Glossary of Terms


It might just on occasion be challenging to understand the great number of terms used by various companies and websites you come across when researching information for your retirement. We at Retirement Happiness understand this and the necessity of comprehending IRA accounts, not to mention the aspects that will vary with them.

So why not use our Retirement Glossary to help you better demystify these often strange acronyms and terms?

This is not a definative list simply a list of terms we have come across while dealing with our own personal retirement planning, we will add/update terms as and when we can. If you have a better explaination or additional term please drop us a line and we will add it.

401(k) Plan

A retirement plan that enables employees to set aside a portion of their compensation in an account that is special frequently with matching contributions from the boss. Contributions and profits develop tax-deferred until withdrawn – ideally at your retirement.

Adjusted Gross Income

a calculation that is interim in computing income tax liability. It’s computed by subtracting particular corrections that are allowable gross earnings.

Age Rule

Rule eligibility that is concerning make efforts to a Traditional IRA. A person must be under age 70½ for the year that is entire make a regular contribution to an IRA.

Asset Allocation

the procedure of determining just how investment funds will be apportioned among different asset classes, such as stocks, bonds, and money reserves. Many monetary advisors think that the mixture of asset classes possesses a greater impact on long-lasting portfolio outcomes than performs any personal investment.


making profits on a principal investment and its interest, frequently calculated on a month-to-month or basis that is annual. Compounding is thought to be one of the ways being top generate wealth.

Coverdell Education Savings Account

A kind of account (previously called the Education IRA) created beneath the Taxpayer Relief Act of 1997, established exclusively for paying education that is qualified associated with the designated beneficiary. Contributions are non-deductible and earnings are tax-free for qualified withdrawals.

Death Distribution

The payment of IRA funds to a beneficiary upon the death of an IRA owner.

Death Benefit

The payment amount available to a beneficiary when the owner dies. 

Deferral Period

The period of time when you are accumulating interest in your annuity before you begin taking payments. 

Deferred Annuity

An annuity that accumulates interest, with the distribution of the annuity delayed until a future date. Depending on the type of deferred annuity, the payments could begin after a set period of time or after the death of the annuity owner. 


cost allowed by the Internal income Service become subtracted from an individual’s gross income before figuring a person’s taxable earnings. Certain Traditional IRA contributions are categorized as a tax deduction.

Defined Benefit Plan

a plan that is qualified to pay good results, typically based on a percentage of salary, at retirement. The boss, not the employee, funds the plan.

Defined Contribution Plan

a retirement that is qualified, like a 401(k) plan, whose benefits depend on the amount contributed by the employee/employer and the profits of the contributions.

Direct Rollover

The motion of funds from your retirement that is qualified into an IRA without the account owner taking receipt of the funds.


Withdrawing funds from your retirement savings plan.


Strategy for reducing the risk of spending in an industry/market that is single or several companies, by spreading the risk over several industries/market sectors or a larger wide range of organizations.

Dollar-Cost Averaging*

A method of collecting assets by spending a fixed amount of bucks in securities at set intervals, regardless of stock exchange motions.

Early Withdrawal

Withdrawal of funds from an IRA, a 401(k) plan, or any tax-qualified retirement plan, usually before age 59½. Very early withdrawals are at the mercy of tax penalties, though you can find some exceptions.

Early Withdrawal Penalty

The 10 per cent penalty the IRS requires you to pay if you withdraw money from a qualified retirement account or an annuity before age 59 ½. You will also be subject to federal and (if applicable) state taxes on your withdrawal.

Earned money Rule

The rule when it comes to eligibility to create contributions to specific types of IRAs. An individual must have earned income to make contributions for the conventional or Roth IRA. Earned income includes but is not restricted to wages, salaries, bonuses, tips, commissions and alimony that is taxable.

Education IRA

See Coverdell Education Family Savings.

Employer-sponsored Retirement Plan

a share that is defined Defined Benefit retirement plan. Probably the most kinds which are common 401(k), Profit Sharing Plans and retirement Plans. Other types include SEP, Keogh and SIMPLE plans.

Excess Contribution

Any IRA contribution that exceeds the greatest share that is possible permitted by law. Penalty taxes apply for each year an share that is excess.


The Federal Deposit Insurance Corporation is an agency that is independent by the Congress to maintain stability and public confidence within the country’s financial system by insuring deposits, examining and supervising economic institutions for safety and soundness and consumer protection, managing receiverships.


The person named in a will to carry out the wishes of the deceased for the distribution of his or her assets. The executor fulfils his or her duties under court supervision.


