A type of Defined Contribution Plan available in the US. There are three types of contributions that can be made to 401(k)s.

  • Pre-tax – No taxes are paid on the contributions or any changes in the market value of the investments in the account until the money is withdrawn. That is, contributions are deducted from your salary in the year they are made.
  • After-tax – Contributions are made with after-tax dollars, but the changes in the market value of the investments purchased with that money are taxed when they are withdrawn.
  • Roth – Contributions are made with after-tax dollars, but no taxes are paid on any changes in the market value of the investments in the account or when money is withdrawn from the account (as long as certain conditions are met).

Accidental Death & Dismemberment Insurance

Insurance that provides term life insurance if you die in an accident and provides a percentage of the face amount of the policy if you lose or lose use of a body part, such as an arm, a leg or an eye.

Actively managed fund

An investment fund with a fund manager who is responsible for selecting the securities that will be owned by the fund and when they will be bought and sold.

Additional Living Expense

A coverage under a homeowners, condo-owners or renters policy that pays for the increase in your living expenses so you can maintain your normal standard of living if your residence is uninhabitable due to an insured peril.

Adjusted gross income

The sum of all of your sources of taxable income, as defined by the US Internal Revenue Service, minus certain deductions allowed for Health Savings Account contributions, retirement savings plan contributions, medical expenses, some tuition expenses and student loan interest, among others.

Alternative minimum tax

A separate tax calculation that applies to some high income individuals.  In that calculation, many of the deductions allowed in the regular tax calculation are reversed.  A higher deduction is applied ($70,300 for single taxpayers and $109,400 for taxpayers who are married filing jointly for tax year 2018) to derive alternative minimum taxable income.  Tax rates of 26% and 28% (for tax year 2018) are multiplied by alternative minimum taxable income to derive the alternative minimum tax.  Taxpayers pay the higher of their regular and alternative minimum tax.

Annual Percentage Rate

The interest rate adjusted to reflect any associated expenses, such as closing costs, mortgage insurance or loan origination fees.   Annual percentage rates are always stated before consideration of the impact of any compounding.

Annual Percentage Yield

The annual percentage rate after consideration of the impact of compounding. Annual percentage yield is the same thing as the effective annual rate.

Asset class

A group of similar investments or things you can buy with the expectation they will hold their value, generate income and/or increase in value. The three primary asset classes used by many investors are equities (stocks), bonds and cash. There are many other asset classes, such as real estate, fine art, mineral rights, gold and so on.