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401(k) — A 401(k) is a retirement savings plan sponsored by an employer. Through a 401(k), you invest a portion of your income before taxes are taken out, and whatever money you earn on your investment grows tax free. You pay taxes on the money as you begin taking withdrawals in retirement.

402(g) Limit – the amount of elective deferrals a plan participant may contribute to the plan. Assuming they do not contribute over 100% of their income. The 2023 limit is $22,500.

415 Limit – The total amount of annual additions allowed in a 401(k) plan including deferrals, matching and profit sharing. The 415 limit for 2023 is $66,000.

529 Plan — A 529 plan is a college savings plan in which a parent, grandparent or other person contributes to the plan on behalf of the future student. Contributions made to a 529 are typically invested in mutual funds, and any earnings grow tax free. Once you start making withdrawals from the account, the money is not subject to federal income tax as long as it’s used for qualified educational expenses.

Annuity — An annuity is a contract you buy from an insurance company that’s designed to give you a steady stream of income in retirement. You make a series of payments (or one lump-sum payment) to the insurance company—which it invests—and in exchange, the insurance company promises to provide you guaranteed monthly payments starting at some point in the future.

Asset — An asset is anything of value that can be converted into cash: a car, a home, a business, collectibles, jewelry, savings accounts and life insurance cash value; and investments such as stocks, bonds or mutual funds.

Asset Allocation — Asset allocation is the process of spreading investment assets across various asset classes (investment types and categories) to minimize the risk of losing everything if one type of investment performs poorly at any given time.

Bond — A bond is a type of investment. When you purchase a bond, you are essentially loaning your money—for a defined period of time—to a company, a government. In exchange, the entity promises to pay you back in full, along with interest payments.

Budget — A budget is an itemized list of expenses (or estimated expenses) for a given period, such as a monthly budget. A budget can be a helpful tool when you want to get a better handle on where your money is going or make changes to your spending habits.

Catch Up Contribution – The extra amount of deferrals allowed for plan participants over the age of 50 on top of their standard 402(g) limit. The catch up contribution for 2023 is $7,500.

Credit Card Debt — Most credit cards are forms of what’s called revolving debt; you’re given a credit limit, and you can make charges up to that limit. You make payments on the balance each month (which can vary depending on how much you charge), and you can either pay it off entirely or you can carry a balance forward to the next month and pay interest.

Credit Score — Your credit score is a reflection of your credit history: how long you’ve had credit, how much debt you have and whether you pay your bills on time. Credit scores range from 300 to 850; the higher the score, the better.

  • 760 – 850: Excellent

  • 720 – 760: Very good

  • 680 – 720: Average – very good

  • 620 – 680: Fair – poor

  • Below 620: Poor

Debt-to-Income Ratio — A debt-to-income ratio is one of the factors that lenders consider if you try to obtain a loan or line of credit. If you have a high level of debt in relation to your income, you may be viewed as someone who’d have trouble making payments. It’s also a factor considered by credit bureaus as they calculate your credit score.

Disability Income Insurance — Disability income insurance replaces a portion of your income if you become injured or ill and unable to work. Disability coverage can be offered through an employer (called group disability) and/or purchased individually.

Emergency Fund — An emergency fund is designed to help you cover the cost of an unexpected expense without having to use a high-interest credit card or borrow the money. Experts recommend having three to six months of living expenses in a bank account you can access quickly.

Estate Planning — Estate planning is the process of making sure your wishes are known and honored after you die. Estate plans typically include legal documents such as a will; a living will (which states your preferences for medical care); and the naming of powers of attorney for health care and finances, who are people you legally empower to make decisions for you if you become ill or incapacitated.

FAFSA — FASFA stands for Free Application for Federal Student Aid. All students who are interested in applying for federal aid or student loans will need to complete this form, which can be downloaded on the FASFA website.

Good Debt vs. Bad Debt — Good debt is debt that is used to acquire an asset (a mortgage loan, a business loan or even a student loan); it’s “good” because it may lead to a higher return on investment in the future. Bad debt is debt you take on (typically on a credit card) to pay for things like eating out, going to the movies or buying jewelry. Bad debt typically carries a higher interest rate than good debt.

