Vocabulary

• Early Retirement – Leaving the workforce before the conventional age of about 65.
• Retirement Plan – A financial plan that helps you achieve your goals after you stop working.
• Pension – A regular payment made to retired employees.
• 401(k) – A retirement savings plan sponsored by an employer.
• Individual Retirement Account (IRA) – A type of savings account that is designed to help you save for retirement.
• Roth IRA – A special type of retirement account where you pay taxes on money going into your account and then all future withdrawals are tax-free.
• Social Security – A US government system that provides financial assistance to people with an inadequate or no income.
• Investment – The act of putting money into financial schemes, shares, properties, etc. with the expectation of achieving a profit.
• Stock – A share in the ownership of a company.
• Bond – A loan made to an organization or government with the guarantee that the borrower will pay back the loan plus interest.
• Mutual Fund – An investment program funded by shareholders that trades in diversified holdings.
• Index Fund – A type of mutual fund with a portfolio constructed to match or track the components of a market index.
• Diversification – The strategy of investing in a variety of securities in order to reduce risk.
• Portfolio – A range of investments held by a person or organization.
• Dividend – A sum of money paid regularly by a company to its shareholders out of its profits.
• Capital Gain – The increase in the value of an investment or asset.
• Inflation – The rate at which the general level of prices for goods and services is rising.
• Deflation – The reduction of the general level of prices in an economy.
• Life Expectancy – The average period that a person may expect to live.
• Annuity – A fixed sum of money paid to someone each year, typically for the rest of their life.
• Financial Advisor – A professional who provides financial services to clients based on their financial situation.
• Risk Tolerance – The degree of variability in investment returns that an individual is willing to withstand.
• Asset Allocation – The implementation of an investment strategy that seeks to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio.
• Liquid Assets – Assets that can be easily converted into cash.
• Fixed Income – Any type of investment in which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule.
• Health Care Costs – The costs associated with health care, including medical services, medications, and health insurance.
• Estate Planning – The preparation of tasks that serve to manage an individual's asset base in the event of their incapacitation or death.
• Tax Planning – The analysis of a financial situation or plan from a tax perspective.
• Passive Income – Earnings derived from a rental property, limited partnership, or other enterprise in which a person is not actively involved.
• Compound Interest – The addition of interest to the principal sum of a loan or deposit.
• Budget – An estimate of income and expenditure for a set period of time.
• Social Security Benefits – Payments made to qualified retirees and disabled people, and to their spouses, children, and survivors.
• Pension Plan – A retirement plan that requires an employer to make contributions to a pool of funds set aside for a worker's future benefit.
• Withdrawal Rate – The pace at which you take money out of your retirement savings.
• Medicare – A national health insurance program in the United States, begun in 1966 under the Social Security Administration.
• Life Insurance – A contract between an insurer and a policyholder in which the insurer guarantees payment of a death benefit to named beneficiaries upon the death of the insured.
• Long-Term Care Insurance – A type of insurance developed specifically to cover the costs of long-term care services.
• Age Pension – A regular income paid by the government to people who have reached a certain age.
• Salary Sacrifice – An arrangement with an employer to forgo part of a salary in return for benefits of similar value.
• Lump Sum – A single payment for the total amount due, as opposed to several payments made over a period of time.
• Rollover – The transfer of funds from one retirement plan to another without suffering tax consequences.
• Tax-Deferred – Investment earnings such as interest, dividends or capital gains that accumulate tax-free until the investor withdraws and takes possession of them.
• Required Minimum Distribution (RMD) – The amount that traditional, SEP and SIMPLE IRA owners and qualified plan participants must begin distributing from their retirement accounts by April 1 following the year they reach age 70.5.
• Deferred Annuity – A type of annuity contract that delays payments of income until the investor chooses to receive them.
• Target-Date Fund – A mutual fund in the hybrid category that automatically resets the asset mix in its portfolio according to a selected time frame that is appropriate for a particular investor.
• Vesting – The process by which an employee accrues non-forfeitable rights over employer-provided stock incentives or employer contributions made to a qualified retirement plan.
• Immediate Annuity – An annuity contract that starts to pay out income immediately after the initial investment is made.
• Defined Benefit Plan – A type of pension plan in which an employer/sponsor promises a specified pension payment, lump-sum or combination thereof on retirement.
• Defined Contribution Plan – A retirement plan in which the employer, employee or both make contributions on a regular basis.
• Bear Market – A condition in which securities prices fall and widespread pessimism causes the stock market's downward spiral to be self-sustaining.