401(k)
A workplace retirement account that may offer tax advantages and employer contributions, subject to plan rules and federal limits.
MONEY, TRANSLATED
The financial glossary.
The words people use when they want finance to sound harder than it is.
84 terms
403(b)
A workplace retirement account commonly offered by public schools and certain nonprofit organizations.
457(b)
A deferred-compensation retirement plan commonly available to state and local government employees.
529 plan
A tax-advantaged account designed for qualified education expenses, subject to plan and tax rules.
Active fund
A fund whose manager selects investments in an attempt to outperform a benchmark.
Amortization
The scheduled process of paying a loan through principal and interest payments over time.
Annuity
An insurance contract designed to accumulate money, produce income, or both. Fees, guarantees, liquidity, and tax treatment vary widely.
APR
Annual percentage rate: a standardized measure of borrowing cost that includes interest and may include certain fees.
APY
Annual percentage yield: the yearly rate earned after accounting for compounding.
Asset
Something you own that has financial value, such as cash, investments, or property.
Asset allocation
How a portfolio is divided among stocks, bonds, cash, and other investment categories.
Beneficiary
The person or organization designated to receive money or property from an account, policy, or estate.
Bond
A loan you make to a government or company in exchange for interest and the expected return of principal.
Brokerage account
An account used to buy and hold investments. A standard taxable brokerage account does not receive retirement-account tax treatment.
Capital gain
The profit created when an asset is sold for more than its tax basis.
Capital loss
The loss created when an asset is sold for less than its tax basis.
Cash flow
Money coming in compared with money going out over a period of time.
Cash value life insurance
Permanent life insurance that combines a death benefit with an internal cash-value component, subject to policy costs and rules.
Certificate of deposit
A bank or credit-union deposit that generally pays a stated rate for leaving money deposited for a set term.
Coinsurance
The percentage of a covered healthcare cost you pay after meeting the deductible.
COLA
Cost-of-living adjustment: an increase intended to help income keep pace with inflation.
Compound growth
Growth earned on both the original money and prior growth. It can accelerate over long periods, but returns are never guaranteed.
Contingent beneficiary
The backup beneficiary who receives an asset if the primary beneficiary cannot.
Cost basis
The tax starting value of an asset, generally adjusted for purchases, reinvestments, and certain other events.
Credit report
A record of reported borrowing and repayment activity maintained by a consumer-reporting company.
Credit score
A number lenders use to estimate how likely you are to repay borrowed money.
Debt-to-income ratio
Monthly debt payments divided by gross monthly income, commonly used by lenders to evaluate borrowing capacity.
Deductible
The amount you generally pay before an insurance plan begins paying covered costs.
Diversification
Spreading money across different investments so one holding has less power to damage the whole portfolio.
Dividend
A distribution a company or fund may pay to shareholders. It is not guaranteed.
Emergency fund
Cash reserved for essential, unexpected costs or loss of income.
Employer match
Money an employer contributes when an employee meets the retirement-plan contribution rules.
Equity
Ownership value. In a home, it is generally market value minus debt; in investing, it often refers to stocks.
Escrow
Money held by a third party for a specific purpose, such as mortgage taxes and insurance.
Estate
The money, property, accounts, debts, and legal interests a person leaves at death.
ETF
Exchange-traded fund: a pooled investment that trades on an exchange throughout the market day.
Expense ratio
The annual operating cost of a fund, expressed as a percentage of the money invested.
Fiduciary
A person or firm legally required in a particular relationship to act in the client’s best interest. Ask when and how that duty applies.
Fixed income
Investments, such as many bonds, designed primarily to provide interest income and return principal under stated terms.
Gross income
Income before taxes, benefits, retirement contributions, and other deductions.
HELOC
Home equity line of credit: revolving debt secured by home equity, usually with a variable interest rate.
HSA
Health savings account: a tax-advantaged account available with eligible high-deductible health plans.
Index
A defined group of investments used to measure a market or market segment.
