As you get closer to retirement, your financial vocabulary will expand tenfold. And while you may have already had discussions with your financial advisor, you may have questions about what exactly certain financial terms mean. Here’s a list of some of the most common financial terms in retirement that are important to know.
Annuity- Used mostly by retirees as a source of income. It is a fixed amount of money paid every month that is issued by financial institutions to the client.
Assets- An asset could be anything that has value, including a car, savings account, boat, or anything else that holds value and could be liquidated or used to gain extra money.
IRA- An IRA, or individual retirement account, is used to save money for retirement in a way that allows for tax-free growth. There are three types of IRAs, listed below.
Traditional IRA- Any money that you put into a traditional IRA could grow tax-deferred until the funds are withdrawn from investment.
Roth IRA- For a roth, you use money that you have already paid taxes on as contributions, with the benefit that your money could grow tax-free as well.
Rollover IRA- A rollover is intended for money that “rolls over” from a qualified retirement plan or savings account. This type of plan allows you to transfer financial assets to a rollover IRA.
401K- One of the most common forms of retirement savings, a 401K comes directly out of your paycheck pre-tax.
Pension- An investment fund that allows people – and their employer – to make payments while working.
If you are starting to plan for your retirement or want a few more tips to add to your already-amazing plan, check out our blog post on retirement planning and saving tips. We also recommend speaking to a financial advisor.