Home  |  Insurance FAQ  |  Financial FAQ  |  Glossary  |  

Here are a few basic terms and their meanings.

Annuity
    An insurance-based contract that provides future payments at regular intervals in exchange for current premiums.  Annuity contracts are usually purchased from banks, credit unions, brokerage firms, or insurance companies.  Any guarantees are contingent on the claims-paying ability of the issuing company.

Beneficiary
    A person named in a life insurance policy, annuity, will, trust, or other agreement to receive a financial benefit upon the death of the owner.  A beneficiary can be an individual, company, organization, and so on.

Employer-Sponsored Retirement Plan
    
A tax-favored retirement plan that is sponsored by an employer.  Among the more common employer-sponsored retirement plans are 401(k) plans, 403(b) plans, simplified employee pension plans, and profit-sharing plans.

Equity
    
The value of a person's ownership in real property or securities; the market value of a property or business, less all claims and liens against it.

403(b) Plan
    
A defined contribution plan that may be established by a non-profit organization or school for retirement.  Employees may allocate a portion of their salaries into this plan and contributions are excluded from their income for tax purposes (with limitations).  Contributions and earnings will compound tax deferred.  Withdrawals from a 403(b) plan are taxed as ordinary income and may be subject to an additional 10 percent federal tax penalty if withdrawn prior to age 59 1/2.

Individual Retirement Account (IRA)
    
Contributions to a traditional IRA are deductible from earned income in the calculation of federal and state income taxes if the taxpayer meets certain requirements.  The earnings accumulate tax deferred until withdrawn and then the entire withdrawal is taxed as ordinary income.  Those earning above the amount that is allowed for deductible contributions could still make non-deductible contributions to their IRA.  The maximum amount allowed as an IRA contribution is now $5000 from 2008 to 2010.  Beginning in 2002, those over 50 could make an additional contribution called a "Catch-up Contribution".  If this applies to you, please call me for more details.


California License #OC28846