Glossary

1035 Exchange

A provision in the tax code which allows policyholders to transfer funds from a life insurance, endowment or annuity to a new policy without having to pay taxes.

401(k) Plan

A qualified company sponsored retirement plan available to eligible employees.

403(b) Plan

A U.S. tax-advantaged retirement savings plan available for public education organizations, some non-profit employers, cooperative hospital service organizations, and self-employed ministers in the United States.

Adjusted Gross Income (AGI)

An individual’s total gross income minus specific deductions

Annual Election Period (AEP)

A Medicare enrollment period from October 15^th to December 7^th which allows Medicare Advantage members a chance to sign up for Medicare Part D and/or switch their current plan

Annuity

A long-term investment that is issued by an insurance company and is designed to help protect you from the risk of outliving your income.

Asset

Property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.

Asset Allocation

Asset allocation is the implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor’s risk tolerance, goals and investment time frame.

Balanced Mutual Fund

A mutual fund offered by an investment company which attempts to hold a balance of stocks and bonds. Mutual funds are subject to fluctuation in value and market risk.

Bear Market

A market experiencing an extended period of declining prices.

Beneficiary

A person who derives advantage from something, especially a trust, will, or life insurance policy.

Bond

A fixed income instrument that represents a loan made by an investor to a borrower

Bull Market

A market experiencing an extended period of rising prices.

Capital Gain or Loss

The profit one earns on the sale of an asset like stocks, bonds or real estate. If the selling price is higher than the purchase price, it results in a Capital Gain. Capital loss is the reverse of capital gain, i.e. the sale price is lower than the purchase price

Cash Alternatives

Assets that are converted into cash and have a low risk of price fluctuation

Cash Surrender Value

The cash amount offered to the policyholder by the issuing life carrier upon cancellation of the contract.

Certificate of Deposit (CD)

A certificate issued by a bank to a person depositing money for a specified length of time. CDs differ from savings accounts as they have a fixed term and usually, a fixed interest rate

Coinsurance or Co-Payment

An insurance benefit in which the company and the insured member share the total cost of covered medical services.

Common Stock

Shares entitling their holder to dividends that vary in amount and may even be missed, depending on the fortunes of the company.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

This gives employees and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss

Credit Score

A number assigned to a person that indicates to lenders their capacity to repay a loan.

Debt

The state of owing money

Deduction

An expense that can be subtracted from a taxpayer’s gross income in order to reduce the amount of income that is subject to taxation

Deferred Annuity

A contract with an insurance company that promises to pay the owner a regular income, or a lump sum, at a future date. This differs from a regular annuity, which makes payments right away.

Dependent

A dependent is a person other than the taxpayer or spouse who entitles the taxpayer to claim a dependency exemption.

Direct Rollover

The direct transfer of assets from one qualified retirement plan or account to another

Dividend

A sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits

Dual Special Needs Plan (D-SNP)

A type of Medicare Advantage Plan for individuals with specific diseases or characteristics. These plans meet the specific needs of the individual by tailoring the benefits, providers and drug formularies for the groups they serve.

Early Withdrawal

The removal of funds from a fixed-term investment, such as an annuity, certificate of deposit, or qualified retirement account, before the account’s maturity date

Equity

The value of the shares issued by a company

Estate Tax

A tax levied on the net value of the estate of a deceased person before distribution to the heirs.

Exchange-Traded Funds (ETFs)

A type of investment fund that is traded on a stock exchange.

Executor

A person or institution appointed by a testator to carry out the terms of their will

Federal Income Tax Bracket

A range of incomes subject to a certain income tax rate

Financial Aid

Funding that is available exclusively to students attending college to assist in covering the costs of education.

Financial Statement

Formal records of the financial activities and position of a business, person, or other entity.

Financial Industry Regulatory Authority (FINRA)

A private corporation that acts as a self-regulatory organization. FINRA is the successor to the National Association of Securities Dealers, Inc. and the member regulation, enforcement, and arbitration operations of the New York Stock Exchange

Fixed Annuity

A type of contract with an insurance company that promises to pay the buyer a specific, guaranteed interest rate on their contributions to the account. These accounts are typically used for retirement planning

Gift

The transfer of assets from one individual to another under which neither receives compensation or interest in his or her gift

Gross Monthly Income

The amount of income earned in one month before taxes and other deductions are considered

Group Life Insurance

A type of life insurance under one contract that covers an entire group of people. These are typically used by companies and given to their employees

Health Maintenance Organization Plans (HMO)

A health insurance organization to which subscribers pay a predetermined fee in return for a range of medical services from physicians and healthcare workers registered with the organization. People in an HMO Medicare Advantage plan must go to a provider that are in their insurance company’s network.

