401(k)

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are paid on the contributions or any changes in the market value of the investments in the account until the money is withdrawn.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dollars, but the changes in the market value of the investments purchased with that money are taxed when they are withdrawn.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dollars, but no taxes are paid on any changes in the market value of the investments in the account or when money is withdrawn from the account (as long as certain conditions are met).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.

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.

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 classes

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 most investors are equities (stocks), bonds and cash.  There are many other asset classes, such as real estate, fine art, mineral rights and so on.

Bodily Injury Liability

Insurance coverage that pays costs related to bodily injury or death for which you become legally responsible.  

Budget

A plan showing targets for income and expenses over a fixed time period, such as a month or a year.

Certificate of Deposit

A savings certificate, usually issued by a commercial bank, that has a stated maturity and interest rate.  Certificates of deposit, often called CDs, are insured by the Federal Deposit Insurance Corporation up to $250,000 per account holder per bank.  The $250,000 limit includes all of your insured accounts at the bank, such as savings and checking accounts.