Index fund
A fund designed to track a specific index instead of paying a manager to select investments in an attempt to beat it.
Inflation
The general rise in prices over time, which reduces what each dollar can buy.
Interest
The cost of borrowing money—or the amount earned for lending or depositing it.
IRA
Individual retirement arrangement: a personal retirement account with tax rules that depend on its type.
IRMAA
Income-related monthly adjustment amount: an additional Medicare premium charged when modified adjusted gross income exceeds applicable thresholds.
Liability
Money you owe, such as a loan, credit-card balance, or unpaid bill.
Liquidity
How quickly an asset can be converted to usable cash without a major loss of value.
Loan term
The scheduled length of time allowed to repay a loan.
MAGI
Modified adjusted gross income: adjusted gross income changed by specific additions or exclusions for a particular tax rule.
Marginal tax rate
The tax rate applied to the next dollar of taxable income—not necessarily the rate paid on all income.
Medicare
The federal health-insurance program primarily for people age 65 or older and certain younger people who qualify.
Mutual fund
A pooled investment that holds a collection of securities and is generally priced once each trading day.
Net pay
The amount of a paycheck remaining after taxes, benefits, retirement contributions, and other deductions.
Net worth
Everything you own minus everything you owe.
Out-of-pocket maximum
The most you generally pay for covered in-network healthcare services during a plan year, excluding premiums and noncovered costs.
Pension
A retirement benefit that typically pays income using a plan formula based on factors such as service and compensation.
PMI
Private mortgage insurance: coverage that protects a conventional mortgage lender when the borrower has limited equity.
Premium
The amount paid to keep an insurance policy active.
Principal
The original amount borrowed or invested, separate from interest or growth.
Probate
The court-supervised process of validating a will and administering certain estate assets.
Rebalancing
Returning a portfolio toward its intended asset allocation after market movement changes the percentages.
Refinance
Replacing an existing loan with a new loan, usually to change the rate, payment, term, or borrower structure.
Return
The gain or loss on an investment, including price change and income, usually expressed as an amount or percentage.
Risk tolerance
A person’s emotional willingness to accept investment losses. It is different from the financial ability to absorb them.
RMD
Required minimum distribution: an amount that generally must be withdrawn from certain retirement accounts under federal tax rules.
Roth IRA
An individual retirement account funded with after-tax money that may provide qualified tax-free withdrawals.
Safe withdrawal rate
A planning estimate for how much may be withdrawn from a portfolio over time. It is not a guarantee.
Sequence-of-returns risk
The danger that poor investment returns early in retirement make withdrawals harder to sustain.
Social Security
A federal program that provides retirement, disability, and survivor benefits to eligible workers and families.
Stock
A share of ownership in a company. Its value can rise or fall, and ownership does not guarantee a return.
Surrender charge
A fee some insurance or annuity contracts impose when money is withdrawn or the contract is ended during a stated period.
Tax credit
An eligible amount that directly reduces tax owed; some credits may be refundable.
Tax deduction
An eligible amount that reduces taxable income. It is not a dollar-for-dollar refund.
Tax diversification
Holding money in accounts with different tax treatment to create more withdrawal options later.
Tax-loss harvesting
Selling an investment at a loss to realize a tax loss, while respecting tax rules such as the wash-sale rule.
Taxable account
An investment account without retirement-account tax deferral; dividends, interest, and realized gains may create current taxes.
Term life insurance
Life insurance designed to provide a death benefit during a specified term without a cash-value component.
Umbrella insurance
Extra liability coverage designed to sit above specified home, auto, or other underlying policies.
Vesting
The process of earning permanent ownership of employer-provided money or benefits over time.
Volatility
How widely and quickly an investment’s price moves up and down.
Withholding
Money taken from income and sent toward taxes or another obligation before the remaining amount is paid to you.
Definitions are intentionally simplified for education. Tax, insurance, legal, and plan-specific rules can vary.
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