security is a federal program that provides income and health insurance to retired persons, the disabled, the poor, and other groups.The program started in 1935 with the signing of the Social Security Act, which was an effort to provide a safety net for the millions of people who had suffered through the Great Depression. Read more

Tax-Deferred Annuity (TDA)

A tax-deferred annuity (TDA), commonly referred to as a tax-sheltered annuity (TSA) plan or a 403(b) retirement plan, is a retirement savings plan available to employees of certain public education organizations, non-profit organizations, cooperative hospital service organizations and self-employed ministers.  Organizations offer tax-deferred annuity plans to eligible employees for long-term investment growth, similar to a 401(k) plan.Contributions to these plans are generally in one of three forms:     The employer makes contributions to the plan through a salary-reduction agreement. Read more

Tax-Deferred Savings Plan

A tax-deferred savings plan is an account that allows the account holder to postpone paying taxes on the investments in the account. A 401(k) plan is the most common example of a tax-deferred savings plan. Read more

Tax-Sheltered Annuity (TSA)

A tax-sheltered annuity (TSA), also referred to as a tax-deferred annuity (TDA) plan or a 403(b) retirement plan, is a retirement savings plan for employees of certain public education organizations, non-profit organizations, cooperative hospital service organizations and self-employed ministers. Organizations offer tax-sheltered annuity plans to eligible employees for long-term investment growth, akin to a 401(k) plan. Read more

Taxable Estate

A taxable estate is the portion of a person's net assets that are taxable upon his or her death. An estate tax is often levied on the assets that the deceased leaves to his or her heirs.  Living spouses who inherit their husband/wife's assets can avoid estate taxes altogether. Read more

Tenancy by Entirety

Tenancy by entirety is property ownership in which all joint owners have equal portions of ownership that are immediately allocated to remaining owners if one owner dies.  Also called joint tenants with right of survivorship (JTWROS), property owned according to tenancy by entirety is wholly owned by all living owners.Unlike joint tenants in common (JTIC), an owner's particular ownership percentage does not posthumously become part his estate. Read more

Transfer Tax

A transfer tax is a tax on the value of goods that one party gives to another. Individuals and organizations frequently give and accept property with no exchange of monetary payment. Read more

Variable Annuity

A variable annuity is a contract sold by an insurance company.The contract provides the holder with future payments based on the performance of the contract's underlying securities. Read more

Will

A will is a legal document that indicates how a person wants his or her estate (money and property) to be distributed after death.Wills must expressly state to whom the will belongs and be signed, dated and include the signatures of at least two witnesses. Read more

Withdrawal Penalty

A withdrawal penalty occurs when a depositor or investor withdraws funds from an account before an agreed-upon withdrawal date for disallowed purposes or in a disallowed manner. Individual retirement accounts (IRAs) are one type of investment often associated with withdrawal penalties. Read more

Year's Maximum Pensionable Earnings

A year's maximum pensionable earnings is what the Canadian government uses to determine the maximum amount a person can get from the Canada Pension Plan. The Canada Pension Plan is similar to the Social Security program in the United States. Read more