Financial terminology can be complicated. This glossary is designed to make common investment, retirement, tax, insurance, estate planning, and financial planning terms easier to understand.
Knowledge can help you ask better questions and make more informed financial decisions.
139 terms
Retirement
A feature in some 401(k) plans that allows participants to borrow from their own vested account balance and repay the loan, with interest, through payroll deductions.
Borrowed money is no longer invested while the loan is outstanding, which can affect long-term growth. If the loan is not repaid on schedule — including, in many cases, after leaving the employer — the remaining balance may be treated as a taxable distribution.
Retirement
An employer-sponsored retirement plan that lets employees set aside part of their paycheck for retirement. Contributions may be made on a pre-tax basis, a Roth (after-tax) basis, or both, depending on what the plan offers. Many employers also add matching or profit-sharing contributions.
Investments inside the plan grow tax-deferred, and annual contribution limits are set by the IRS and may change from year to year. Withdrawals before retirement age may be subject to income taxes and additional penalties.
Retirement
A retirement savings plan similar to a 401(k), offered to employees of public schools, certain nonprofit organizations, and some religious organizations. Contributions are typically made through payroll and may be pre-tax or Roth, depending on the plan.
Retirement
A deferred compensation plan available to many state and local government employees and to some employees of nonprofit organizations. It works much like a 401(k), though its withdrawal rules can differ, so it is worth understanding the specific terms of your plan.
Financial Planning
A tax-advantaged savings plan designed to help families save for education expenses. Earnings grow tax-deferred, and withdrawals used for qualified education costs are generally free from federal income tax.
Plans are sponsored by individual states, and features, investment options, fees, and state tax benefits vary. Withdrawals used for non-qualified expenses may be subject to income taxes and an additional penalty on earnings.
Insurance
A provision in the tax code that allows certain insurance and annuity contracts to be exchanged for another similar contract without the exchange itself being treated as a taxable event. For example, a life insurance policy may be exchanged for another life insurance policy or for an annuity.
An exchange may involve new fees, surrender charges, or a new surrender period, and the replacement contract may have different features or guarantees. The costs and benefits of both contracts should be compared carefully before making a change.
Taxes
Your total gross income minus certain specific adjustments, such as some retirement contributions, student loan interest, or health savings account contributions.
AGI is an important figure on your tax return because it is used to determine eligibility for many deductions, credits, and other tax provisions.
Estate Planning
A legal document that records your wishes for medical care if you become unable to communicate them yourself. It may include a living will and the appointment of someone to make health care decisions on your behalf. Requirements vary by state, so these documents are typically prepared with an attorney.
Investments
A broad term for investments outside of traditional stocks, bonds, and cash — such as private equity, private credit, hedge funds, real estate funds, or commodities.
Alternative investments can be complex and may carry higher fees, limited liquidity, and less transparency than traditional investments. They are not suitable for all investors and are often available only to those who meet certain income or net worth requirements.
Taxes
A parallel federal income tax system designed to ensure that taxpayers who benefit from certain deductions and preferences still pay at least a minimum amount of tax. Taxpayers calculate their liability under both systems and pay whichever is higher.
Events such as exercising certain stock options can trigger the AMT, so it is worth reviewing with a tax professional before making those decisions.
Banking and Credit
The yearly cost of borrowing money, expressed as a percentage. APR includes the interest rate plus certain fees, which makes it a useful way to compare loan or credit card offers on a consistent basis.
Insurance
A contract with an insurance company in which you make a lump-sum payment or a series of payments in exchange for future income or other benefits. Annuities can be designed to provide income for a set period or for life.
Annuities come in several forms, including fixed, variable, and indexed. They may carry fees, surrender charges, and other costs, and any guarantees are backed by the claims-paying ability of the issuing insurance company. Withdrawals may be subject to income taxes and, if taken early, additional penalties.
Financial Planning
Anything of value that you own — such as cash, investments, real estate, retirement accounts, a business interest, or personal property.
Investments
How a portfolio is divided among different types of investments, such as stocks, bonds, and cash. The mix is typically shaped by your goals, time horizon, and comfort with risk.
Asset allocation does not ensure a profit or protect against loss in declining markets.
