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Glossary: Retirement Terms
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- Deferred Compensation Account
- Deferred Compensation is a retirement savings program operating under Section 457 of the Internal Revenue Code (IRC). It is an agreement between you and the state that postpones part of your income until retirement. This lowers your taxable income and allows the money to grow untaxed until you begin withdrawals at retirement.
- Individual Retirement Account - IRA
- Individual Retirement Account, which comes in in several types; contributions may be from pre-tax or after-tax income. Federal limits apply.
- IRA
- An Individual Retirement Account or IRA is a retirement savings account that enables qualifying individuals to save and invest for retirement. There are a number of different types of IRAs, including employer provided plans and others set up by an individual. "Traditional" and "Roth" are special classifications for tax purposes.
- Principal
- The original amount of a debt on which interest is calculated.
- Roth IRA
- An individual retirement plan that bears many similarities to the Traditional IRA. Contributions are never deductible, and qualified distributions are tax-free. A qualified distribution is one that is taken at least five years after the taxpayer established his/her first Roth IRA and when he/she is age 59½, disabled, or using the withdrawal to purchase a first home (limit $10,000), or deceased (in which case the beneficiary collects).
- Simplified Employee Pension - SEP
- Simplified Employee Pension (SEP) Plans allow self-employed persons, sole proprietorships, partnerships, small businesses, small employee groups and corporations to provide retirement plans via an easily established and maintained retirement program.
- Traditional IRA
- Individual taxpayers are allowed to contribute 100%% of compensation up to a specified maximum dollar amount to their Traditional IRA. Contributions to the Traditional IRA may be tax-deductible depending on the taxpayer's income, tax-filing status, and coverage by an employer-sponsored retirement plan.