A person who is required to act in your best interest with prudence, diligence, skill, and loyalty. In financial situations, this means a fiduciary is required to make financial decisions that are in your best interest, rather than their own.

Financial Advisors

Financial Advisors focus on investment products, including stocks, bonds, and mutual funds. They also manage portfolios, deliver financial plans, recommend investments, are securities licensed, and help monitor financial performance versus goals over the long term.

Form 5329

The IRS tax kind on which early (premature) withdrawals are reported.

Form 8606

The IRS taxation form on which nondeductible IRA efforts are reported.

Financial Planner

Financial planners deliver financial plans, which you can initiate on your own or through a financial advisor. This service also includes ongoing reviews and guidance. Financial planners are like architects who design a house—they can create the plan, but you need to hire the contractors to build it.

Financial Professional

Several professions in the financial services industry, including insurance agents, accountants, investment managers, financial planners, and financial advisors.

Full Retirement Age

The age at which a person may become entitled to full or unreduced retirement benefits. 

Individual pension Account (IRA)

A retirement and saving plan that is tax-deferred that an individual with earned income can start. Some persons may deduct their IRA contributions from their taxable income.

Inflation Risk

the chance that the buying power of your investment will be eroded by inflation. Because more conservative investments generally offer the best returns over time, they are often more exposed to inflation risk that is possible.

IRA Rollover

The movement of IRA funds from one IRA provider or retirement that is qualified to the account owner, then to a different IRA provider. The account owner has 60 times to perform this transaction before the transaction is considered a circulation that is taxable of.

IRA Transfer

The movement of IRA funds directly from one IRA provider to another without the IRA owner receipt that is using funds. This transaction might be known as a Trustee to Trustee transfer.

Life Expectancy

the number that is the average of an individual is expected to live based upon his or her current age. Life expectancy tables given by the IRS are utilized in calculating Minimum that is required distributions Substantially Equal Periodic repayments for IRA distributions.

Lump-Sum Distribution

Payment to a receiver of all funds accumulated in a 401(k) account or other tax-qualified plans within one 12 months that is taxable.

Matching Contributions

An employer contribution to a person’s 401(k) account in line with the amount the contributes that are individual. The individual contributes, for instance, the boss may match 50 cents for every buck.

Qualified Retirement Plan

A Defined Benefit or Defined Contribution retirement plan that receives taxation that is unique since it meets certain requirements of the Internal sales Code.

Required Minimum Distribution (RMD)

the minimum dollar amount an IRA owner must withdraw each year starting whenever she or he reaches age 70½, as required by the IRS.

Required Beginning Date (RBD)

The deadline by which an IRA owner must take his or her first Minimum that’s needed is Distribution. The RBD is 1 after the 12 months in which the IRA owner turns age 70½ April.


A tax-free motion of funds from one plan that is tax-qualified another or even to an IRA. The requirements for a rollover depend on the kind of program from which the circulation is manufactured and the type of program receiving the distribution.

Rollover IRA

An IRA established to keep the assets of an eligible circulation from a plan that is qualified.

Roth IRA

A type of IRA established under the Taxpayer Relief Act of 1997. The Roth IRA might be referred to as the ‘back-ended’ IRA since contributions are not tax-deductible, but the earnings can be withdrawn tax-free if IRS tips are met.

Roth IRA Conversion

The distribution of assets from a conventional IRA into a Roth IRA.


The reversal of a Roth IRA conversion or the redesignation of funds between plan types.

Self-directed IRA

An IRA that allows the person to find the investment options that best fit their investment objectives. The investment alternatives include stocks, bonds, mutual funds and other funds and other investment vehicles, Certificate of Deposits and other savings automobiles.

Simplified Employee Pension Arrange (SEP)

a retirement that is employer-sponsored that is made for owners of smaller businesses or self-employed individuals. Contributions are tax-deductible and earnings tax-deferred. Qualified individuals can contribute a fixed percentage of their earned income that is net to $49,000 optimum for 2011). SEPs are more flexible, easier to create, and simpler to manage than numerous other plans that are qualified.

Substantially Equal Periodic Payments

A type of circulation from an IRA that may begin, without penalty, prior to age 59½. Substantially payments being equal calculated on the IRA owner’s life span.


The postponement of taxes and sometimes the investment that is initiated before the funds are distributed.

Traditional IRA

Original IRA designed to encourage individuals to save for retirement. The three great things about a Traditional IRA are taxation deferral of interest/earnings, potential tax deferral of contributions and assurance for a more financially secure retirement.


For your retirement savings plan participant, vesting refers to the granting that is gradual of contributions made by your employer.

1 Comment
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