Financial Words You Should Know: Over 1,000 Essential Investment, Accounting, Real Estate and Tax Words

By Michele Cagan; P.T. Shank | Go to book overview
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RETIREMENT

401(k) plan

A special tax-advantaged investment account designed to help employees save for retirement. Pretax contributions are deducted directly from employees’ paychecks and deposited into their individual accounts.

See also: Pretax contribution

A401(k) planis often used as an enticement for potential employees.


403(b) plan

A retirement savings account available only to public school employees, employees of certain tax-exempt institutions, and some ministers. Investments in these accounts get the same tax-advantaged treatment of other retirement accounts, such as tax-deferred contributions and earnings.

See also: 401(k) plan

As a guidance counselor at Rydell High, Laura had a403(b) planas part of
her benefits package
.


457 plan

A tax-advantaged deferred compensation program for government employees, wholly funded by payroll deductions from those employees. Similar to a retirement plan, but not considered as such by legal definition.

See also: Retirement plan

Once she started working for the senator, she was eligible for the457 plan
offered
.


Catch-up provisions

A special rule added into the U.S. tax code that lets people age fifty and older contribute more to retirement plans than younger people can.

See also: Retirement plan

Minnie hadn’t saved much during her younger years so began to take advan-
tage of the
catch-up provisionsimmediately after her fiftieth birthday.


Cliff vesting

A special benefit of some employee retirement plans where employer contributions become the property of the employee all at once, rather than gradually over an extended time period.

See also: Vested

The company’scliff vestingpolicy allowed the employees to own 100% of their
retirement accounts after they’d worked there for three years
.

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