401(k) Plan

A 401(k) Plan is an employer-sponsored, salary reduction and qualified retirement plan that allows employees to defer paying current federal income taxes on a portion of their annual compensation. Contributions and earnings grow tax-deferred until they are withdrawn. Withdrawals are taxed at the employee’s income tax rate at the time of withdrawal. The name 401(k) comes from the IRS section describing the program.

403(b) Plan

A 403(b) Plan is a salary reduction plan for employees of nonprofit organizations and government entities such as schools, hospitals, and educational organizations. Like a 401(k) Plan, contributions and earnings are tax-deferred until the money is withdrawn from the plan and withdrawals are taxed at the employee’s income tax rate at the time of withdrawal.

529 Plan

A 529 Plan is a tax-advantaged education savings plan operated by a state or educational institution.

Catch Up Contributions

Additional tax-deferred funds that are set aside for retirement and are placed into retirement accounts such as an IRA or 401(k). Catch-up contributions are used by people who are over 50 years old and have less time to take advantage of compounding. Also, these may have a maximum contribution limit, which depends on the type of retirement account used by the contributor and the year the contribution is made.


CERTIFIED FINANCIAL PLANNER™ is a credential granted by the Certified Financial Planner Board of Standards, Inc., to individuals who complete a comprehensive curriculum in financial planning and ethics. CFP® and CERTIFIED FINANCIAL PLANNER™ are certification marks that are owned by the CFP Board and awarded to individuals who successfully complete the CFP Board’s initial and ongoing certification.

Certified Public Accountant (CPA) 

A license granted by a state board of accountancy to someone who has passed the Uniform CPA Examination, administered by the American Institute of Certified Public Accountants, and has fulfilled that state’s educational and professional experience requirements for certification.

Cost Basis

The tax cost of securities, which determines the profit when sold.

Early Withdrawal Penalty

A penalty on money withdrawn prematurely from a fixed-term investment, such as a tax-deferred retirement plan before age 59 1/2.

Employee Retirement Income Security Act (ERISA)

ERISA is a federal law covering all aspects of employee retirement plans. If employers provide plans, they must be adequately funded and provide for vesting, survivor’s rights, and disclosures under federal law.

Estate Tax

Upon the death of a decedent, federal and state governments may impose tax on the value of an estate left to heirs.


Someone designated in a will or by the probate courts to carry out the wishes of someone who has died.

Financial Planning

Financial planning encompasses a wide array of services designed to implement an overall program for managing the financial resources of a client. Financial plans are based on the client’s needs and circumstances and can be relatively simple or can include retirement and estate planning, assessing insurance coverage, and tax planning. Financial plans can be provided in a variety of formats and involve a variety of tools including questionnaires, education materials, on-line services and software. (United Planners website)

IRA (Individual Retirement Account)

A personal tax-deferred investment account to save for retirement. Contributions to a standard IRA may be deductible and investments, including earnings and gains, generally are not taxed until distributed to you. Contributions to a Roth IRA are not deductible, but qualified distributions are not taxable. Withdrawals begin at age 59 1/2 or later (or earlier, with a 10% penalty). The exact amount depends on the year and your age. (FPA website)

Longevity Risk

The risk that a pension fund or life insurance company takes on by offering its plans, due to the chance that the company could end up paying out more than anticipated due to increasing life expectancy. The risk is particularly high for any plans that ensure lifetime benefits for the recipient. Alternatively, the risk that the amount of money an individual saves for retirement might not be enough to sustain them, due to increased life expectancy.


Required Minimum Distribution. The minimum annual required distribution amount for an IRA holder who reaches age 70 ½ is calculated by dividing your account balance on December 31st of the previous year by your life expectancy.


A tax-free reinvestment of a distribution from a qualified retirement plan into an IRA or other qualified plan within a specific time frame, usually 60 days. These transfers can happen when leaving a job at an employer who offered a retirement plan such as a 401(k) plan.