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401(k): A employer-sponsored retirement plan that allows pre-tax contributions and potential employer matching.
403(b): Similar to a 401(k), but for employees of public schools, charities, and other tax-exempt organizations.
A
Accumulation Phase: The period during which you are actively saving and investing money for retirement.
Amortization: The gradual repayment of a loan through regular payments that include both principal and interest.
Asset Allocation Model: A specific strategy for diversifying investments based on risk tolerance and goals.
Annual Percentage Yield (APY): The effective annual rate of return on an investment, taking into account compounding.
B
Bear Market: A period of sustained stock price declines.
Beneficiary Designation: Specifying who receives the proceeds of your financial accounts or insurance policies.
Bond Ladder: Investing in bonds with different maturities to create a predictable income stream.
Brokerage Account: An account held with a financial institution that allows you to buy and sell investments.
Bull Market: A period of sustained stock price increases.
C
Capital Gains Tax: The tax paid on the profits from selling assets held for more than a year.
Cash Flow: The net amount of money coming into and going out of your accounts in a specific period.
Cost Basis: The original purchase price of an investment used to calculate capital gains or losses.
Compound Interest: Interest earned on both the initial principal amount and the accumulated interest, leading to exponential growth.
D
Dollar-Cost Averaging: Investing a fixed amount of money at regular intervals regardless of the asset's price.
Down Payment: The initial amount paid upfront for a loan, like a mortgage.
Diversification Strategy: The specific method used to diversify your investments across different asset classes.
E
Emergency Fund: Savings set aside to cover unexpected expenses.
Estate Planning: The process of managing the disposition of your assets after your death.
Estate Tax: A tax levied on the value of your estate exceeding a certain threshold upon your death.
Expense Ratio (Net): The annual fee charged by a mutual fund or ETF after accounting for any expense waivers.
F
Fiduciary Standard: A legal obligation to act in the best interest of another person when managing their finances.
Financial Independence: The ability to live comfortably without relying on income from employment.
Financial Planning: The process of creating a roadmap for achieving your financial goals, including budgeting, saving, investing, and risk management.
Fixed Annuity: An annuity that provides a guaranteed stream of income for a defined period or lifetime.
Fixed Income Security: An investment that provides a predictable stream of income payments.
G
Gift Tax: A tax levied on the value of assets you give away during your lifetime exceeding a certain threshold.
Guaranteed Minimum Withdrawal Benefit (GMWB): An optional feature of some annuities that guarantees a minimum income stream.
H
High-Net-Worth (HNW) Individual: Individuals with significant investable assets.
Health Insurance: Insurance that covers medical expenses.
Health Savings Account (HSA): An account used to pay for qualified medical expenses with tax-advantaged contributions and tax-free withdrawals.
I
Immediate Annuity: An annuity that starts paying out income immediately after purchase.
Individualized Retirement Account (IRA): A retirement account with tax-advantaged contribution options. See Roth IRA
Index Fund: A passively managed fund that tracks a market index.
Insurance Needs Analysis: An assessment of your insurance coverage needs based on your circumstances.
Investment Horizon: The timeframe for which you plan to hold an investment before needing the funds.
L
Legacy Planning: Planning for the transfer of your assets to your beneficiaries in accordance with your wishes.
Life Insurance: A contract that pays a death benefit to your beneficiaries upon your death.
Long-Term Care (LTC): Services and supports needed by individuals who cannot manage daily activities due to age or illness.
M
Margin Account: An account that allows you to borrow money from your broker to buy investments.
Maturity Date: The date when an investment, such as a bond, reaches its end and you receive the principal amount back.
Mutual Fund: A professionally managed investment pool that holds a variety of assets.
P
Passive Income: Income earned without actively working, like from investments or rental properties.
Power of Attorney: A legal document authorizing someone to act on your behalf in financial matters.
Portfolio Rebalancing: Adjusting your portfolio mix to maintain your target asset allocation.
R
Required Minimum Distribution (RMD): The minimum amount you must withdraw from your traditional IRA or 401(k) starting at age 72.
Risk Management: Strategizing to protect your financial well-being from potential losses.
Risk Tolerance: Your ability and willingness to withstand investment losses.
Roth IRA: An IRA with contributions made after-tax, but qualified withdrawals in retirement are tax-free.
Roth Conversion: Converting a traditional IRA to a Roth IRA, resulting in taxes upfront but tax-free withdrawals in retirement.
S
Self-Directed IRA: An IRA that allows you to invest in a wider range of assets than traditional IRAs.
Standard Deduction: A fixed dollar amount you can deduct from your taxable income.
Stock: A share of ownership in a company, representing a claim on its profits and assets.
Stock Market Volatility: The degree to which stock prices fluctuate.
T
Target-Date Fund: A mutual fund with an asset allocation that automatically becomes more conservative as the target retirement date approaches.
Tax Bracket Optimization: Strategizing to minimize your tax liability by using available deductions and credits.
Tax-Loss Harvesting: Selling investments at a loss to offset capital gains and reduce taxable income.
Term Life Insurance: Life insurance that provides coverage for a specific period (term) and only pays a death benefit if you die within that term.
Total Expense Ratio (TER): The combined expense ratio of an investment, including both the fund's own expense ratio and any underlying fund expenses.
Trust: A legal arrangement that manages assets for the benefit of beneficiaries according to specified conditions.
U
Underwriting: The process of assessing the risk associated with issuing a loan or insurance policy.
Universal Life Insurance: A type of life insurance with flexible premiums and adjustable death benefit coverage.
V
Variable Annuity: An annuity that links your income stream to the performance of an underlying investment portfolio.
Variable Universal Life (VUL): A type of universal life insurance where the investment component is linked to the performance of a specific investment portfolio.
W
Will: A legal document that outlines your wishes for the distribution of your assets after your death.
Withdrawal Rate: The percentage of your retirement savings you withdraw each year to maintain your desired lifestyle.
Wrap Account: An investment account that combines investment management and financial planning services into one package.
Y
Yield: The income generated by an investment, expressed as a percentage of the investment's value.
Yield Curve: A graph showing the relationship between the maturity of an investment and its yield.
Z
Zero-Coupon Bond: A bond that pays no interest but is sold at a discount to its face value, providing the return upon maturity.