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401(k) Plan
An employer-sponsored retirement savings plan that lets employees defer part of their pay, often with an employer match. Contributions may be pre-tax or Roth, and annual limits and withdrawal rules are set by the IRS.
403(b) Plan
A retirement savings plan similar to a 401(k) that is offered by public schools, certain nonprofits and some religious organizations. Contribution limits and distribution rules are set by the IRS.
Adjusted Gross Income (AGI)
Total income minus certain adjustments allowed by the tax code. AGI is the starting point for many tax calculations and helps determine eligibility for various deductions and credits.
Annuity
A contract with an insurance company under which the buyer makes a payment or series of payments in exchange for future income, often in retirement. Guarantees are subject to the claims-paying ability of the issuing insurer, and annuities may involve fees, surrender charges and tax considerations.
Asset
Anything of monetary value that a person or business owns, such as cash, investments, real estate or business interests.
Asset Allocation
How a portfolio is divided among asset classes such as stocks, bonds and cash. Allocation is typically based on goals, time horizon and risk tolerance. Asset allocation does not guarantee a profit or protect against loss.
Bear Market
A period of broadly declining market prices, commonly described as a drop of 20 percent or more from a recent high.
Beneficiary
The person or entity designated to receive assets from an account, insurance policy, retirement plan or estate. Beneficiary designations often override instructions in a will, so keeping them current matters.
Bond
A debt security in which an investor lends money to a government or company in exchange for interest payments and the return of principal at maturity. Bond values fluctuate with interest rates and credit conditions, and issuers can default.
Bull Market
A period of broadly rising market prices, often accompanied by investor optimism.
Business Continuation Planning
Planning for how a business would operate, transfer or wind down after an owner's death, disability or departure. It often involves legal agreements, insurance and coordination among advisors.
Buy-Sell Agreement
A legal agreement among business co-owners describing how an owner's interest will be bought out after events such as death, disability or retirement. Often funded with life or disability insurance.
Capital Gain / Loss
The difference between what you paid for an asset and what you sold it for. Gains may be taxable and losses may offset gains within limits; rates depend on how long the asset was held and your income.
Cash Value
The savings component that can build inside certain permanent life insurance policies. Accessing cash value through loans or withdrawals can reduce the death benefit and may have tax consequences.
Charitable Trust
A trust designed to benefit one or more charitable organizations, sometimes while also providing income or tax benefits to the donor or their family. These arrangements are complex and typically involve legal and tax professionals.
Compound Interest
Interest earned on both the original amount and on previously earned interest. Over long periods, compounding can meaningfully affect how savings grow.
Deduction (Tax)
An amount subtracted from income before tax is calculated, reducing taxable income. Taxpayers generally choose between the standard deduction and itemizing eligible expenses.
Disability Income Insurance
Insurance that replaces a portion of income if illness or injury prevents you from working. Policies differ in how they define disability, how long benefits last and when they begin.
Diversification
Spreading investments across different assets, sectors or regions so that no single holding dominates results. Diversification is a risk-management technique; it does not guarantee a profit or protect against loss in a declining market.
Dollar-Cost Averaging
Investing a fixed amount on a regular schedule regardless of price. This can reduce the effect of short-term volatility on the average purchase price, but it does not guarantee a profit or protect against loss, and it involves continuous investment through changing prices.
Equity
Ownership value. In investing, equity commonly refers to stock ownership; for a business or home, it is the value of ownership after subtracting debts against the asset.
Estate
Everything a person owns at death — property, accounts, business interests and personal belongings — less debts owed. An estate is settled and distributed under a will, trusts, beneficiary designations and state law.
Estate Tax
A tax on the transfer of assets at death, applied above exemption amounts set by federal and, in some cases, state law. Exemption levels and rules change over time.
Estimated Tax
Quarterly tax payments made during the year on income that is not subject to withholding, such as self-employment or investment income. Underpaying can result in penalties.
Executor
The person or institution named in a will and appointed to settle an estate: gathering assets, paying debts and taxes, and distributing what remains to beneficiaries.
Exchange-Traded Fund (ETF)
A pooled investment fund that trades on an exchange like a stock. ETFs are bought and sold at market prices, involve risk including possible loss of principal, and investors should consider objectives, risks, charges and expenses before investing.
Fixed Income
Investments, such as bonds, that pay set interest on a schedule. Often used for income and to balance the volatility of stocks, though values still fluctuate.
Gift Tax
A federal tax that can apply to transfers of money or property during life above annual and lifetime exclusion amounts. Most people owe no gift tax because of these exclusions, but larger gifts may require a gift-tax return.
Inflation
A general rise in prices over time, which reduces what a dollar buys. Long-term plans often account for inflation when estimating future income needs.
Individual Retirement Account (IRA)
A personal, tax-advantaged retirement account. Traditional IRA contributions may be tax-deductible with taxes due on withdrawal; annual limits, income rules and early-withdrawal penalties apply.