Investments
A group of investments that share similar characteristics and tend to behave in similar ways. Common asset classes include stocks (equities), bonds (fixed income), cash equivalents, and real estate.
Investments
A prolonged period of falling prices in a financial market, often described as a decline of 20% or more from a recent high. Bear markets are a normal, if uncomfortable, part of long-term investing.
Estate Planning
A person or organization named to receive assets from an account, insurance policy, trust, or will. Beneficiary designations on retirement accounts and life insurance generally take priority over instructions in a will, so it is important to review them regularly.
Investments
A loan made by an investor to a government, municipality, or corporation. In return, the issuer typically pays interest over a set period and returns the original amount at maturity.
Bond prices generally move in the opposite direction of interest rates. Bonds are subject to interest rate risk, credit risk, and inflation risk, and may be worth more or less than their original cost if sold before maturity.
Investments
A taxable investment account held with a brokerage firm that allows you to buy and sell stocks, bonds, mutual funds, ETFs, and other securities. Unlike retirement accounts, it generally has no contribution limits or withdrawal restrictions, though gains and income may be taxable each year.
Investments
A sustained period of rising prices in a financial market, usually accompanied by investor optimism and a growing economy.
Business Planning
A legal agreement among business owners that sets out what happens to an owner's share of the business if that owner dies, becomes disabled, retires, or leaves. It typically establishes who may buy the interest and how its price will be determined.
These agreements are often funded with life or disability insurance and should be prepared with qualified legal and tax professionals.
Taxes
The difference between what you paid for an investment or other asset (its cost basis) and what you receive when you sell it. A sale for more than your basis produces a gain; a sale for less produces a loss.
Gains on assets held longer than one year are generally taxed at long-term capital gains rates, which are often lower than ordinary income tax rates. Losses can offset gains and, within limits, ordinary income.
Insurance
The savings component that builds up inside some permanent life insurance policies. Policyholders may be able to borrow against or withdraw from the cash value, though doing so can reduce the death benefit and may have tax consequences.
Banking and Credit
A savings product offered by banks and credit unions that pays a fixed interest rate for a set period of time. Withdrawing money before the CD matures usually results in a penalty. CDs at insured institutions are generally covered by FDIC or NCUA insurance up to applicable limits.
Charitable Planning
An irrevocable trust that makes payments to one or more charities for a set period. When that period ends, the remaining assets pass to non-charitable beneficiaries, such as family members.
These trusts can be complex, involve ongoing administrative costs, and have significant tax implications. They should be established with qualified legal and tax professionals.
Charitable Planning
An irrevocable trust that pays income to you or other named beneficiaries for life or a set term. When the trust ends, the remaining assets go to the charities you have chosen.
Charitable remainder trusts can be complex and cannot be undone once established. They should be designed with qualified legal and tax professionals.
Insurance
A federal law that allows many workers and their families to keep the group health coverage they had through an employer for a limited time after a job loss, reduction in hours, or other qualifying event. The individual generally pays the full premium, plus an administrative fee.
Investments
A type of ownership share in a corporation. Common stockholders typically have voting rights and may receive dividends, but in a bankruptcy they are paid only after creditors and preferred stockholders.
Estate Planning
A form of marital property ownership used in certain states, under which most assets acquired during a marriage are considered owned equally by both spouses. Community property rules can affect how assets are divided, inherited, and taxed.
Financial Planning
Interest earned on both your original amount and on the interest that has already been added to it. Over long periods, compounding can have a significant effect on how savings grow — or on how debt accumulates.
Financial Planning
A government measure of the average change over time in the prices consumers pay for a broad basket of goods and services. The CPI is one of the most widely used indicators of inflation.
Business Planning
A business structure that is legally separate from its owners. A corporation can own property, enter into contracts, and be held liable on its own, which generally limits its shareholders' personal liability for business debts.
Taxes
The original value of an asset for tax purposes, usually what you paid for it, adjusted for items such as reinvested dividends, improvements, or depreciation. Cost basis is used to calculate a capital gain or loss when the asset is sold.
Banking and Credit
A number that summarizes your credit history and helps lenders estimate how likely you are to repay borrowed money. Payment history, amounts owed, and length of credit history are among the factors that influence it.
