6 Key Retirement Terms
This 2-minute video highlights 6 important retirement terms you should know and how they impact your retirement planning. You don’t have to be an expert to improve your savings and reach your goals. With these concepts in your back pocket, you’ll be on your way toward saving for a comfortable retirement.
| Visual | Audio |
|---|---|
| An open book pops onto the screen. A blue question mark is floating out of the book. The words “Asset Allocation,” “Deferral Rate,” “Roth vs. Traditional,” “Vesting,” and “Beneficiaries” come out of the pages and surround the book. | Knowing a few important words can make a big difference in how you manage your retirement savings. Let’s look at six common terms and what they mean for you. |
| The words “Deferral Rate” appear on screen above the phonetic spelling and type of word (noun). Below the term is the definition of deferral rate: “The percentage of your paycheck that you contribute to your employer-sponsored retirement plan.” | We’ll start with “deferral rate.” Your deferral rate is simply the percentage of your paycheck that you contribute to your employer-sponsored retirement plan. |
| A piggy bank with “401(k)” appears as money is inserted into the piggy bank. | The more you put in, the more you can invest, allowing you the opportunity to grow your money and reduce your taxable income. |
| The words “Asset Allocation” appear on screen above the phonetic spelling and type of word (noun). Below the term is the definition of asset allocation: “how you decide to invest your retirement savings into stocks, bonds, and cash.” | That money you contribute then needs to be allocated. Asset allocation is how you decide to invest your retirement savings into different asset classes, such as stocks, bonds, and cash. |
| A pie chart showing three different sections titled “Stocks, bonds, and cash” appears and begins to pulse with a dollar sign in the middle. | According to multiple studies, your asset allocation is one of the biggest factors in shaping your long-term retirement planning success. The good news is your retirement specialist can help you set the right allocation to meet your goals. |
| The words “Roth Retirement Plan” appear on screen above the phonetic spelling and type of word (noun). Below the term is the definition of Roth retirement plan: “A plan that allows you to put in money after paying taxes then you can withdraw that money tax-free in retirement.” | The next term is Roth Retirement Plan, which if your plan allows, lets you pay taxes on the money you put into your plan up front so you can make tax-free withdrawals in retirement. |
| The words “Traditional Retirement Plan” appear on screen above the phonetic spelling and type of word (noun). Below the term is the definition of Traditional retirement plan: “A plan that allows you to put money in before paying taxes, and then you pay taxes when you withdraw that money in retirement.” | On the flipside is a traditional retirement plan where you don’t pay taxes up front on your contributions, but your withdrawals in retirement are taxed. |
| The image of a scale moving back and forth to reach an equal state appears. | Both Roth and Traditional plans offer tax benefits and can be helpful depending on where you are in your career and where you plan to be in retirement. |
| The word “Beneficiaries” appear on screen above the phonetic spelling and type of word (noun). Below the term is the definition of beneficiaries: “The person, people, or entities you designate to receive the funds in your 401(k) when you pass away.” | Another term is beneficiaries. It’s important to consider who can inherit your retirement savings. The person, people, or entities you designate to receive the funds in your retirement plan when you die are your beneficiaries. |
| A figure head appears on screen and three more enter below it. A line begins to connect the three figure heads below to the larger one in a lineage like manner. | It’s a good idea to list not only your primary beneficiary, but also any back-up beneficiaries, also known as contingent beneficiaries, in case your primary beneficiary has passed away at the time of your death. |
| The word “Vesting” appear on screen above the phonetic spelling and type of word (noun). Below the term is the definition of vesting: “Employer-contributed money is fully accessed only after a fixed period of employment.” | The last term we’ll cover is “vesting.” This means your employer may require you to work at the company for a specific amount of time before you gain full access to the money they put into your retirement plan. |
| A calendar graphic appears and a specific date is marked with a checkmark on different days. | So, it’s important to understand your company’s vesting schedule because if you leave before your vesting date, you may lose some of your employer-contributed money. |
| A figure head appears on screen as the terms “Asset Allocation,” “Deferral Rate,” “Roth vs. Traditional,” “Vesting,” and “Beneficiaries” from the first slide appear on screen. | You don’t have to be an expert to improve your retirement savings. With these key concepts in your back pocket, you’ll be on your way towards saving for a comfortable retirement. |
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