Glossary of Financial Terms

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Annuity – (1) A series of periodic payments. (2) A contract under which an insurance company promises to make a series of regular income payments to a named individual for a time period.

Variable Annuity: An insurance contract that invests your premium in various mutual fund-like investments.

Beneficiary – A person, institution, trustee, or estate named to receive death benefits from insurance or annuity contracts, or anyone receiving Social Security benefits.

Defined benefit pension plan – A traditional pension plan, usually insured by the government, that pays a certain benefit usually based on your age at retirement, rate of pay and the number of years you worked. The employer’s pension administrator controls investments and bears the risk of investment.

Defined contribution pension plan – A retirement plan in which contributions are made by the employee, the employer, or both. The final payout will depend on how much is invested and the success of the investments. The employee bears the risk. This type of retirement plan is not insured by the government.

Direct Deposit: An electronic method for transferring and depositing money directly into your account.

Direct Express Debit Card: A debit card that allows you to access your federal benefits without a bank account. Your federal benefits payment is deposited to your Direct Express® card account on your payment day. You can use the card to make purchases, pay bills or get cash.

Disability insurance – Insurance that replaces income for individuals unable to work due to accident or illness. Disability insurance is sometimes offered through an employer, but can also be purchased individually.

Elder Financial Exploitation: An act of using an older adult’s money or assets contrary to his or her wishes, needs, or best interests for the abuser’s personal gain.

Fiduciary: A person who manages the assets for the benefit of another person rather than for his or her own profit.

Fraud: A type of illegal act involving the obtaining of something of value through willful misrepresentation.

Grandparent Scam: A scam whereby a caller pretends to be a relative in need of immediate funds to deal with an emergency. The caller may also represent themselves as a hospital employee, law enforcement officer, or attorney.

Identity Theft: A fraud committed or attempted using the identifying information of another person without authority.


Immediate annuity – An annuity which you can buy at or after retirement. The payments begin right away and are guaranteed to continue for as long as you live.

Individual retirement account (IRA) – A retirement savings vehicle for individual workers. Traditional IRAs allow tax-deductible contributions, with earnings tax-deferred until withdrawal, subject to minimum distribution rules; contributions to Roth IRAs are made with after-tax funds, and withdrawals are tax-free.

Lump-sum distribution – A single-sum payment from a pension or employee benefit plan to a participant retiring or leaving employment.

Pharming: When criminals seek to obtain personal or private information by making fake websites appear legitimate.

Phishing: When criminals send out unsolicited emails that appear to be from a legitimate source in an attempt to trick you into divulging personal information.

Ponzi Scheme: Also called a “pyramid” scheme, the scam artists promise high returns and use the money of some investors to pay off other investors.

Power of Attorney: A power of attorney (POA) is a legal document that allows someone to act on your behalf.

Durable Power of Attorney: A power of attorney (POA) that remains in effect even if you become incompetent.

Reverse Mortgage – A special type of loan contract with a financial institution that allows a homeowner age 62 and older to get retirement income from the equity in the home, with no repayment needed for as long as the individual lives in the home.

Rollover IRA – A type of individual retirement account usually funded with money transferred from a former employee’s company-sponsored retirement plan account. Investment earnings continue to grow tax-deferred until benefits are distributed.

Scam: A confidence trick, confidence game, or con for short, is an attempt to intentionally mislead a person or persons, usually with the goal of financial or other gain.

Spam: Unsolicited commercial email.

Social Security – A federal government program that provides retirement, survivors, and disability income benefits for eligible workers and their families.

Survivor’s benefit – Income payable to a beneficiary, often the widow or widower, from a defined benefit pension plan, Social Security, annuity or insurance policy when the employee or policyholder dies.

Tax deferral – The postponement of income tax on certain investment accounts until money is taken out.

Vesting – The right of an employee, earned over a specified period of time, to receive some retirement benefit, regardless of whether he or she remains with the employer.

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