Definitions Page 2

These definitions will help you to understand the rest of this website, and get more from the books and links we reference

  • Annuity – 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 and may include a death benefit that will pay your beneficiary a guaranteed minimum amount, such as your total purchase payments.
  • Fixed Annuity – Is an investment contract between an annuitant (investor) and an insurance company. The insurance company agrees to pay the annuitant a fixed income for a period of time based upon the value invested in the annuity.
  • Variable Annuity – A contract between you and an insurance company, under which the insurer agrees to make periodic payments to you, beginning either immediately or at some future date. You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments.
  • Will – A document prepared by someone which states what they want to happen to their property when they die - how they want it distributed - identifying what property should go to which people. By preparing a legally valid will, a person can avoid having their probate estate pass on to others via state intestacy statutes.
  • Estate Planning – Is the process of anticipating and arranging for the disposal of an estate. Estate planning typically attempts to eliminate uncertainties over the administration of a probate and maximize the value of the estate by reducing taxes and other expenses.
  • Trusts – When you create a Trust you transfer all your property, assets, bank accounts, securities, real estate to a person or persons you “Trust”. You no longer own these assets, the “Trust” does. You still have access to all these assets while you are alive. You instruct your Trust to pay out all income to you during your lifetime, and on your death whatever is left would be given to your beneficiaries. The main difference between a Trust and a Will is the fact that your property won’t go through probate when you die. With a Will the transfer of property takes place at your death and will need to go through the court system, (probate) to determine the legalities of the will and the properties being dispersed. During probate much of the estate is taken by taxes and sometimes attorneys. When you create a Trust you transfer your properties to it while you are still alive and it continues on through your death.
  • 529 Plan – Is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs.
  • 401k – A 401k plan is offered by a company to its employees to save for retirement. Investing in a 401k comes straight from your paycheck with pretax dollars. Maximum contribution amount for the year is $16,500. If you are age 50 or older, you may also be eligible to make "catch-up 401k contributions" in addition to your regular 401k limits — IF your employer allows them. And the catch up amount is $5,500.
  • Roth IRA – For starts IRA stands for Individual Retirement Account. A Roth IRA is another type of retirement savings for individuals that are looking for other investment choices if they want more then just there 401k. You invest after taxed dollars and your money will grow tax free. Meaning when you withdraw money in retirement you do not have to pay tax on that money. Maximum contribution amount for the year is $5,000 ($6,000 if the individual is age 50 or older).
  • Traditional IRA – The Traditional IRA is a savings plan that offers certain tax advantages for individuals to plan for retirement. Contributions made to a Traditional IRA are made with pre-tax dollars. The plan grows tax-deferred. Now when you take money out of this when you retire you will have to pay taxes on the principal and gains. Maximum contribution amount for the year is $5,000 ($6,000 if the individual is age 50 or older).
  • SEP IRA - The SEP IRA is a retirement plan designed to benefit self employed individuals and small business owners. Sole proprietorships, S and C corporations, partnerships and LLCs qualify. Maximum contribution amount for the year is $49,000.
  • Keogh - A tax deferred pension plan available to self-employed individuals or unincorporated businesses for retirement purposes. Maximum contribution amount for the year is $49,000.
  • SIMPLE IRA - Savings Incentive Match PLan for Employees. Because this is a simplified plan, the administrative costs should be lower than for other, more complex plans. Under a SIMPLE IRA plan, employees and employers make contributions to traditional Individual Retirement Arrangements (IRAs) set up for employees (including self-employed individuals), subject to certain limits. It is ideally suited as a start-up retirement savings plan for small employers who do not currently sponsor a retirement plan. Maximum contribution amount for the year is $11,500. And if you are over 50 years of age the catch up amount is $2,500.
  • 403b Plan - A 403b is similar to a 401k. A 403b is a type of retirement plan available to employees of government-funded education institutions such as public schools, some non-profit organizations, and self-employed ministers. Maximum contribution amount for the year is $16,500. And if you are over 50 years of age the catch up amount is $5,500.
  • 457 Plan - A 457 plan is a retirement / pension plan that provides benefits to government employees as well as employees of tax-exempt organizations. Employees participating in 457 plans are allowed to defer their compensation on a before-tax basis via regular payroll deductions. Money placed in these accounts grows on a federally tax-free basis until withdrawn. Maximum contribution amount for the year is $16,500. And if you are over 50 years of age the catch up amount is $5,500.
  • Chapter 7 Bankruptcy - Sometimes call a straight bankruptcy is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose so Chapter 7 will give that person a relatively quick "fresh start".
  • Chapter 13 Bankruptcy - Is also known as a reorganization bankruptcy. Chapter 13 bankruptcy is filed by individuals who want to pay off their debts over a period of three to five years. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also only an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off their debts.