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Online Glossary

• 401(K) Plan: A plan in which employees may elect to make pre-tax contribution to an employer-sponsored plan in lieu of receiving taxable income.
• Asset Allocation: Assigning an amount or percentage of the asset to one or many funds.
• Beneficiary: The recipient of a benefit, such as in a will or trust.
• Bond: A promise by a corporation or government to repay the bondholder principal plus interest.
• Compensation: Compensation is but is not limited to, base salary, commissions, bonuses, overtime and vacation pay.
• Deferral: An amount of money set aside for the participant’s use at retirement.
• Defined Benefit Plan: An employer sponsored retirement plan providing a predetermined benefit for the plan participant upon retiring.
• Defined Contribution Plan: A type of qualified plan in which a participant’s benefits are based solely on the participant’s account balance; the account balance depends on the level of employer and employee contributions and the earnings on those contributions.
• Direct Rollover: This is a qualified retirement plan distribution that is deposited directly into a Traditional IRA.
• Distribution: A specified amount paid out to the participant by the financial institution.
• Diversified: Assets spread among various funds.
• Dividend: A share of profits paid to a stockholder.
• Education IRA: These are IRAs that can be contributed to on a non-deductible basis, for the purpose of saving for qualified educational expenses with tax-free distributions. If the funds are not used for one child, they can be rolled over to the next child’s Education IRA.
• Index: A list used to compare fund performance.
• Individual Retirement Account (IRA): An individual retirement account or an individual retirement annuity that holds assets on a tax-deferred basis.
• Investment: To put money into a stock or bond with the purpose of obtaining profit or interest.
• Matching Contribution: The voluntary company contribution made to the participant’s account. This varies from plan to plan.
• Maturity: The date when a bond becomes due and payable.
• Money Purchase Pension Plan: An individual account plan, in which the employer has a fixed obligation to make annual contribution to the plan, usually based on a percentage of pay.
• Mutual Fund: A collection of stocks, bonds or other securities owned by a group of investors and managed by a professional investment company.
• Pension Plan: A savings plan setup to pay out an amount regularly to an individual after retiring.
• Pooled Fund: A fund that is managed by a registered investment company, bank, or insurance company and that is offered as an investment choice in a participant-directed plan.
• Portfolio: The securities of an investor.
• Principal: A financial holding separate from interest and revenue.
• Profit Sharing Plan: A profit Sharing Plan is a defined contribution plan under which the employer decides how much will be contributed each year. A participant’s retirement benefits are based on the amount in his individual account at retirement.
• Qualified Retirement Plan: A plan that meets the requirements of IRC Sec. 401(a) is a qualified retirement plan and is eligible for special tax considerations.
• Rollover: A tax-free movement of cash or other assets from one retirement plan to another is a rollover.
• Roth IRA: Tax-deferred growth and a tax-free status for your earnings at retirement, provided specific IRS guidelines are met, are the distinguishing characteristics of the Roth IRA.
• SIMPLE IRA (Savings Incentive Match Plan for Employees): A plan that both employer and employee contribute to an IRA for the participant’s retirement on a tax-deferred basis.
• Stock: A unit of ownership (equity) in a company.
• Stock Market: The purchase and sale of stocks
• Tax-deferred: A term used to describe the process of setting aside the taxes due until a specified date.
• Trustee: A person or a company to whom the property of the beneficiary is entrusted.
• Vesting Schedule: A schedule that states the date in which a participant becomes eligible for a certain percentage of the company’s matching contribution to their account.