Resources Glossary

As you begin saving for retirement, you can expect to encounter quite a few new words, phrases and concepts. Familiarizing yourself with them will make you a more confident saver, help you navigate the process and evolve your savings strategies.

Tax-deferred savings and investment plan in which employees may choose to contribute up to a certain amount. Employers often match a percentage of an employee's contributions.
Employer-sponsored retirement plan offered by some nonprofits, schools and hospitals. Allows employees to contribute a portion of their pay on a pretax basis. May also be offered as a Roth.
457 Plan
Employer-sponsored retirement plan offered by some state and local governments and tax-exempt organizations that allow employees to contribute a portion of their pay on a pretax basis. May also be offered as a Roth.
Contract between an individual and an insurance company. The individual pays money into an account in exchange for a guaranteed payment at or during retirement.
Asset Allocation
Mix of certificates, stocks, bonds and cash in a retirement account. The proportions aim to balance risk and reward based on the investor's goals, risk tolerance and investment horizon.
Persons or trust designated to receive plan benefits of a participant in the event of the participant's death.
Investment vehicle that represents a loan to a corporation, government or municipality. These generally pay a fixed interest rate and return the principal investment at maturity.
Certificate of Deposit (CD)
Bank instrument enabling a depositor to earn interest on their money during a fixed time period. Rates vary.
Compounding Interest
Interest that is calculated not only on the principal, but also on interest accumulated from prior periods.
Monetary contribution to a retirement plan, often expressed as a percentage of annual income.
Movement of assets from a Traditional, SEP or Simple IRA to a Roth IRA.
Defined Benefit Plan
Pension plan that guarantees specific retirement benefits.
Defined Contribution Plan
Pension plan that requires specific rates of contribution but doesn't guarantee any specific retirement benefit.
Removal of assets from a retirement account; assets are then paid to the account owner or beneficiary.
Early Withdrawal Penalty
Penalty of ten percent imposed for withdrawal of assets from a qualified retirement plan prior to age 59½.
Estate Plan
Comprehensive plan for the orderly handling, disposition and administration of assets left after an individual's death.
Individual Retirement Account (IRA)
Personal retirement account opened by an individual with earned income or whose spouse has earned income; component of the overall Individual Retirement Arrangement.
Rate at which prices for goods and services rise and, consequently, purchasing power is falling.
Mutual Fund
Collection of securities managed by an investment company and owned by a group of shareholders.
Pension Fund
Fund set up and invested by an employer or union to provide income for workers when they retire. Government and military employees often collect pensions.
Power of Attorney (POA)
Authorization of one person to make legal decisions and take other actions on behalf of another person.
Act of changing a Roth IRA back into a Traditional IRA.
Required Minimum Distribution (RMD)
Amount of money the federal government requires you to withdraw each year from retirement accounts after you reach age 72.1
Moving assets from one qualified plan to another or to an IRA within 60 days of distributions, while retaining the tax benefits of a qualified plan.
Roth IRA
IRAs funded with nondeductible contributions; not taxed upon withdrawal.
Simplified Employee Pension (SEP)
An option for business owners and self-employed individuals as a method to contribute toward their employees' retirement as well as their own retirement savings.
Social Security
A federal government program of social insurance and benefits including retirement income, disability income, Medicare and Medicaid, and death and survivorship benefits.
Share of ownership in a company, traded on one or more exchanges.
Any investment, account or plan that is tax-exempt, is tax-deferred or offers other tax benefits.
Tax Deferral
Taxes are not due on the account's earnings (and in some cases, contributions made to the account) until they're withdrawn.
Thrift Savings Plan (TSP)
Employer-sponsored retirement plan for federal employees and service members. Employees contribute a portion of their pay, which is matched by the employers.
Traditional IRA
IRA that allows individuals to contribute pretax income, up to certain annual limits, toward investments that can grow tax-deferred.
Agreement in which assets are transferred from a grantor to a trustee for the purpose of benefiting one or more beneficiaries.
Individual, bank or trust company having fiduciary responsibility for holding plan assets.
1For IRA owners who turn 70½ on or after 1/1/2020

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Investors should carefully consider the investment objectives, risks, and charges and expenses associated with municipal fund securities before investing. This and other information about municipal fund securities is available in the issuer's official statement which can be obtained directly from the issuer, or if distributed through a broker dealer, may be obtained from a financial adviser, and should be read carefully before investing.

An investor should consider, before investing, whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program.

If a municipal fund security describes one or more of their investment options as having the characteristics of a money market fund, it is important to know that an investment in the security is not insured or guaranteed by the FDIC or any other government agency (unless such guarantee is specifically provided by or on behalf of such issuer) and, if the security is held out as maintaining a stable net asset value, that although the issuer seeks to preserve the value of the investment at $1.00 per share or such other applicable fixed share price, it is possible to lose money by investing in the security.