Investing for Retirement: 401(k), 403(b), and 457 Plans


Account Balance: Your total value in the 401(k) plan, including contributions and earnings as well as any rollover amounts transferred into the plan.

After-Tax: Money you have already paid income tax on. Some 401(k) plans allow you to contribute after-tax money to the plan.

Annuity: An investment that pays out a fixed sum of money each year.

Asset Allocation: Diversifying your assets to minimize risk.

Beneficiary: The person(s) you have designated to receive benefits when you die.

Closed-End Fund: A fund you must hold until maturity or sell on an exchange.

Contributions: The amount of your pay that you elect to put into your 401(k) plan.

Direct Rollover: Rollovers to and from retirement plans where the money is directly transferred from plan to plan.

Diversification: The concept of reducing risk by investing your money in different types of investments.

Dollar-Cost Averaging: Investing fixed sums of money over a long time period to reduce the risk of buying investments at peak prices.

401(k) Loan: Money borrowed from your 401(k) account.

Hardship Withdrawal: Taking money out of your account if you have an immediate and heavy financial need. You will be required to pay ordinary income tax and possibly a 10% penalty on the withdrawal.

Individual Retirement Annuity: An annuity contract, issued by an insurance company, which meets specific tax requirements.

Investment Options: The different funds that you can choose from to invest your money.

Liquidity: The ease with which something can be converted to cash.

Lump-Sum Distribution: A distribution to you in one taxable year of all the money in your retirement plan.

Maturity: When an investment comes due.

Open-end Fund: A fund you can freely buy and sell from a bank, broker, or mutual fund company.

Portfolio: Refers to the makeup of all of your investments, both inside and outside your 401(k) plan.

Pre-tax Contribution: Money you have not paid tax on. Your taxable income is reduced by the amount of pre-tax money you contribute to your 401(k) plan.

Promissory Note: A signed promise to repay the amount of money you have borrowed from the plan.

Prospectus: A document giving detailed information about an investment to prospective buyers.

Qualified Retirement Plan: A plan that meets complex requirements of the Internal Revenue Code. Contributions to qualified plans and the resulting earnings are tax-deferred.

Risk Tolerance: A measure of your ability to risk principal for a higher return on your investments.

Rollover: A transfer of the money in your 401(k) account into another retirement plan or IRA.

Roth IRA: A type of Individual Retirement Account (IRA) that will allow you to save money on a tax-free basis, provided you meet the eligibility requirements and the holding period rules.

Tax-Deferred: Money that will be taxed at some point in the future.

Tax-Free: Money that will not be taxed.

Time Horizon: The amount of time between now and one of your financial goals.

Vesting: An employee's non-forfeitable right to benefits or monies earned. Pensions and profit-sharing plans have vesting schedules, typically defining how long an employee has to be an active participant in a plan before he or she is entitled to a portion or all of the benefits earned.

Withholding: The amount taken out of your distribution to be used to pay income taxes.

Share Article:
Add to GooglePlus

Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Heartland Bank and Heartland Planning Associates are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Heartland Planning Associates, and may also be employees of Heartland Bank. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Heartland Bank and Heartland Planning Associates. Securities and insurance offered through LPL or its affiliates are:

Not Insured by FDIC or Any Other
Government Agency
Not Bank
Not Bank Deposits or
May Lose


The LPL Financial registered representatives associated with this website may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.

Heartland Bank ("Financial Institution") provides referrals to financial professionals of LPL Financial LLC ("LPL") pursuant to an agreement that allows LPL to pay the Financial Institution for these referrals. This creates an incentive for the Financial Institution to make these referrals, resulting in a conflict of interest. The Financial Institution is not a current client of LPL for brokerage or advisory services. Please visit or scan the QR code below for more detailed information.