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RETIREMENT

401(k) plan
Qualified plan established by employers to which eligible employees may make salary-deferral (salary-reduction) contributions on a post- and/or pre-tax basis; employers may make matching contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature; earnings accrue on a tax-deferred basis
Annuity
Long-term investment vehicle designed to help accumulate funds and provide income for retirement
Certificate of deposit (CD)
Time deposit, FDIC insured to $100,000 per person ($250,000 on retirement accounts), with a fixed maturity date, typically from three months to five years; it usually pays higher interest than a savings account, and a penalty is charged for withdrawing funds before the maturity date
Deferred annuity
Annuity that can be paid either with a single premium or a series of installments, providing for income payments to begin at some future date
Deferred compensation plan
Benefit plan that allows an employee to save pre-tax dollars; many are set up similar to a 401(k) plan, including multiple investment options, but without regulated limits on the amount that can be deposited
Defined benefit plans
Pension plans that guarantee a specific retirement benefit
Defined contribution plan
Benefit plan under which contributions are fixed in advance by formula; benefits to retiring employees may vary
Direct rollover
Distribution of eligible rollover assets from a qualified retirement plan; reportable but not taxable
Early withdrawal penalty
Depositor forfeits interest or is assessed a service charge for withdrawing funds from or closing out a time deposit before its maturity date
Estate planning
Planning for the orderly handling, disposition and administration of assets that are left behind after an individual's death; includes drawing up a will, setting up trusts and figuring out ways to minimize estate taxes
Federal Deposit Insurance Corp. (FDIC)
An agency of the U.S. government that manages the bank insurance funds, which insure deposits at banks and other qualifying financial institutions up to $100,000 per account ($250,000 on retirement accounts) in interest and principal; mandatory for all nationally chartered banks and all banks that are members of the Federal Reserve System
Inflation indexed
Benefits that rise over time to offset increases in the cost of living, usually as measured by the Labor Department's consumer price index
Individual Retirement Account (IRA)
An investing tool used by individuals to earn and earmark funds for retirement savings; contributions may be tax-deductible, and earnings are not taxed until the funds are withdrawn at age 59� or later
IRA rollover
Transfer of funds from a retirement account into a Traditional IRA or a Roth IRA
Keogh plan
Tax-deferred pension account for self-employed workers or employees of unincorporated businesses
Long term care insurance
Policy that provides benefits for the chronically ill or disabled over a long period of time
Pension fund
Fund set up and invested by an employer or a labor union to provide retirement income for workers; funds accumulate income and capital gains tax-free which are used to pay benefits
Power of attorney
Agreement authorizing someone (generally an attorney) to act as one's agent in making legal decisions and taking other actions, such as signing legal documents; may be general (complete authority) or special (limited authority)
Qualified plan
Plan purchased with pre-tax dollars, generally under a pension plan, specially sponsored program, or individual retirement account that the IRS approves as meeting the requirements of Section 401(a) of the 1986 Internal Revenue Code, as amended; such plans receive tax advantages
Refinancing
Revising a payment schedule, usually to reduce monthly payments (i.e. reducing interest rate on a mortgage)
Rollover
Reinvesting funds from a mature security into a new issue of the same or a similar security; or transferring the holdings of one retirement plan to another without suffering tax consequences
Roth IRA
Individual retirement plan that allows taxpayers, subject to certain income limits, to save for retirement while allowing the savings to grow tax-free; taxes are paid on contributions, but withdrawals, subject to certain rules, are not taxed at all
Savings Incentive Match Plan For Employees of Small Employers (Simple IRA)
A retirement plan sponsored by companies with fewer than 100 employees; avoids some of the administrative fees and paperwork of plans such as a 401(k) plan; may be structured as a 401(k)
Simplified employee pension plan
Retirement program for self-employed people or owners of small companies allowing them to defer taxes on investments intended for retirement
Social Security Number (SSN)
Number issued to individuals by the Social Security Administration that may be used in order to confirm identity and/or obtain certain reports
Tax deferred
An investment which accumulates earnings that are not subject to taxes until the investor takes possession of the earnings, often at a point at which the investor is in a lower tax bracket than before, such as retirement
Trusts
Estate-planning tools that can replace or supplement wills, as well as help manage property during one's life
Vesting
The point, through length of service, at which an employee has the right to receive employer-contributed benefits such as pensions