Investment and Retirement Services Glossary

When it comes to investing and retiring, we’ve outlined a few points that may help you decide what types of accounts may be good for your financial health.

·         IRA – An IRA is an Individual Retirement Account, and provides either a tax-deferred or tax-free way of saving for retirement. There are many types of accounts available, but the most common are Roth and Traditional.   

·         401(k) or 403(b) – A 401(k) and 403 (b) are long term savings plans designed to accumulate money towards retirement. 401(k) plans are typically only available through an employer; the money is generally taken out of the employee’s paycheck every week or month and deposited into the account. A 403(b) account is made for university, civil government and not-for-profit employees. It has the same characteristics and benefits as a 401(k). 

·         Mutual Funds – A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund.

·         Stocks – Stock is a share in the ownership of a company. Stock represents a claim on the company’s assets and earnings. As you acquire more stock, your ownership stake in the company becomes greater.

·         Bonds – A bond is a debt security, similar to an I.O.U. When you purchase a bond, you are lending money to a government, municipality, corporation, federal agency or other entity known as an issuer.

·         Annuities – An annuity is a contract between you and an insurance company, under which you make a lump-sum payment or series of payments. In return, the insurer agrees to make periodic payments to you beginning immediately or at some future date. Annuities typically offer tax-deferred growth of earnings any may include a death benefit that will pay your beneficiary a guaranteed minimum amount, such as your total purchase payments. The annuities can be fixed or variable.

·         College Savings Plans – Also known as 529 plans, the college savings plans come in two varieties: college savings plans and prepaid tuition plans. These plans can be used at virtually any accredited college or university, as well as prepaid tuition for private schools. The plans can be used to pay for tuition, room and board, fees, books, supplies and equipment required for enrollment. Also, there is not an income limitation on a person’s ability to contribute to an account and you can contribute up to $300,000 or more per beneficiary.