Financial terms can be intimidating. The financial industry can even seem to have its own language designed to keep the average person confused. But if you understand the terminology, you'll gain the confidence you need to make good, informed decisions. In this small report, you’ll find some of the most common financial terms and acronyms used in the world of banking, mutual funds, stocks, and real estate transactions. Although you may need to allow a little time to make sense of all the new terms, they're really not difficult if you dive right in. Keep this guide handy as you explore the world of investing!

1. Retirement &
Education
Common Investment Terms

2. Similar Funds and Funding Plans
• Retirement and education terms have been lumped
together because these types of investments share
many similarities.
• With retirement funds, you seek to save for your
retirement. With education funds, you seek to save for
a college education for you or a loved one.
• For both investments, it is frequently possible to make
pre-tax contributions and/or take tax-free distributions.

3. Individual Retirement Account (IRA)
• An account by an individual to maintain and invest
funds for retirement. Depending on the type of the
account, either the contributions to the account are
tax-deductible or the earnings are tax-free.

4. Keogh Plan
• This plan is very similar to a 401k, only it is for self-
employed individuals, partners, and owners of
unincorporated businesses. It is sometimes referred to
as an H.R. 10 plan.

5. Qualified Retirement Plan
• These are plans that are acknowledged and
authorized by the IRS and required to follow specific
rules and regulations. Participants may accumulate
money in these accounts on a tax-deferred basis. IRAs
and 401(k)s are examples of qualified retirement
plans.

6. Required Minimum Distribution
• In general, holders of traditional IRAs must begin
withdrawing money from the account by April 1 of the
year after turning 70½. The amount required is a
minimum distribution determined by your age and life
expectancy. The IRS has tables available to determine
the required withdrawal.
• If required withdrawals are not made on time, the IRS
will collect an excise tax.
• Roth IRAs aren't subject to minimum distribution
requirements until after the Roth owner dies.

7. Rollover
• Under certain circumstances, when changing jobs, for
instance, an investor may transfer funds from one
qualified retirement account to another. This may be
done without a tax penalty.

8. Roth IRA
• Roth IRAs were first available in 1998. This IRA only
allows after-tax contributions, but the earnings aren’t
taxed. Provided the guidelines are followed, all
distributions are not taxable.

9. Traditional IRA
• Traditional IRAs were first available in 1974. Typically,
contributions to a traditional IRA are tax-deductible,
provided that certain income thresholds are not
exceeded.

10. 401(k) Plan
• A retirement plan sponsored by employers. A 401(k)
allows employees to make tax-deferred contributions
directly from their salaries to the plan. Employers may
match a certain percentage of the employee’s
contributions.

11. 403(b) Plan
• This is very similar to a 401(k) plan, only it applies to
employees of public schools, universities, and non-
profit organizations.

12. 457 Plan
• Again, similar to a 401(k), but only applies to
employees of state and local governments.

13. 529 Plan
• An investment program that is supported by state
governments to help pay future qualified higher
education expenses. There are two types of plans:
• Pre-Paid 529 Plan: These allow the purchase of
academic credits at the present-day cost for future
use. The school must be specified when opening the
account.
• College Savings Plans: These allow contributions to an
investment account for application to higher
education costs. The school does not have to be
specified.

14. Long Term Saving
• Saving for your retirement and your kids’ college
education is usually a long-term endeavor – or at least
it should be! It’s much easier if you spread it out over a
long time.
• Start soon to begin saving for a bright financial future
and enjoy the benefit of tax-favored funds and the
power of long-term interest.

15. We hope you enjoyed your Special Report!
Curtis Roese is an experienced professional with extensive experience in
personal finance and small business matters. Curtis writes and
publishes articles, courses, guides and special reports on his personal
finance blog.
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