Glossary of Terms

IRA: Individual Retirement Account. See Traditional IRA or Roth IRA. An individual retirement plan that offers tax advantages for retirement savings.

Offered by many financial institutions, an IRA is a vehicle that an individual can open and put a yearly limited contribution amount to save for retirement.  The type of IRA, Traditional or Roth, will determine how the IRS will tax the plan.

No IRA is federally insured. There is a risk of losing principle.

The limit on contributions is the smaller of: $5,500 ($6,500 if you’re 50 or older by year end) a year, or all your taxable compensation for the year.

IRS Comparison Chart

IRS IRA Information

Traditional IRA: All contributions given to this account can be tax deductible, lowering your yearly taxable income. (Unless you an enrolled in a retirement plan through work and are in certain income brackets. Click here for more information.) Federal and state taxes are applied to distributions, when you withdraw money from the IRA. At age 70 1/2, you are required to make minimum withdrawals or face serious penalties. At 59 1/2 to 70 1/2, you can withdraw any amount of money. Before the age of 59 1/2, withdrawals incur an additional 10% penalty, except under some circumstances.

Roth IRA: No contributions are tax deductible. You must put in post-income tax money. Withdrawals are not subject to capital gains or income tax. There is no age where you have to make withdrawals. You can start withdrawing funds at 59 1/2. Prior to that, you can withdraw any amount of contributions, as long as they have been in the Roth IRA for 5 years, with no penalty but you cannot withdraw any returns.

Contributions: Money put into the IRA account. Tax deductible when contributing to a traditional IRA. Not in a Roth IRA

Distribution: Money withdrawn from an account, in our case, the IRA.

Tax deductible: See tax write-off. When reporting your income to the IRS tax deductible items are not subject to income tax. These can be used to lower your tax bracket.

Security (Securities): Financial instruments with a market value. Examples are equities (stocks), bonds, mutual funds, real estate, annuities, etc. etc.


Stocks (Equities): Comes in two forms, preferred and common. Preferred works more like a bond, where company dividends are regularly scheduled. Also in the case of insolvency; preferred shares are paid before common stock.


Unemployment: Percentage of US workers actively seeking employment but unable to find it


Underemployment: Workers who are employed in a lower capacity (either in terms of skills or hours) than they could be or would prefer to be. E.g. A graduate with a highly technical degree working part-time in food service.

An acronym for an association of Emerging Markets (Brazil, Russia, India, China, and South Africa) that showed high growth, formed in 2009 as BRIC, adding South Africa in 2010


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