Advertising
anchor link to jump to start of content

The Seattle Times Company NWclassifieds NWsource seattletimes.com
seattletimes.com Home delivery Contact us Search archives
 Home  Retiring Well  Getting started  Nearly there  In retirement  Resources  Glossary  About the guide

Sunday, February 8, 2004
 
Glossary

401(k): Employer-sponsored plan that allows employees to contribute money before taxes are taken out. Employers often match contributions. Interest, dividends and capital gains accumulate tax-free until withdrawn.

403(b): Like a 401(k), but for employees of nonprofit and tax-exempt entities such as school systems.

Annuity: Contract sold by an insurance company that agrees to pay either a regular, fixed amount when you retire or an amount based on how much your investment earns. Earnings are taxed upon withdrawal.

Bequest: A direct gift of cash or assets from an estate after death.

Bond: An IOU issued by a company or a unit of government promising to pay interest at a certain rate and to repay the principal at a specified time.

Capital gains: Profits from selling stocks at a price higher than the cost.

Certificate of deposit (CD): A deposit that earns a specified interest rate for a certain time period.

Defined benefit: Employer-funded pension plan that pays employees who retire a set amount based on a certain number of years worked. A traditional pension plan.

Defined contribution: Pension plan in which employees and employers may contribute, with retirement payouts determined by how well the investment performs. A 401(k) or 403(b) plan.

Disability insurance: Insurance policy that pays benefits to the insured should he or she not be able to work.

Dividends: Periodic cash payments made by corporations and mutual funds to their stockholders.

Income-producing stock: Stock in a company that pays dividends.

Individual retirement account (IRA): A personal, tax-deferred retirement account. There are two kinds, the traditional and the Roth. A contribution into a traditional IRA may be tax-deductible and is limited to up to $3,000 a year unless you are over 50 and then goes up to $3,500. Money is taxed upon withdrawal, and significant penalties may occur on withdrawals before age 59-1/2. Contributions to Roth IRAs are not tax-deductible, but earnings and withdrawals are tax-free as long as the account has been open at least five years.

 Interest rate: What it costs you to borrow money, such as through a credit card or home or auto loan. Usually expressed as an annual percentage rate.

Long-term-care insurance: Insurance to cover long-term personal or custodial care.

Marketable securities: In general, stocks and bonds that are easily sold. A marketable security has a readily determined fair market value and can be converted into cash at any time.

Mortgage: An IOU to repay a real-estate lender, who holds a lien on the property until the loan is repaid with interest.

Real Estate Investment Trust (REIT): A company, often with shares traded on a stock exchange, that manages a portfolio of real-estate holdings.

Pension: Payments by a company to an employee who retires, usually based on how much the employee earned and how long he or she worked at the company.

Securities: Proof of ownership, such as a stock certificate issued by a company or a bond issued by a government entity.

Simplified Employee Pension Plan (SEP IRA): A pension plan used by small employers (or the self-employed) in which both employee and employer contribute.

Tax-deductible interest: Interest paid on a loan, such as a mortgage, that can be deducted from income taxes.

Tax-deferred: An investment such as a 401(k) plan or individual retirement account in which interest, dividends and capital gains are not taxed until the money is withdrawn.

Trust: A legal entity, administered by a trustee, set up to provide for heirs.

Sources: This glossary includes material from the U.S. Department of Labor's "Savings Fitness" publication (available at www.dol.gov/ebsa or toll-free at 1-866-444-3272) and "The Wall Street Journal's Guide to Planning Your Financial Future."



 NEWS SEARCH
Today Archive

Advanced search

 
advertising

seattletimes.com home
Home delivery | Contact us | Search archive | Site map | Low-graphic
NWclassifieds | NWsource | Advertising info | The Seattle Times Company

Copyright

Back to topBack to top