Investments Article | Transamerica

25 Financial Terms Every Retiree Should Know

Financial literacy gives you the precise tools you need to make appropriate decisions in managing your personal finances. Here are 25 terms it pays to know as you enter this new phase of your financial life. Financial Terms

  1. Annuity:  A contract sold by a life insurance company that provides periodic income payments for a lifetime, or for a defined period of time or both.
  2. Asset allocation: Investment among a variety of asset classes to help manage risk.
  3. Bear market: a market condition in which securities are declining in value.
  4. Beneficiary:  The individual(s) or entity (i.e., trust) that is designated as benefit recipient upon your death.
  5. Bull market: a market condition in which securities are rising in value.
  6. Cash alternatives (liquid assets):  Examples are, bank CDs, U.S. savings bonds, Treasury bills.
  7. Debt instruments: Examples are bonds, mortgage-related securities.
  8. Disability income insurance:  This is a form of insurance that provides periodic payments to replace income if the insured is unable to work due to injury or illness.
  9. Diversification: Spreading risk by investing in a variety of asset categories.
  10. Exchange: Facility (physical or electronic) for the trading of securities.
  11. Free look:  A period of time during which a policy owner may examine a newly issued policy and, if not satisfied, surrender it in exchange for a full refund of premium.
  12. Index: A group of securities that represent a specific market or segment of a market.
  13. Investment portfolio: A collection of investments.
  14. Life insurance:  Insurance in which the risk insured against is the death of a particular person, with the insurance company paying a stated sum or income to the beneficiary.
  15. Liquidity: The ability to quickly convert investments into cash.
  16. Risk:  The probability that you will make or lose money with an investment.
  17. Risk tolerance: Your capacity to absorb financial loss and your emotional feelings about losing money.
  18. Rollover IRA: An Individual Retirement Account (IRA) established for the purpose of receiving the assets from a qualified retirement plan, in order to preserve the tax-deferred status of the account. A rollover is tax free, provided it takes place within 60 days after the distribution is received.
  19. Roth IRA: An Individual Retirement Account (IRA) in which contributions are made with after tax dollars. Earnings in the account accumulate tax-free. Withdrawals that are qualified distributions (generally those taken after age 59 ½ and after the account has been open for five years) can be made with no income or penalty tax. Annual contributions may be made by an individual who is employed; contribution amounts may be limited if you income exceeds certain levels.
  20. Securities: Generally, stocks, bonds and other investment instruments.
  21. Tax-deferred: An investment with earnings and/or contributions that are taxed at a later date. For example, taxes on annual contributions to a retirement savings plan or traditional IRA may be deferred until the money is withdrawn.
  22. Time horizon: How long you will remain invested.
  23. Universal life:  Insurance policy with a death benefit and flexible premium paid into an interest-bearing account from which fees and costs of insurance are deducted.
  24. Variable annuity:  A contract sold by an insurance company that provides periodic income payments, but those payments and the value of your account can fluctuate depending on the value of the underlying securities. Penalties may also apply for early withdrawals.
  25. Yield: Generally, the income return on an investment. This refers to the interest or dividends received from a security.