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savings; taxes on this deferred income and on any earnings the account generates are deferred until the funds are withdrawn—normally in retirement.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.

    • Partnership
    • Permanent Life Insurance
    • Policy Loan
    • Policy Rider
    • Policyholder
    • Portfolio
    • Power of Attorney
    • Preferred Stock
    • Prenuptial Agreement
    • Price/Earnings Ratio (P/E Ratio)
    • Prime Interest Rate
    • Principal
    • Probate
    • Property
    • Profit-Sharing Plan
    • Prospectus
    A contract under which two or more individuals manage and operate a business venture.
    A class of life insurance policies that do not expire—as long as premiums are kept current—and which combine a death benefit with a savings component. This savings portion can accumulate a cash value against which the policy owner may be able to borrow funds. Several factors will affect the cost and availability of life insurance, including age, health and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
    A loan made by an insurance company to a policyholder. Policy loans are secured by the cash value of a life insurance policy. Withdrawals of earnings are fully taxable at ordinary income tax rates. If you are under age 59½ when you make the withdrawal, you may also be subject to a 10% federal income tax penalty. Also, withdrawals may reduce the benefits and value of the contract.
    A provision to a life insurance policy that is purchased separately from the basic policy and that provides additional benefits at additional cost.
    The person or entity who holds an insurance policy; usually the client in whose name an insurance policy is written.
    The combined investments of an individual investor or mutual fund.
    A legal document that grants one person authority to act for another person in specific legal or financial matters in the event that said individual becomes incapacitated.
    Securities that represent ownership in a corporation and have a higher claim on a company’s assets and earnings than common stock. Dividends on preferred stock are generally paid out before dividends to common stockholders.
    A contract entered into by those contemplating marriage that sets forth how their individual property will be divided should they ultimately divorce.
    A ratio calculated by dividing a stock’s price by its earnings per share. Investors use this ratio to learn how much they are paying for a company’s earnings.
    The interest rate commercial banks charge their most credit-worthy or “prime” customers. The prime interest rate is influenced by the federal funds rate.
    The original amount invested in a security, excluding earnings; the face value of a bond; or the remaining amount owed on a loan, separate from interest.
    The court-supervised process in which a deceased person’s debts are paid and any remaining assets distributed to his or her heirs.
    Anything over which a person or business has legal title. Property may be held in common or privately owned.
    A defined-contribution plan under which employees share in company profits. The funds within the plan accumulate tax deferred.
    A legal document that provides the information an investor needs to make an informed decision about an investment offered for sale to the public. Prospectuses are required by and filed with the Securities and Exchange Commission.