Glossary

A federal law that establishes the regulations under which retirement plans are governed and spells out the federal income tax regulations and effects for qualified retirement plans.

A retirement plan sponsored by an employer for the benefit of its employees. These typically fall into one of two types: defined-contribution plans (such as SEP IRAs, 401(k) plans and 403(b) plans) and defined-benefit plans (such as traditional pensions).

The value of real property or a business after all liabilities have been paid. A home worth $300,000 with a $200,000 mortgage would have $100,000 in equity.

The preparations necessary to manage a person's financial and healthcare matters during his or her lifetime and to effectively and economically distribute the assets within that estate upon his or her death.

Federal and/or state taxes that may be levied on the assets of a deceased person upon his or her death. These taxes are paid by the deceased person's estate rather than his or her heirs.

A share of an investment company that owns a block of shares selected to pursue a specific investment objective. ETFs trade like stocks and are listed on stock exchanges and sold by broker-dealers. Exchange-traded funds are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

An executive benefit paid for by an employer.

A person named by a will or appointed by the probate court to distribute the deceased's assets as directed by the will or, in the absence of a will, in accordance with the probate laws of the state.

A series of income ranges within which a taxpayer's income is taxed at a certain rate. Taxpayers pay the tax rate in a given bracket only for that portion of their overall income that falls within the bracket's range.

The United States' central bank. The Federal Reserve System consists of a series of 12 independent banks that operate under the supervision of a seven-member, federally appointed board of governors. The Fed strives to maintain maximum employment, stable price levels, and moderate long-term interest rates. It establishes and enforces the regulations banks, savings and loans, and credit unions must follow. It also acts as a clearing house for certain financial transactions and provides banking services to the federal government.

Loans, grants, scholarships, and work-study programs provided by federally and privately funded sources to enable students to attend college.

FINRA is an independent regulator that oversees all securities firms doing business in the U.S. FINRA seeks to protect investors by making sure the securities industry operates fairly and honestly.

A formal record of the financial activities of a business, person, or other entity. For a business, financial statements typically include a balance sheet, a profit and loss statement, and a cash flow statement.

Joint life insurance taken out on the lives of two or more people that pays its death benefit when the first insured person dies.

A contract with an insurance company that guarantees investment growth at a fixed interest rate as well as current or future payments in exchange for a premium or series of premiums. The interest earned on an annuity contract is not taxable until the funds are paid out or withdrawn. The guarantees of an annuity contract depend on the issuing company's claims-paying ability. Annuities have fees and charges associated with the contract, and a surrender charge also may apply if the contract owner elects to give up the annuity before certain time-period conditions are satisfied.

A mortgage with a set interest rate that will not change over the life of the loan.

The legal process under which a creditor seizes the property of a borrower who has not made timely payments on his or her debt.

The voluntary transfer of assets under which the giver receives no compensation and retains no interest in his or her gift.

A tax the federal government and some states levy on the transfer of property as a gift. Generally gift taxes increase with the amount of the gift and are paid by the donor.

Total monthly income generated from all sources before taxes and other expenses are considered.

Life insurance that insures all the members of a specific group, most often the employees of a specific company or the members of a professional association.

An account that offers individuals covered by high-deductible health plans a tax-advantaged means to save for medical expenses. Within certain limits, funds contributed to the account are not subject to federal income taxes. Unlike Flexible Spending Accounts (FSAs), funds can be rolled over from year to year if not spent.

The real value of a home after all liabilities have been paid. Thus a home worth $300,000 with a $200,000 mortgage would have $100,000 in equity.

Monies or other compensation received from any source. This includes wages, commissions, bonuses, Social Security and other retirement benefits, unemployment compensation, disability, interest, and dividends. Generally, all income is taxable unless it is specifically exempted by law.

An average of the prices of a hypothetical basket of securities representing a particular market or portion of a market. Among the most well known are the Dow Jones Industrials Index, or the Dow; the Standard & Poor's 500 Index, or the S&P 500; and the Russell 2000 Index. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index.

A qualified retirement account for individuals. Contributions to a Traditional IRA may be fully or partially deductible, depending on your individual circumstances. Once you reach age 73, you must begin taking the required minimum distributions from a traditional IRA in most circumstances. Withdrawals from traditional IRAs are taxed as ordinary income and, if taken before age 59_, may be subject to a 10% federal income tax penalty. Contributions to a traditional IRA may be fully or partially deductible, depending on your adjusted gross income.

An upward movement in the average level of prices. Each month, the Bureau of Labor Statistics reports on the average level of prices when it releases the Consumer Price Index (CPI).

A company's first public offering of stock. In an IPO, investment banks buy a company's shares and then offer them to the public at an offering price. As the stock is traded, the market price may be more or less than the offering price. Keep in mind that the return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.

The cost to borrow money expressed as a percentage of the loan amount over one year.

The condition of an estate when its owner dies without leaving a valid will. In such circumstances, state law normally determines who inherits property and who serves as guardian for any minor children.