Investments
A financial institution that holds and safeguards investments on behalf of its clients and keeps records of transactions and account activity.
Taxes
An amount that reduces the income subject to tax. Taxpayers generally choose between the standard deduction and itemizing specific deductions, such as certain mortgage interest, state and local taxes, or charitable gifts.
Retirement
An employer-sponsored retirement plan that promises a specific benefit at retirement, typically based on a formula that considers salary and years of service. A traditional pension is the most common example.
Retirement
An employer-sponsored retirement plan in which the amount contributed is defined, but the eventual benefit is not. The account value depends on contributions and investment performance. 401(k) and 403(b) plans are common examples.
Retirement
A transfer of retirement plan assets directly from one plan or account to another — for example, from a former employer's 401(k) to an IRA — without the money being paid to you first. Handled correctly, a direct rollover generally avoids tax withholding and current taxes.
Before moving assets out of an employer plan, it is worth comparing fees, investment options, services, and protections.
Insurance
Insurance that replaces a portion of your earned income if illness or injury prevents you from working. Policies vary in how they define disability, how long benefits last, and how long you must wait before benefits begin.
Investments
Spreading investments across different asset classes, industries, and regions so that the performance of any single investment has less effect on the overall portfolio.
Diversification does not ensure a profit or protect against loss in declining markets.
Investments
A portion of a company's earnings paid out to its shareholders, usually in cash or additional shares. Dividends are not guaranteed and can be reduced or discontinued at any time.
Investments
Investing a fixed amount at regular intervals, regardless of market conditions. This approach buys more shares when prices are lower and fewer when prices are higher.
Dollar-cost averaging does not ensure a profit or protect against loss in declining markets. Investors should consider their ability to continue investing through periods of low prices.
Charitable Planning
A charitable giving account held by a sponsoring public charity. You make an irrevocable contribution, may be eligible for a tax deduction in the year of the gift, and can recommend grants to qualified charities over time.
Contributions cannot be returned, and the sponsoring organization has final control over grants. Fees and investment options vary by sponsor.
Investments
A widely followed stock market index that tracks the share prices of 30 large U.S. companies. It is often used as a quick snapshot of how the broader stock market is performing. Indexes are unmanaged and cannot be invested in directly.
Retirement
Taking money out of a retirement account, annuity, or CD before the age or date allowed under its rules. Early withdrawals from retirement accounts may be subject to ordinary income taxes plus an additional federal penalty, though certain exceptions may apply.
Financial Planning
Money set aside in an accessible account to cover unexpected expenses or a temporary loss of income. Having a reserve can help avoid selling investments or taking on debt at an inconvenient time.
Retirement
A retirement savings plan offered by an employer to its employees, such as a 401(k), 403(b), 457(b), SIMPLE IRA, or pension plan. These plans often allow contributions through payroll and may include employer contributions.
Investments
Ownership in an asset after subtracting any debts against it. In investing, equity usually refers to stock — an ownership stake in a company. In real estate, it refers to the portion of a property's value you own outright.
Retirement
The Employee Retirement Income Security Act, a federal law that sets minimum standards for most private-sector retirement and health plans. It establishes rules for plan participants' rights, disclosure, and the conduct of those who manage plan assets.
Estate Planning
The process of arranging how your assets will be managed and distributed during your lifetime and after your death. It may include wills, trusts, powers of attorney, health care directives, and beneficiary designations.
Estate planning documents should be prepared by a qualified attorney, with financial planning helping coordinate how assets are titled and passed on.
Estate Planning
A tax on the transfer of property at death. Federal estate tax applies only to estates above an exemption amount set by law, and some states impose their own estate or inheritance taxes. Exemption amounts can change, so current rules should be reviewed with a qualified professional.
Investments
An investment fund that holds a basket of securities and trades on a stock exchange throughout the day, much like an individual stock. Many ETFs are designed to track an index.
ETFs are subject to market risk, including the possible loss of principal, and their shares may trade at a price above or below the value of the underlying holdings. Investors should review a fund's prospectus, including its objectives, risks, and expenses, before investing.
Estate Planning
The person or institution named in a will to manage the estate after death. Responsibilities typically include gathering assets, paying debts and taxes, and distributing property according to the will.
