Key investing terms related to workplace benefits and retirement plans provide a foundation for you to start building your financial IQ.
Budgeting, saving for retirement, workplace benefits: Figuring out your finances can be stressful and hard—and a knowledge deficit may translate into real dollars. Lack of knowledge about personal finances costs people about an average of $948 a year.
How do you start to build that knowledge—and boost your confidence when it comes to your financial goals and plans? This list helps you make sense of everything from your paycheck to your retirement savings.
An
Real cost of borrowing, including interest rate, fees, and additional charges.
Document detailing retirement contributions, withdrawals, and rate of return (or loss) for a period of time. (Sign up to receive your Principal account documents electronically by
An investment contract that provides provide a guaranteed source of income in retirement; many different types available.
A financial asset’s increase in value over a period of time.
How you divide the funds in your retirement savings; typically assets are allocated to balance between risk tolerance and expected return on investment.
Categories of securities such as stocks, bonds, and cash.
A decline in stock market value of 20% or more; opposite of a bull market (see below).
People or other entity, such as a trust, to receive your account assets when you die.
A loan to a government or company; bonds typically make up some portion of investment accounts.
Investment account opened with a stock brokerage or investment firm, which then places orders on your behalf.
An extended period of stock market gains exceeding 20%; opposite of a bear market (see above).
Profits from selling something you own—an asset—such as a home, stocks, or bonds.
Annual maximums the IRS allows you to contribute to accounts like a 401(k), IRA, or health savings account.
Additional contributions people age 50+ may make to retirement accounts to increase retirement savings.
When investment growth, in the form of dividends and/or capital gains, is reinvested and then continues to earn more interest over time.
A way for employers to help employees save for retirement and supplement an existing qualified employer-sponsored retirement plan; deductions may be made as a before income taxes (pre-tax), which reduces income tax liability.
Insurance that helps replace a portion of income if a serious illness or injury prevents you from working; often included in workplace benefits plans.
When someone owns different investments in several asset classes (see above) to balance the effects of volatility and maximize returns.
Portion of company profits paid to shareholders.
A weighted average of the stock prices of 30 United States-based companies; probably the most well-known stock index.
A company-provided plan that gives employees stocks or ownership shares; typically based on tenure.
Often included as part of 401(k), 403(b), or 457 employer-sponsored retirement plans (see above). Employers may match up to a certain percentage of your contribution to your retirement savings.
A retirement plan such as a 401(k) set up by your employer for you that allows you to make ongoing contributions, typically as automatic pre-tax payroll deductions.
A type of mutual fund invested in the stocks of companies.
A diversified investment fund that holds a mix of assets such as stocks or bonds can can be traded at market prices on an exchange.
Federal Reserve System governing board that sets the nation’s interest rate and manages financial policy.
A person such as a financial professional who is required by law to perform their duties (such as managing your money) in your best interest.
A person who offers insight into financial-related topics.
A mutual fund that pays a set rate of return by investing in bonds and other debts to generate income.
Workplace benefit that allows you to contribute to a pre-tax savings account and use the funds for qualified medical expenses. FSA funds must be used in the year in which they are saved.
Your income before payroll taxes and deductions.
A pre-tax savings account for qualified health expenses; these funds do not have to be used from year to year.
A passively managed mutual fund that mimics the investments in an index.
Investment account not tied to an employer; you make contributions with pre-tax dollars but pay taxes upon withdrawal.
An increase in the price of goods and services.
The price of money, from the rate on loans (such as mortgages) to the rate paid on accounts (such as savings).
A group that pools resources to invest in things like stocks or stock indexes.
A service for an investment account actively overseen by a professional.
A pooled investment vehicle, managed by a professional, that lets investors purchase different asset classes in a single transaction; funds follow a pre-set investment ratio and risk level.
The income paid to you after all payroll deductions are made, aka your paycheck. Net worth: Your assets minus your liabilities.
Investments made with gross income, or those that you have not yet paid taxes on; includes 401(k) or IRAs.
An investment collection.
Periodic manual or automatic adjustment of an investment portfolio to its original target asset allocation (e.g., 70% stocks/30% bonds) to reach a goal, such as maintaining a desired risk level.
Defined by the National Bureau of Economic Research as two consecutive quarters in a row of declining economic activity, or gross domestic product.
Money that you, once you reach a certain age, are required to withdraw from employer-sponsored retirement plans, such as 401(k)s.
Your personal ability to tolerate volatility in investments.
Consolidating or moving retirement funds from one account to another, such as from a 401(k) to an IRA.
Investment account not tied to an employer; you make contributions with post-tax dollars, so do not pay taxes when you withdraw funds.
A legal owner of shares of a company; may be common or preferred. Common shareholders generally have voting rights but are paid last, while preferred are paid first.
Ownership claim of a company (private or public).
A measurement of a collection of public stocks, such as the Dow, Nasdaq, or S&P.
Owner of a common or preferred stock.
Collection of public stock buyers and sellers, such as the New York Stock Exchange (NYSE).
Investment account that grows assets and reduces risk over a specified period of time; the name often includes a year, such as 2035, at which time the investor will begin to make withdrawals.
Investment or savings account, such as a 401(k), IRA, and health savings account, that offers a tax benefit.
Investment account that offers a mostly steady rate of risk over a specified length of time.
Investment accounts, such as IRAs, for which you have not yet paid taxes, but will do so when making withdrawals.
The total percentage of employer contributions to your retirement savings based on your tenure; the time and structure of vesting varies based on your workplace benefits.
Fluctuations in your investments.
The total deducted from your gross income (see above) to arrive at your net income.
May include employer-sponsored retirement plans, non-medical benefits such as dental, vision, accident, critical illness, wellness programs, and more, all part of compensation provided by your employer.
One step you can take today to get started building your financial foundation? Check out how much you’re saving now versus how much you could be saving.
