Glossary Terms

Word:

 Meaning:

Gross Income:

  For a Wage earner (W-2 Employee), Gross income, or gross pay, is the amount of salary or wages paid to the individual by an employer, before any deductions are taken.

 Net Income:

For a wage earner (W-2 Employee), net income, or net pay, is the residual amount of earnings after all deductions have been taken from gross pay, such as payroll taxes, garnishments, and retirement plan contributions.

 403b:

  A 403(b) plan is a retirement plan for specific employees of public schools, tax-exempt organizations and certain ministers. These plans can invest in either annuities or mutual funds. A 403(b) plan is another name for a tax-sheltered annuity (TSA) plan. The features of a 403(b) plan are comparable to those found in a 401(k) plan.

 HSA:

health savings account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP). The funds contributed to an account are not subject to federal income tax at the time of deposit.

 529:

  A 529 plan provides tax advantages when saving and paying for higher education. There are two major types, prepaid tuition plans and savings plans. Prepaid tuition plans allow the plan holder to pay for the beneficiary's tuition and fees at designated institutions in advance. Savings plans are tax-advantaged investment vehicles, similar to IRAs

 457:

  A 457 plan is a non-qualified, deferred compensation plan established by state and local governments and tax-exempt governments and tax-exempt employers. Eligible employees are allowed to make salary deferral contributions to the 457 plan. Earnings grow on a tax-deferred basis and contributions are not taxed until the assets are distributed from the plan.

 401a:

  A 401(a) plan is a money-purchase retirement plan that is set up by an employer. The plan allows for contributions by the employer, the employee or both. Contribution amounts are either dollar-based or percentage-based. and the sponsoring employer establishes eligibility and the vesting schedule. Funds can be withdrawn from a 401(a) plan through rolloversto a different qualified retirement plan, a lump-sum payment or through an annuity.

 IRA:

  A traditional individual retirement account (IRA) allows individuals to direct pretax income towards investments that can grow tax-deferred; no capital gains or dividend income is taxed until it is withdrawn.

 Roth IRA:

  Roth IRA is an individual retirement plan (a type of qualified retirement plan) that bears many similarities to the traditional IRA. The biggest distinction between the two is how they’re taxed. Since traditional IRAs contributions are made with pretax dollars, you pay income tax when you withdraw the money from the account during retirement. Conversely, Roth IRAs are funded with after-tax dollars; the contributions are not tax deductible (although you may be able to take a tax credit of 10 to 50% of the contribution), depending on your income and life situation). But when you start withdrawing funds, these qualified distributions are tax free.

  Whole Life Insurance:

A type of permanent or “cash value” life insurance that provides benefits for the “whole” of your life (versus term insurance that only lasts for a specific period of time). (www.bankonyourself.com/what-is-dividend-paying-whole-life-insurance)

 Dividend Paying Whole Life Insurance:

 Life Insurance Policies that pay dividends. These policies are also known as participating whole life insurance, because the policy owners participate in the profits generated by the company. (www.bankonyourself.com/what-is-dividend-paying-whole-life-insurance

 Specially Designed Dividend Paying Whole Life Insurance:

Same as the definition above but these are “specially designed” to meet the unique needs of individuals or businesses based on their financial picture.