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 Interest, dividends and capital gains accumulate tax-free until withdrawn.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.