Investments
The annual cost of owning a mutual fund or ETF, expressed as a percentage of the assets invested. These expenses are deducted from the fund's returns, so even small differences can add up over time.
Taxes
A range of taxable income that is taxed at a particular rate. The U.S. uses a progressive system, so different portions of your income are taxed at increasing rates — your top bracket applies only to the income that falls within it, not to all of your income.
Banking and Credit
The central bank of the United States. Among its roles, the Federal Reserve sets monetary policy, influences short-term interest rates, supervises banks, and works to support stable prices and maximum employment.
Financial Planning
A person or organization legally obligated to act in the best interest of another party. Trustees, executors, and certain financial professionals may have fiduciary responsibilities, depending on their role and the services provided.
Financial Planning
A comprehensive look at your current financial situation, your goals, and the strategies that may help you pursue them. A plan typically considers cash flow, investments, retirement, taxes, insurance, and estate planning together, and is reviewed as life changes.
Financial Planning
A summary of financial information. For individuals, it often means a statement of net worth listing assets and liabilities, or a cash flow statement showing income and expenses. For businesses, it includes the balance sheet, income statement, and cash flow statement.
Investments
The Financial Industry Regulatory Authority, a self-regulatory organization that oversees broker-dealers and their registered representatives in the United States. Investors can use FINRA's BrokerCheck tool to research the background of firms and financial professionals.
Insurance
An annuity that credits a guaranteed minimum interest rate for a set period and can provide predictable income. Guarantees are based on the claims-paying ability of the issuing insurance company. Fixed annuities may have surrender charges for early withdrawals, and taxes and penalties may apply.
Investments
Investments, such as bonds, that typically pay a set amount of interest on a regular schedule. Fixed income is often used to generate income or reduce overall portfolio volatility, though it carries interest rate, credit, and inflation risks.
Banking and Credit
A home loan with an interest rate that stays the same for the life of the loan, so the principal and interest portion of the monthly payment does not change.
Estate Planning
A transfer of money or property to another person without expecting anything of equal value in return. Gifting can be part of a family's estate and legacy planning.
Taxes
A federal tax on certain transfers of property by gift. Most gifts fall within annual or lifetime exclusions and do not result in tax owed, though some may require filing a gift tax return. Current exclusion amounts should be confirmed with a qualified tax professional.
Taxes
All income you receive before taxes and deductions — including wages, interest, dividends, rental income, business income, and certain retirement distributions.
Investments
Shares of a company expected to grow its earnings faster than the overall market. Growth companies often reinvest profits rather than pay dividends, and their stock prices can be more volatile.
Estate Planning
A person appointed to care for a minor child or an adult who cannot manage their own affairs. Parents often name a preferred guardian for their children in their wills.
Estate Planning
A legal document that names someone to make medical decisions for you if you are unable to make them yourself. It is sometimes called a health care proxy.
Taxes
A tax-advantaged account available to people enrolled in a qualifying high-deductible health plan. Contributions may be tax-deductible, earnings can grow tax-free, and withdrawals for qualified medical expenses are generally tax-free.
Withdrawals for non-medical expenses may be subject to income taxes and penalties. Annual contribution limits are set by the IRS and adjust over time.
Investments
A mutual fund or ETF designed to track the performance of a specific market index, such as a broad U.S. stock index. Index funds generally aim to match, rather than outperform, their benchmark. They are subject to market risk, and indexes themselves cannot be invested in directly.
Retirement
A personal retirement savings account that offers tax advantages. With a traditional IRA, contributions may be tax-deductible and growth is tax-deferred; withdrawals are generally taxed as income. Eligibility, contribution limits, and deductibility rules depend on income and other factors.
Withdrawals before retirement age may be subject to income taxes and an additional penalty.
Financial Planning
The general rise in prices over time, which reduces the purchasing power of money. Even modest inflation can significantly affect long-term goals such as retirement income.
Banking and Credit
The cost of borrowing money, or the amount earned for lending or depositing it. Interest is usually expressed as an annual percentage rate.
Estate Planning
Dying without a valid will. When this happens, state law determines how the estate is distributed, which may not reflect what the person would have wanted.