Investing — Investing is the process of putting your money in a financial vehicle where it has the potential to grow more quickly than it would in a savings account. Some of the most common investment assets are stocks, bonds, mutual funds and exchange-traded funds.

Life Insurance — The primary purpose of life insurance is to protect loved ones when you die. It gives you a way to leave tax-free money behind for the people who depend on you for financial support. Proceeds can be used to cover funeral costs, pay off debt and provide survivors with money to live on.

Living Will — A living will (sometimes called a health care power of attorney) is a legal document that states your preferences for medical care if you’re unable to make decisions for yourself.

Long-term Care Needs — Long-term care refers to services provided to chronically ill people. These services are generally needed for an extended period of time and may not cure or heal the individual receiving them. Rather, these services help with routine tasks such as eating, bathing and dressing. Long-term care expenses are not typically covered by Medicare, but long-term care insurance is available to pay some of these expenses.

Mutual Funds — Mutual funds are collections of stocks, bonds and other investments. When you invest in a mutual fund, your money is pooled with money from hundreds or thousands of other people and then invested (and managed) by professional money managers.

Non-Qualified Plan– a type of employer-sponsored retirement plan that falls outside of the employee retirement income security act guidelines. Non-qualified plans are designed to meet specialized retirement needs for key executives and other select employees.

Permanent Life Insurance — Permanent life insurance stays with you for life, as long as your premiums are paid. Not only does it provide a death benefit, it also builds cash value over time. As you make premium payments, this cash value grows and becomes a source of funding you can access to help meet other financial goals.

Qualified Plan – I type of retirement plan that is described in section 401(a) of the Tax Code. These plans normally receives some sort of preferential tax treatment making them attractive options for employee benefits.

Required Minimum Distributions — A required minimum distribution (RMD) is the amount the government requires you to withdraw from qualified retirement accounts each year, starting at age 70½.

Roth IRA — A Roth IRA is a retirement savings account you open as an individual. The big difference between a Roth IRA and a traditional IRA is this: When you make a contribution to a Roth IRA, you pay taxes on that money before you make the contribution, which means your withdrawals (and gains) in retirement will generally be tax free. In addition, there are income limits that determine who can contribute to a Roth.

Roth 401(k) — A Roth 401(k) is a retirement savings vehicle offered by an increasing number of employers. The big difference between a Roth 401(k) and a traditional 401(k) is this: When you make a contribution to a Roth 401(k), you pay taxes on that money before you make the contribution, which means your withdrawals (and gains) in retirement will generally be tax free.

Safe Harbor Plan – A type of 401(k) plan that requires employers make either an eligible matching or nonelective contribution. In return for meeting minimum requirements set out by the IRS the plan is automatically deemed to pass non-discrimination testing. This is a powerful plan that lets owners and highly compensated employees fully participate in 401(k) deferrals that they might not otherwise be eligible for.

Stocks — Stocks are a common investment vehicle. When you buy stock in a company, you become a shareholder, or part owner. When the company does well, the price of its stock (and the value of your investment) goes up. When the company performs poorly, the price of its stock might drop, and you could lose some or all of your investment.

Term Life Insurance — Term life insurance provides death benefit coverage only for a specific period of time. During that time, as long as your premiums are paid, coverage is in place. But if you stop making payments or if the term of your policy expires and you don’t renew it, your coverage ends.

Traditional IRA — IRA stands for Individual Retirement Account. Contributions made to a traditional IRA are typically invested in mutual funds, and any earnings grow tax free. You can open an IRA at most major banks or investment firms; and depending on your income, your contribution may be tax deductible.

Will vs. Trust — Wills and trusts are legal documents that essentially spell out who gets what after you’re gone. Both a will and a trust will help to ensure that the assets you’ve accumulated during life (car, house, investments, insurance) get transferred to the people you choose and according to your wishes. A big difference between them is this: A will becomes a matter of public record during a court process called probate. That means anyone can see what’s in the will and who gets what. A trust is handled privately.