Terminology

401(K) PLAN

A 401(k) is a variety of retirement savings account that allows the investor to withdraw funds when he or she reaches 59 1/2 years old. Removing funds before this age is reached can result in strict tax penalties. Due to the fact that Social Security is on the decline, and fewer and fewer employers are offering pension benefits, it is increasingly more important to factor 401(k) planning into your financial portfolio. Having a solid 401(k) plan can ensure that retirement is as comfortable as possible, and make it so that individuals do not have to suffer a reduction in quality of life when they stop working.

403(B) PLAN

A 403 (B) Plan Is a form of retirement plan that is intended for public-school employees, ministers, and employee’s of tax-exempt organizations. An individual 403 (B) account is established and maintained by employees. 403 (B) plans tend to come in three different forms: an annuity contract through an insurance company, a custodial account, or an IRA. The employer may determine where the 403 (B) account is held.

BONDS

In essence, a bond is an IOU from the government or company to the person who purchases the bond, known as a bondholder. You purchase bonds by means of getting a predetermined amount of money to the government or company, and in return the government or company agrees to pay the amount of the bond, plus interest at a certain point in the future determined by the parameters of the bond. The maturity time for bond can be anywhere from one to 30 years, depending on the type.

BROKERAGE ACCOUNT

If you are interested in building a stock portfolio, the first step is to open a brokerage account. A brokerage account will allow you to purchase stocks, bonds, mutual funds, and any other investment with the help of trained brokers. This can assist individuals who are not very familiar with financial markets investing, because essentially you are paying a broker to do your investing for you. This arrangement often results in better returns for the investor and considerably less stress. New brokerage accounts typically have a minimum investment of between  $500 and $1000.

CAPITAL GAINS TAX PLANNING

Capital gains refers to the amount of profit that is received by an individual upon the sale of a property or an investment. A capital gains tax in the amount of tax that is levied upon that profit. The amount of capital gains tax that will be placed upon the sale of properties or investments depends one the jurisdiction in which you live. Be sure to do area specific research when planning for capital gains taxes, and if necessary get the assistance of trained professionals to help you mitigate the loopholes of the process.

COLLEGE PLAN

There are a variety of different ways to save for the expenses incurred in college. Due to the fact that higher education is becoming more and more expensive, it is more important than ever to arrange for the cost of a college education while a child is still young. There are a variety of different college plans that can help interested investors accomplish this. Some are offered from the federal government, others through the state government, and there are also private investment accounts. Examples of college plans include the Educational IRA or a 529 College Savings Plan.

COMMON STOCK

Common stock is one form of equity ownership and is named as such to distinguish it from preferred stock. In the event that a company files for bankruptcy, those who hold preferred stock will receive their funds prior to those who hold common stock. However, in general, over a long period of time common stock performs better than preferred stock.

Generally speaking, common stock is a form of voting share. This means that the holder of common stock can influence the Corporation by voting on things like policy, stock splits, and can often elect members on the board of directors. Common stock returns are uncertain, due to the fact that they do not have a fixed dividend that is paid out to the holder.

DISABILITY INCOME

Disability income is the money that a person receives when he or she has been rendered unable to work in a normal capacity, due to an injury or illness. There are many different forms of disability income, some through private insurance and others through federal programs. You can get either long-term or short-term disability insurance for private insurers or employers, depending on your vocation. On the federal level, there are programs for Social Security and welfare offices, and these are known as Social Security Disability Insurance and Supplemental Security Income, respectively. The programs that you are eligible for on the federal level depend on your income, the nature of your disability, and the amount of time that you put into working prior to your disability.

EDUCATIONAL IRA

Also commonly known as a Coverdale Education Savings Account, this variety of IRA is designed to help individuals save money to cover educational expenses in the future, be they for elementary school, secondary school, or college. It can be used to pay for anything from tuition, to books, uniforms, class fees, and more. Education IRAs also allow nearly any sort of investment (such as stocks, bonds, and mutual funds) which differentiates them from other sorts of educational investment plans, which are generally much more restrictive in their requirements when it comes to investing.

ESTATE PLAN

The process of estate planning involves making provisions for how and in what ways an estate will be liquidated after the death of an individual. Estate planning generally attempts to keep the surviving family and friends of an individual out of probate court by making stipulations for property and monetary assets prior to the death of the person who holds the estate.

The devices involved in estate planning can include wills, trusts, beneficiary designations, powers of attorney, and more. Estate planning is a vital part of planning for actions that will be taken after the death of the individual that currently holds the estate.

ESTATE PLANNING

At a minimum, every adult should have a will, a durable power of attorney, and a health care proxy. A durable power of attorney designates an individual to control their fina cial affairs if they become incapacitated, while a health care proxy delegates health care decisions to a third person when they are unable to make those decisions.

ESTATE TAX PLANNING

Estate tax is a tax that is levied on the personal property and other assets of an individual after he or she is deceased. Estate tax planning should be considered an essential part of estate planning as a whole. The amount of tax that will be levied on properties and assets depends upon the value of those properties and assets, as well as the jurisdiction in which the deceased individual resided. Estate tax planning is best accomplished with the help of a qualified tax expert familiar with such matters.

GOVERNMENT SECURITY

Government security is defined as any sort of debt obligation that a government has on any level, which is backed by the credit and taxing power of a government that has very little risk of default. In the case of the United States, a government security may include debt securities such as debentures, bonds, and banknotes. In essence, it is any sort of debt that a financially solvent government holds, either to individual investors, corporations, or other countries.

