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Account Types

401(k) Plan
A plan in which employees may elect, as an alternative to receiving taxable cash in the form of compensation or a bonus, to contribute pretax dollars to a qualified tax-deferred retirement plan. Withdrawals are taxed as ordinary income and are subject to an additional penalty if withdrawn prior to age 59 ½.

403(b) Plan
A Defined Contribution Plan covered in Section 403 (b) of the Internal Revenue Code. Permits employees of qualifying nonprofit organizations to set aside tax-deferred funds. Withdrawals are taxed as ordinary income and are subject to an additional penalty if withdrawn prior to age 59 ½.

Annuity
A series of regular payments that provide an income for a specified period of time (a number of years or for life). Annuities are generally issued by insurance companies. Fixed Annuities are long-term investment vehicles designed for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 1/2 are subject to 10% IRS penalty tax, and surrender charges may apply.

Beneficiary Accounts
Accounts managed on behalf of one or more beneficiaries.

Blue Chip Stock
Stock in a company known nationally for the quality and wide acceptance of its products or services and for its ability to make money and pay dividends.

Brokerage Accounts
Accounts maintained on behalf of clients for securities brokerage activities.

Cash Accounts
Most basic and common account, all transactions are expected to be paid in “cash” or kind. That is, on Settlement Date, the Executing Broker will expect payment to be deposited into the account by the client. These accounts are also known as Type-1 accounts.

Charitable Lead Trust
An arrangement whereby the charity receives an income from a trust for a period of years, then the remainder is paid to noncharitable beneficiaries (generally either the donor or his/her heirs).

Charitable Remainder Trust
Irrevocable trust in which one or more individuals are paid income until the grantor’s death, at which time the balance is passed on to a designated charity.

Defined Benefit Plan
A defined benefit plan is an employer-sponsored retirement plan providing a predetermined benefit for the plan participant at retirement.

Stock
An ownership interest in a company.

Term Insurance
Term life insurance provides a death benefit if the insured dies. It does not grow in cash value, and it ends after a certain number of years or at a certain age, without reimbursement of the premiums to the insured.

Testamentary Trust
A trust established by a will that takes effect upon death.

Trust
A legal arrangement under which an individual (trustor) gives fiduciary control of property to a person or institution (trustee) for the benefit of a beneficiary.

Universal Life Insurance
Life insurance that combines a death benefit with a savings and investment element which grows, tax deferred, at current interest rates.

Whole Life Insurance
Life insurance that offers a death benefit and also grows in cash value, tax deferred, at fixed interest rates.

Will
A document which sets out how a person wishes his/her estate or property to be dispersed after his/her death. The document must be signed by the testator/testatrix (the person making the will) in the presence of two witnesses who must also sign. An executor (female form executrix) or executors are appointed by the testator to ensure that his/her wishes are carried out.

Zero-Coupon Bond
A bond that pays all of its interest at maturity but none prior to maturity. The value of these bonds is subject to market fluctuations because they don't pay interest until maturity. Therefore, their market prices tend to be more volatile than bonds that pay interest regularly. Although interest will not be paid until maturity, income tax on the interest will have to be paid every year.