1035 Exchange

A method of exchanging insurance-related assets without triggering a taxable event. Cash-value life insurance policies and annuity contracts are two products that may qualify for a 1035 exchange.

401(k) Plan

A qualified retirement plan available to eligible employees of companies. 401(k) plans allow eligible employees to defer taxation on a specific percentage of their income that is to be put toward retirement savings; taxes on this deferred income and on any earnings the account generates are deferred until the funds are withdrawn—normally in retirement. Employers may match part or all of an employee’s contributions. Employees may be responsible for investment selections and enjoy the direct tax savings.

401(k) Loan

A loan taken from the assets within a 401(k) account. 401(k) loans charge interest and are normally paid back through payroll deductions. If the borrower leaves an employer before a 401(k) loan has been repaid, the full amount of the loan is generally due. If the borrower fails to repay the loan, it is considered a distribution, and ordinary income taxes may be due, along with any applicable tax penalties.

403(b) Plan

A 403(b) plan is similar to a 401(k). A 403(b) is a qualified retirement plan available to employees of non-profit and government organizations.

    • Federal Income Tax Bracket
    • Federal Reserve System (The Fed)
    • Financial Aid
    • Financial Statement
    • Financial Industry Regulatory Authority (FINRA)
    • First-to-Die Life Insurance
    • Fixed Annuity
    • Fixed-Rate Mortgage
    • Foreclosure
    • Front-End Load
    • Fundamental Analysis
    A series of income ranges within which a taxpayer’s income is taxed at a certain rate. Taxpayers pay the tax rate in a given bracket only for that portion of their overall income that falls within the bracket’s range.
    The United States’ central bank. The Federal Reserve System consists of a series of 12 independent banks that operate under the supervision of a seven-member, federally appointed board of governors. The Fed strives to maintain maximum employment, stable price levels, and moderate long-term interest rates. It establishes and enforces the regulations banks, savings and loans, and credit unions must follow. It also acts as a clearing house for certain financial transactions and provides banking services to the federal government.
    Loans, grants, scholarships, and work-study programs provided by federally and privately funded sources to enable students to attend college.
    A formal record of the financial activities of a business, person, or other entity. For a business, financial statements typically include a balance sheet, a profit and loss statement, and a cash flow statement.
    FINRA is an independent regulator that oversees all securities firms doing business in the U.S. FINRA seeks to protect investors by making sure the securities industry operates fairly and honestly.
    Joint life insurance taken out on the lives of two or more people that pays its death benefit when the first insured person dies.
    A contract with an insurance company that guarantees investment growth at a fixed interest rate as well as current or future payments in exchange for a premium or series of premiums. The interest earned on an annuity contract is not taxable until the funds are paid out or withdrawn. The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities have fees and charges associated with the contract, and a surrender charge also may apply if the contract owner elects to give up the annuity before certain time-period conditions are satisfied.
    A mortgage with a set interest rate that will not change over the life of the loan.
    The legal process under which a creditor seizes the property of a borrower who has not made timely payments on his or her debt.
    A sales fee paid at the time an investment is purchased. This fee is deducted from the investment—thus lowering the size of the investment.
    A method of evaluating securities that examines financial and economic factors—such as the current finances of a company and the prevailing economic environment—to determine whether the company’s future value is accurately reflected in its current stock price.