INCOME TAX PLANNING

Income tax is a variety of tax that is levied directly on the personal income that an individual receives. The exact percentage depends on the jurisdiction in which the individual resides. In order to appropriately plan for income tax, it is advisable to get the guidance of someone who is well versed in the laws surrounding income tax in your state or province. When planned for appropriately, income tax can be managed and even eliminated in certain cases.

LIFE INSURANCE

Life insurance is a form of insurance that is paid upon the death of the one holding the policy. Life insurance is most important for the individual who is the main breadwinner in the family. This money can be used to cover funeral costs, outstanding debts, and provide a living stipend for those who survive the deceased. You can get life insurance on either a short-term or long-term basis, depending on your needs and financial situation.

LONG TERM CARE

Long-term care is defined as the variety of services that are required to keep an individual alive and healthy after a life-changing injury or illness has rendered that individual disabled. There are many different forms of long-term care, which can include such services as live-in nurses, hospital expenses, nursing home payments, and more. The kind of long-term care that is necessary depends on the scope of the disability of the individual in question. There are also a variety of expenses that are incurred depending on the kind of long-term care that is purchased.

PROFIT SHARING PLAN

Profit-sharing amounts to the process of individual employees having a financial stake in the company beyond their salaries; typically, this comes in the form of stock ownership. What this means is that the better a company does, the more profit that the individual investor will make. Profit-sharing plans are often used to help fund retirement accounts, and 401(k) plans often involved some modicum of profit-sharing.

RETIREMENT PLAN

A retirement plan is any sort of account that is designed to retain money for the investor that will typically be paid out once the investor reaches retirement age. These plans are often tax-exempt, or at the very least tax-deductible, in order to encourage individuals to plan for their own retirement. Given that fewer and fewer companies are offering their employees sizable pensions in the modern market, opening a retirement plan and planning for your own retirement with your personal funds is becoming increasingly vital.LAN]

ROTH IRA

A Roth IRA is a particular form of individual retirement account that is usually not taxed. This is contingent on certain conditions outlawed by the Taxpayer Relief Act of 1987. The difference between a Roth IRA and other forms of IRA is that the tax break on the money is not given when the investor puts money in the account, but rather there is a tax break when the owner of the account withdraws money after retirement. A Roth IRA account may contain investments in securities, common stocks, or bonds. A Roth IRA has the most flexible tax structure of all the IRAs, and there are fewer restrictions regarding what sorts of investments can be placed in this type of account.

SEP IRA

The acronym SEP IRA stands for Simplified Employee Pension Individual Retirement Account. This is the variety of IRA that is adopted by business owners in order to give retirement benefits to both the owners of the business and the employees. (They may also be used by self-employed individuals.) This is the form of IRA account where deductions are made from an employee’s paycheck and then routed directly into the IRA. This helps the individual who owns the SEP IRA save money for retirement, and also lowers the account holder’s income tax liability.

SIMPLE IRA

Simple IRA is actually an acronym that stands for Savings Incentive Match For Employees Individual Retirement Account. This is often considered one of the most affordable retirement savings plans and is offered through an employer. In a simple IRA, the employee makes an investment into the simple IRA of a certain amount and then the employer will match that investment. Simple IRA is best for small businesses that do not have the resources to offer their employees more complicated retirement benefits.

TAX PLAN

This is a general term used for the process of lawfully minimizing tax liabilities. This generally consists of a carefully thought-out plan of action so that the taxpayer pays fewer taxes. Tax planning can be done by a competent individual taxpayer, or may be done with the help of a trained professional. In this way, the taxpayer can streamline their accounts and ensure that what they are doing with their money is both legal and financially viable when it comes to taxes

TRADITIONAL IRA

The traditional IRA is an individual retirement account that was established by the Tax Reform Act Of 1986. A traditional IRA is held by a custodian institution, like a bank or brokerage, and it can be invested in anything that the custodian allows. For example, a bank might allow the investor to invest certificates of deposits in their traditional IRA.
Probably the most determining characteristic of a traditional IRA is the fact that contributions to one are considered tax-deductible, depending on eligibility requirements based on availability of other retirement plans, income, or tax-filing status. A traditional IRA is available to anyone who has sufficient income to make the initial contribution to the fund. As of 2010, the initial contribution for those who are under age 49 sits at $5,000, while those who are age 50 and above must pay $6,000.

TREASURY BILL

Treasury bills are often considered one of the least-risky investments that US investor can make Generally, a treasury bill will mature in one year or less. Treasury bills are sold on a weekly basis, and generally have maturity dates of 28 days, 91 days, 182 days, and 364 days. In the event where the U.S. Treasury has unusually low reserves, they may also sell cash management bills. Cash management bills tend to be more irregular in amount when compared to treasury bills, MA also have a different maturity rate.

TREASURY NOTE

Treasury notes are treasury securities purchased through the United States government. They tend to have a maturity rate between 1 to 10 years. They only come in denominations of $1000 or more. In the typical transaction, the purchaser of a treasury note will pay $950 for $1000 bond, and over the course of a predetermined amount of time (usually 10 years) the bond will reach full maturity. In this example, assuming that the bond matures at a rate of 3% per year, after 10 years the Treasury note will be worth $1300. In the finance world, the 10-year Treasury note has become the standard when discussing how well the government bond market in the United States is faring.

VARIABLE ANNUITY

Of variable annuity is a contract available through insurance companies, which provide sure payments at specific points. The most common time for payouts for any sort of annuity is retirement. There are many different kinds of annuities, but the most common are fixed and variable. A fixed annuity guarantees a payment for a specified amount of money, while variable annuities have no such guarantee. However, a variable annuity has a higher chance for appreciation than a fixed annuity.

 Print This Page Print This Page