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10 Retirement Terms to Know

To Help Grow Your Account

We know the “language of retirement” can be confusing – and we want to help make it easier for you. So we’ve translated some common investment terms into words you can understand.

Diversification. Investing your money in a variety of investment options so no single investment makes up too much of your overall account.

Risk Tolerance. Your comfort level with investment risk. Are you more conservative, moderate or aggressive with your investment strategy?

Compound Interest. Compound interest is interest paid on both the principal and on the accrued interest. In other words, it is the
“interest on the interest.”

Qualified Default Investment Alternative (QDIA). An investment series chosen by your employer based off the unique demographics of your organization. You are automatically defaulted into the applicable investment series unless you elect to make a change. The investment mix is typically based on age.

Stocks. A stock (also known as equity) is a share in the ownership of a corporation and represents a claim on part of the corporation’s assets and earnings.

Bonds. A bond is a type of investment option that represents debt obligations. When a company issues a bond, they repay the loan over time with interest.

Mutual Funds. Mutual funds are types of investments, managed by a portfolio manager, that pool your money with other investors
to purchase assets such as stocks, bonds and other securities. Rollover. A rollover occurs when you transfer your retirement savings from your previous employer’s plan to your new employer’s plan or an IRA.

Beneficiary. A beneficiary is an individual, entity, trust or estate that you designate to receive a share of your retirement plan assets at the time of your death.

Roth 401(k) Contributions. With Roth 401(k) contributions, you make contributions AFTER taxes have been taken out of your paycheck. Then you get tax-free withdrawals when you retire. Reversely, traditional 401(k) contributions are PRE-TAX. This reduces your taxable income for that year and the money is taxed when withdrawn in retirement.

For informational purposes only. It is not intended to provide any legal or financial advice. Consult with your advisor regarding your particular set of facts and circumstances.