Health Savings Account (HSA)

A savings account used in conjunction with a high-deductible health insurance policy that allows users to save money tax-free against medical expenses

Income

Money received, especially on a regular basis, for work or through investments

Individual Retirement Account (IRA)

A qualified retirement account for individuals that allows them to save for retirement with tax-free growth or on a tax-deferred basis

Initial Enrollment Period (IEP)

This is when an individual is eligible to sign up for Medicare. This enrollment period starts 3 months before your 65^th birthday and ends 3 months after the month you turn 65. Individuals who have company insurance can wait to sign up until they drop their employer’s insurance.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding

Irrevocable Trust

A type of trust that cannot be modified or canceled after its creation without the permission of the beneficiaries or trustee

Joint Tenancy

The holding of an estate or property jointly by two or more parties, the share of each passing to the other or others on death

Keogh Plan

A type of retirement plan for self-employed people and small businesses

Life Insurance

A contract under which an insurance company promises to pay the beneficiary a sum of money in exchange for a premium upon the death of the insured person

Liquidity

The availability of liquid assets to a market or company which an individual can purchase or sell an asset without causing a drastic change in the assets price

Living Trust

A trust created during an individual’s lifetime which designates a trustee, who is responsible for managing assets for the beneficiary while the grantor is still alive.

Living Will

A written statement detailing a person’s desires regarding their medical treatment in circumstances in which they are no longer able to express informed consent, especially an advance directive

Long-Term-Care Insurance

Non-medical care that includes a variety of services designed to meet a person’s health or personal care needs during a short or long period of time. These services help individuals live as independently and safely as possible when they can no longer perform every day activities on their own

Lump-Sum Distribution

A one-time payment of the entire balance from an account such as an annuity, pension or qualified plan

Marital Deduction

A provision of the tax code that allows an individual to transfer an unlimited amount of assets to his or her spouse at any time without triggering a tax liability

Market Risk

The risk of losses on financial investments causes by movements in market prices

Medicaid

A federal and state program that helps with medical costs for individuals with limited income and resources.

Medicare

The federal government’s health program for individuals aged 65 or individuals who have certain disabilities or an end-stage renal disease. Original Medicare includes part A and B.

Medicare Advantage

Also known as Part C, this is another way to get your Medicare Part A and Part B coverage as well as prescription drug coverage. These are plans offered through Medicare approved companies.

Money Market Fund

An open-ended mutual fund that invests in short-term debt securities that are easily converted into cash and have low risk of price fluctuation.

Medicare Part A

Part A covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care

Medicare Part B

Part B covers certain doctors’ services, outpatient care, medical supplies, and preventive services

Medicare Part D

Helps cover the cost of prescription drugs (including many recommended shots or vaccines)

Medigap

Commonly known as Medicare supplement, is health coverage provided by private companies that pay for costs not covered by original Medicare.

Municipal Bond

Commonly known as a Muni Bond, it is a security issued by or on behalf of a local authority

Municipal Bond Fund

A mutual fund offered by an investment company which specifically invests in municipal bonds

Mutual Fund

An investment program funded by shareholders that trades in diversified holdings and is professionally managed

National Association of Securities Dealers Automated Quotations (NASDAQ)

An American stock exchange originally founded by the National Association of Securities Dealers that handles electronic securities trading around the world

Net Asset Value

The value of a mutual fund that is reached by deducting the fund’s liabilities from the market value of all of its shares and then dividing by the number of issued shares

Net Income

An entity’s total income minus its costs, expenses, and taxes

Net Worth

The total wealth of an individual, company, or household, taking account of all financial assets and liabilities

Non-qualified Plan

A retirement or employee benefit plan that is not eligible for favorable tax treatment because they do not adhere to Employee Retirement Income Security Act (ERISA) guidelines as with a qualified plan

Old-Age, Survivors, and Disability Insurance (OASDI)