Investments
The possibility that an investment's actual return will differ from what was expected, including the possibility of losing some or all of the money invested. Common types include market, interest rate, credit, inflation, and liquidity risk.
Estate Planning
A trust that generally cannot be changed or cancelled once it is created without the consent of the beneficiaries or a court. Assets placed in it are typically removed from the grantor's control.
Irrevocable trusts are used for a variety of estate, tax, and asset-protection goals. Because they are difficult to undo, they should be established with a qualified attorney and tax professional.
Estate Planning
A form of shared ownership in which two or more people own property together. With joint tenancy with right of survivorship, a deceased owner's share passes automatically to the surviving owner or owners, generally outside of probate.
Business Planning
Life or disability insurance owned by a business on an owner or employee whose loss would significantly affect its operations. The policy benefit can help the business manage the financial impact of that loss.
Insurance
A contract in which an insurance company pays a death benefit to named beneficiaries when the insured person dies, in exchange for premium payments. It is commonly used to replace income, pay debts, fund business agreements, or support estate plans.
Coverage and cost depend on health, age, underwriting, and the policy's terms, and any guarantees are subject to the claims-paying ability of the issuing insurer.
Business Planning
A flexible business structure that generally protects owners from personal liability for business debts while allowing profits and losses to pass through to the owners' personal tax returns, depending on how it elects to be taxed.
Investments
How quickly and easily an asset can be converted to cash without significantly affecting its price. Cash is highly liquid; real estate and private investments are generally less so.
Insurance
Insurance that helps pay for extended care services, such as in-home care, assisted living, or nursing home care, when someone can no longer perform certain daily activities on their own. Premiums, benefits, and waiting periods vary widely by policy.
Investments
The total market value of a company's outstanding shares, calculated by multiplying the share price by the number of shares. Companies are often grouped as large-cap, mid-cap, or small-cap based on this figure.
Retirement
The federal health insurance program for people age 65 and older and for some younger people with certain disabilities or conditions. It is divided into parts that cover hospital care, medical services, and prescription drugs, with private plan options also available.
Banking and Credit
A loan used to buy real estate, in which the property itself serves as collateral. If the loan is not repaid as agreed, the lender may take possession of the property.
Investments
A bond issued by a state, city, or other local government to fund public projects. Interest is often exempt from federal income tax and sometimes from state and local taxes. Some municipal bond income may be subject to the alternative minimum tax, and municipal bonds carry interest rate and credit risk.
Investments
An investment that pools money from many investors to buy a diversified portfolio of stocks, bonds, or other securities, managed according to a stated objective.
Mutual funds are subject to market risk, including the possible loss of principal, and charge ongoing expenses. Investors should carefully review a fund's prospectus, including its objectives, risks, charges, and expenses, before investing.
Investments
The per-share value of a mutual fund or ETF, calculated by dividing the total value of the fund's holdings, minus liabilities, by the number of shares outstanding.
Financial Planning
The value of everything you own minus everything you owe. Tracking net worth over time offers a simple view of overall financial progress.
Taxes
Income taxed at regular federal income tax rates, such as wages, interest, short-term capital gains, and most distributions from traditional retirement accounts.
Retirement
A retirement plan, usually provided by an employer, that pays a regular benefit in retirement. Benefits are often based on years of service and salary, and retirees may choose among payout options, such as a single-life or joint-and-survivor benefit.
Insurance
Life insurance designed to last for the insured's lifetime, as long as premiums are paid. Whole life and universal life are common types. Many permanent policies also build cash value. Premiums are generally higher than for term insurance, and policy loans or withdrawals can reduce the death benefit.
Investments
The complete collection of investments held by an individual or organization, such as stocks, bonds, funds, and cash.
Estate Planning
A legal document that authorizes someone to act on your behalf in financial or legal matters. A durable power of attorney remains effective if you become incapacitated. These documents should be prepared with an attorney.
Insurance
The amount paid for an insurance policy, typically monthly, quarterly, or annually.
Charitable Planning
A charitable organization usually funded by a single individual, family, or company, which makes grants to other charities or runs its own charitable programs. Foundations offer a high degree of control but carry administrative, reporting, and distribution requirements.
