Allows you to contribute to retirement savings without paying income taxes on the funds used to contribute to your retirement investment account. For example, contributions to traditional IRAs are made from current income before you have paid income tax, reducing your current taxable income.
A retirement savings option in which an individual pays money into an account administered by an insurance company in exchange for a guaranteed payment amount during retirement. In general, the concept of an annuity is similar to life insurance, except that an individual is able to receive payment while still alive. Annuities can grow tax-deferred, meaning investors pay no taxes on the earnings until they receive payments or make withdrawals.
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement plans and establishes protections for consumers, including standards about disclosing plan information and rules regarding fiduciary responsibilities for the plans.
A national benefit program funded by tax dollars to ensure economic security for those who can no longer work because of their age or a disability. Those who qualify for Social Security benefits receive monthly stipends based on their reported income.
An investment program funded by shareholders that trades in diversified holdings and is professionally managed.
SIMPLE stands for Savings Incentive Match Plan for Employees. Perhaps the best way to describe the SIMPLE IRA plan is as the little brother of the more robust but more costly 401(k) plan. Much like the traditional 401(k) plan, the SIMPLE IRA Plan allows for both employer contributions as well as employee salary deferral contributions.
Accounts set up at a financial institution that allow an individual to save for retirement with tax-free growth or on a tax-deferred basis. There are two types of IRAs: Roth and Traditional.
The addition of interest to the principal sum of your retirement savings, or in other words, interest on interest. Compound interest rates grow faster than simple interest rates because they include all of the accumulated interest on your investments, allowing you to grow your wealth over time.
An employer-sponsored retirement plan that allows employees to add pre-taxed income to a retirement savings account. The funds will be taxed, however, once the employee makes a withdrawal from the account. Oftentimes, employers will also make contributions to the employee’s 401(k). 401(k)s are portable, so when an employee moves jobs their retirement account will go with them.