The official name of the Social Security program. This program offers a retirement income benefit, disability income, veterans’ pensions, public housing, and food stamps

Open Enrollment Period (OEP)

A Medicare enrollment period from January 1^st to March 31^st that allows Medicare Advantage members a chance to switch their plan

Partnership

A contract under which two or more individuals manage and operate a business venture

Policyholder

A person or group in whose name an insurance policy is held

Power of Attorney

A legal document that grants the authority to act for another person in specified or all legal or financial matters

Preferred Provider Organization Plans (PPO)

A type of Medicare Advantage plan that offers a medical care arrangement in which medical professionals and facilities provide services to subscribed clients at reduced rates. Clients are able to choose any physician they with, either inside or outside of their network.

Preferred Stock

Also known as Preference shares, are shares of a company’s stock with dividends that are paid out to shareholders before common stock dividends are issued

Private Fee-for-Service Plans (PFFS)

A type of Medicare Advantage plan that determines how much it will pay doctors, other health care providers, and hospitals as well as how much you will pay when you get care.

Probate

The official proving of a will

Profit-Sharing Plan

A plan that gives employees a share in their company’s profits based on its quarterly or annual earnings

Qualified Retirement Plan

A retirement plan that meets the requirements of Internal Revenue Code Section 401(a) of the Internal Revenue Service (IRS) where investment income accumulates tax-deferred. Examples of qualifies plans include individual retirement accounts (IRAs), pension plans and Keogh plans.

Required Minimum Distribution (RMD)

Amounts that U.S. tax law requires one to withdraw annually from traditional IRAs and employer-sponsored retirement plans. An account holder must start taking their RMDs when they reach the age 72 by the second half of the year and are calculated by specific percentages that are determined by the holders age

Revenue

Also known as gross sales, Revenue is the total amount of income generated by the sale of goods or services related to the company’s primary operations

Revocable Trust

A trust that can be modified or cancelled by the creator. Unlike an irrevocable trust, this type offers flexibility during the lifetime of the creator.

Rollover

A tax-free transfer of assets of all kind from one qualified retirement program to another.

Roth IRA

An individual retirement account allowing a person to set aside after-tax income up to a specified amount each year. Both earnings on the account and withdrawals after age 59½ are tax-free

Self-Directed IRA

An individual retirement account which allows alternative investments for retirement savings. They hold a variety of alternative investments that regular IRA’s cannot hold, such as real estate.

Share

A unit of ownership in a corporation or financial asset.

Savings Incentive Match Plan for Employees (SIMPLE)

A qualified retirement plan available to small businesses that allows employees and employers to contribute to traditional IRAs set up for employees.

Special Enrollment Period (SEP)

A Medicare enrollment period that individuals can use if eligible. Certain life events can determine eligibility, such as if you move or loss of other insurance coverage

Standard & Poor’s 500 Index (S&P 500)

A stock market index that measures the performance of the 500 largest companies in the stock exchange. This is one of the most commonly followed equity indices

Stock

An equity investment that represents an ownership share in a company. Stockholders are entitled to any dividends and financial participation in company growth. The value of stock prices will fluctuate as market conditions change and shares can be sold for more or less than their original cost.

Tax Credit

An incentive which allows some taxpayers to subtract the amount of the credit they have accrued from the total they owe the state. It may also be a credit granted in recognition of taxes already paid

Tax Deduction

An amount that is subtracted from a taxpayer’s income before taxes are calculated. This lowers the taxable income and thus reduces tax liability

Taxable Income

A taxpayer’s gross income, which includes some or all items of income minus expenses and other deductions

Trust

An arrangement whereby a person holds property as its nominal owner for the good of one or more beneficiaries

Trustee

An individual person or member of a board given control or powers of administration of property in trust with a legal obligation to administer it solely for the purposes specified

Uniform Gift to Minors Act (UGMA)

An act in some states of the United States that allows an individual to transfer assets to be held in the custodian’s name for the benefit of the minor without the need of a trust

Unlimited Marital Deduction

A provision of the tax code that allows an individual to transfer an unlimited amount of assets to his or her spouse at any time, including upon the individual’s death-without triggering a tax liability

Will

A legal document containing instructions as to what should be done with one’s money and property after one’s death.

Withholding

The portion of an employee’s wages that is not included in his or her paycheck but is instead paid to the government