Estate Planning
The court-supervised process of validating a will, paying debts, and distributing a deceased person's assets. Probate can be time-consuming and public, which is one reason some families use trusts and beneficiary designations.
Charitable Planning
A direct transfer from an IRA to a qualified charity by an IRA owner who has reached the eligible age. A QCD can count toward required minimum distributions and is generally excluded from taxable income.
Eligibility rules and annual limits apply and may change, so a QCD should be coordinated with a tax professional.
Taxes
A dividend that meets certain IRS requirements and is taxed at the lower long-term capital gains rates rather than ordinary income rates.
Investments
Adjusting a portfolio back to its target asset allocation after market movements have shifted it. Rebalancing can help keep risk in line with your plan, though it may involve transaction costs and, in taxable accounts, taxes.
Retirement
The minimum amount that owners of traditional IRAs and many employer retirement plans must withdraw each year once they reach the age set by law. RMDs are generally taxed as ordinary income, and missing one can result in a penalty.
The starting age and other RMD rules have changed in recent years, so current requirements should be confirmed with a tax professional.
Estate Planning
A trust you create during your lifetime and can change or cancel at any time. You typically serve as trustee while living, and a successor trustee manages and distributes the assets after your death or incapacity. Assets properly titled in the trust generally avoid probate.
Trusts involve legal costs and ongoing administration and should be established with a qualified attorney.
Investments
Your ability and willingness to accept ups and downs in the value of your investments. It reflects both your financial capacity to absorb losses and your emotional comfort with uncertainty.
Retirement
Moving money from one retirement account to another, such as from an employer plan to an IRA. Rollovers must follow specific rules and timelines to avoid taxes and penalties; a direct rollover is often the simplest approach.
Retirement
Moving money from a traditional IRA or other pre-tax retirement account into a Roth IRA. The amount converted is generally taxable as ordinary income in the year of the conversion, but future qualified withdrawals may be tax-free.
Whether a conversion makes sense depends on current and expected future tax rates, the ability to pay the tax from other funds, and other factors. Conversions should be reviewed with a tax professional.
Retirement
An individual retirement account funded with after-tax dollars. Qualified withdrawals, including earnings, are tax-free, and Roth IRAs are not subject to required minimum distributions during the original owner's lifetime.
Eligibility to contribute depends on income, and withdrawals of earnings must meet certain age and holding-period requirements to be tax-free.
Business Planning
A corporation that elects to pass its income, losses, deductions, and credits through to its shareholders for federal tax purposes, generally avoiding tax at the corporate level. Eligibility requirements apply.
Investments
Tradable financial instruments that represent ownership, debt, or rights to ownership — such as stocks, bonds, mutual fund shares, and ETFs.
Business Planning
A Simplified Employee Pension plan that allows self-employed individuals and small business owners to make tax-deductible retirement contributions for themselves and eligible employees.
Retirement
The risk that poor investment returns early in retirement, while withdrawals are being taken, can have a lasting effect on how long savings may last — even if average returns over time are reasonable.
Business Planning
A retirement plan designed for small businesses that allows employees to contribute through payroll and requires employer contributions according to plan rules. It is generally simpler and less costly to administer than a 401(k).
Retirement
The federal program that provides retirement, disability, and survivor benefits to eligible workers and their families. The age at which you begin benefits affects the monthly amount you receive, so the timing decision is an important part of retirement planning.
Business Planning
The simplest business structure, owned and run by one person. There is no legal separation between the owner and the business, so the owner is personally responsible for its debts.
Taxes
A fixed dollar amount that reduces taxable income for those who do not itemize. The amount depends on filing status and is adjusted periodically for inflation.
Taxes
An adjustment of an inherited asset's cost basis to its market value at the original owner's death. This can reduce or eliminate capital gains taxes if the heir later sells the asset. Rules can be complex, particularly for certain trusts and community property.
Investments
A share of ownership in a company. Stockholders may benefit from rising share prices and dividends, but stock values can fluctuate significantly and may lose value.
Business Planning
A strategy for transferring the ownership and leadership of a business when an owner retires, sells, becomes disabled, or dies. A thoughtful plan can help protect the value of the business, its employees, and the owner's family.