Joint Tenancy
A form of co-ownership in which owners hold equal shares and, with rights of survivorship, a deceased owner's share passes directly to the surviving owner(s) outside of probate.
Key-Person Insurance
Life or disability insurance a business owns on an essential employee or owner, designed to help the company absorb the financial impact of losing that person.
Life Insurance
A contract that pays a death benefit to beneficiaries when the insured dies. Term insurance covers a set period; permanent insurance can last a lifetime and may build cash value. Guarantees are subject to the claims-paying ability of the insurer.
Liquidity
How quickly an asset can be converted to cash without a significant loss in value. Cash is highly liquid; real estate and business interests generally are not.
Long-Term Care Insurance
Insurance that helps pay for extended care — at home, in assisted living or in a nursing facility — that health insurance and Medicare generally do not cover. Premiums, benefits and eligibility vary by policy.
Marginal Tax Rate
The tax rate applied to your last dollar of taxable income. In a progressive system, income fills lower brackets first, so your marginal rate is higher than the average rate you pay overall.
Market Risk
The possibility that investments decline in value because of broad market movements rather than anything specific to one holding. All investing involves risk, including possible loss of principal.
Municipal Bond
A bond issued by a state or local government. Interest is often exempt from federal income tax and sometimes state tax, though some municipal interest can affect other tax calculations.
Mutual Fund
A pooled investment that combines money from many investors to buy a portfolio of securities managed to a stated objective. Investors should consider a fund's objectives, risks, charges and expenses carefully before investing; this information is found in the prospectus.
Net Worth
The value of everything you own minus everything you owe. A basic measure of overall financial position, often tracked over time.
Pension
An employer-funded retirement plan that pays a defined benefit, often monthly for life, based on factors such as salary and years of service. Payout elections are usually irrevocable, so they deserve careful review.
Portfolio
The combined collection of a person's investments — such as stocks, bonds, funds and cash — viewed and managed as a whole.
Power of Attorney
A legal document authorizing someone to act on your behalf in financial or legal matters. A durable power of attorney remains effective if you become incapacitated.
Probate
The court-supervised process of validating a will, paying an estate's debts and distributing assets. Assets with beneficiary designations or held in certain trusts generally pass outside probate.
Prospectus
The official document describing an investment offering — its objectives, risks, fees and expenses. Read it carefully before investing.
Qualified Retirement Plan
An employer-sponsored plan, such as a 401(k) or pension, that meets IRS requirements and receives tax advantages. Contributions, vesting and withdrawals are governed by specific rules.
Required Minimum Distribution (RMD)
The minimum amount the IRS requires you to withdraw each year from certain retirement accounts starting at a set age. RMDs are generally taxable, and missing one can trigger a penalty.
Risk Tolerance
How much investment fluctuation — financially and emotionally — a person can accept in pursuit of their goals. It shapes how a portfolio is built and maintained.
Rollover
Moving retirement money from one eligible account to another, such as from an employer plan to an IRA, generally without triggering current tax when done correctly. Rules, timing and options deserve careful attention before acting.
Roth IRA
An IRA funded with after-tax dollars. Qualified withdrawals, including earnings, are tax-free when IRS conditions are met. Income limits can affect eligibility to contribute directly.
Stock
A share of ownership in a company. Stock values fluctuate with company performance and market conditions, and investors can lose principal.
Succession Planning
Preparing for the orderly transfer of business leadership and ownership — to family, partners, employees or an outside buyer — on a planned timeline or after an unexpected event.
Tax Credit
A dollar-for-dollar reduction of tax owed, unlike a deduction, which reduces the income on which tax is calculated. Some credits are refundable; many phase out at higher incomes.
Tax-Deferred
Earnings on which tax is postponed until money is withdrawn, as in traditional retirement accounts and certain annuities. Withdrawals are generally taxed as ordinary income and may face penalties before a set age.
Time Horizon
How long until you expect to need the money you are investing. Longer horizons can generally accommodate more short-term fluctuation; shorter horizons usually call for more stability.
Trust
A legal arrangement in which a trustee holds and manages assets for beneficiaries under written terms. Trusts can help direct how and when wealth transfers, and are drafted by attorneys.
Volatility
How much and how quickly an investment's value moves up and down. Higher volatility means larger swings in both directions.
Will
A legal document directing how your property should be distributed at death and naming an executor and, where relevant, guardians for minor children. Assets with beneficiary designations generally pass outside the will.
Yield
The income an investment produces — interest or dividends — expressed as a percentage of its price. Yield is not the same as total return, which also includes price changes.
Zero-Coupon Bond
A bond sold at a discount that pays no periodic interest; the return comes from receiving full face value at maturity. Tax may be due annually on accrued interest even though no cash is received.
Glossary definitions are provided for general educational purposes only and should not be considered investment, tax or legal advice. Financial terms and rules may vary based on circumstances and can change over time.
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Social Security
The federal program that pays retirement, disability and survivor benefits funded through payroll taxes. The age at which you claim retirement benefits permanently affects the monthly amount.
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