Taxes
An amount that directly reduces the tax you owe, dollar for dollar. Credits are generally more valuable than deductions of the same amount, which only reduce taxable income.
Taxes
Investment earnings that are not taxed until they are withdrawn. Traditional IRAs, 401(k)s, and annuities are common examples. Deferral can allow more money to remain invested, though withdrawals are generally taxed as ordinary income.
Taxes
Income or gains that are not subject to tax when certain requirements are met, such as qualified Roth IRA withdrawals or interest on many municipal bonds. Some tax-free income may still be subject to state taxes or the alternative minimum tax.
Taxes
Selling investments at a loss to offset capital gains and, within limits, ordinary income. Rules such as the wash-sale rule apply, and the strategy should be reviewed with a tax professional in the context of your overall plan.
Insurance
Life insurance that provides coverage for a specific period, such as 10, 20, or 30 years. It pays a death benefit if the insured dies during the term and generally does not build cash value, which typically makes it less expensive than permanent coverage.
Investments
Debt issued by the U.S. government, including Treasury bills, notes, bonds, and inflation-protected securities. They are backed by the full faith and credit of the U.S. government as to timely payment of principal and interest, though their market value can fluctuate if sold before maturity.
Estate Planning
A legal arrangement in which one party, the trustee, holds and manages assets for the benefit of others, the beneficiaries, according to the terms set by the person who created it. Trusts can help manage assets, provide for loved ones, and pass wealth on with greater control and privacy.
Trusts involve legal and administrative costs and should be established with a qualified attorney.
Estate Planning
The person or institution responsible for managing a trust's assets and carrying out its terms. A trustee has a fiduciary duty to act in the best interest of the beneficiaries.
Insurance
Extra liability coverage that goes beyond the limits of your home, auto, or other policies. It can help protect your assets from large claims or lawsuits.
Insurance
The process insurers use to evaluate risk and decide whether to offer coverage and at what price. For life insurance, this often includes a review of health, lifestyle, and medical history.
Insurance
A type of permanent life insurance with flexible premiums and an adjustable death benefit. Cash value grows based on interest credited by the insurer or, in some versions, market-linked options. Policy performance and costs can vary, so these policies should be reviewed regularly.
Financial Planning
A custodial account that allows an adult to hold and manage assets for a minor. Gifts to the account are irrevocable, and the assets transfer to the child's control at the age set by state law.
Insurance
An annuity whose value depends on the performance of underlying investment options, called subaccounts. Variable annuities may offer optional benefits, such as guaranteed income or death benefits, for an additional cost.
Variable annuities are subject to market risk, including possible loss of principal, and typically carry fees, expenses, and surrender charges. Guarantees are based on the claims-paying ability of the issuing insurer. They are sold by prospectus, which should be read carefully before investing.
Retirement
The process of earning full ownership of employer contributions to a retirement plan or of other benefits, such as stock options, usually over a period of service. Your own contributions are always fully vested.
Investments
How much and how quickly an investment's price moves up and down over time. Higher volatility generally means a wider range of potential outcomes, both positive and negative.
Taxes
An IRS rule that disallows a tax loss if you buy the same or a substantially identical investment within 30 days before or after selling it at a loss.
Insurance
Permanent life insurance with level premiums, a guaranteed death benefit, and cash value that grows at a guaranteed rate, subject to the claims-paying ability of the insurer. Some policies may also pay dividends, which are not guaranteed.
Estate Planning
A legal document that states how you want your property distributed after your death and names an executor to carry out your wishes. Parents can also use a will to name a guardian for minor children. A will should be prepared with an attorney and reviewed as life changes.
Investments
The income an investment produces, such as interest or dividends, expressed as a percentage of its price or value. Yield is only one part of an investment's total return.
Investments
A bond that pays no periodic interest. Instead, it is purchased at a discount and pays its full face value at maturity. Zero-coupon bond prices can be especially sensitive to interest rate changes, and in taxable accounts, investors may owe tax on interest that accrues each year even though no payment is received.
This glossary is provided for general educational purposes only and is not intended as individualized investment, tax, legal, or insurance advice. Financial concepts and rules may change over time. Please consult the appropriate qualified professionals regarding your individual circumstances.
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