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Investing Finance Jargon, Wording Explained

Updated on November 11, 2009

Piggy Bank

Smart Piggy Financing Info
Smart Piggy Financing Info

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Allot more people are returning to investing. So I have put together some basic terms for people to hopefully understand. There are tons of terms but Hopefully I have covered the ones you knew about but really didn't know about. I will have other Hubs about other various terms. I have been investing since I was 16. And allot of times I did not know what the words meant so hopefully this Hub and future Hubs will help others.

What is Earnings Before Interest, Depreciation And Amortization EBIDA?

  • Earnings of a company that adds the interest expense, depreciation and amortization back to the net income number, but takes the tax expense into consideration. This measure is not as well known or used as often as its counterpart, (EBITDA).

What is a Municipal Bond?

A debt security issued by a state, municipality or county to finance its capital expenditures. Municipal bonds are exempt from federal taxes and from most state and local taxes, especially if you live in the state in which the bond is issued.

What is a 10-Year Treasury Note?

  • A debt obligation issued by the U.S. Treasury that has a term of more than one year, but not more than 10 years.

What is a 401(a) Plan?

  • A money purchase retirement savings plan that is set up and contributed to by an employer. The 401(a) plan allows for contributions by the employee, the employer, or both. Contribution amounts, whether dollar based or percentage based, eligibility and vesting schedule, are all determined by the sponsoring employer.

    Funds are withdrawn from a 401(a) plan through lump-sum payment, rollovers to another qualified plan, or through an annuity.

What is a 401(k) Plan?

  • This is a plan established by employers so employees may make salary deferral contributions on a post-tax/or pretax basis. Employers offering a 401(k) plan may make matching or non-elective contributions on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on a tax-deferred basis.

What is a 403(b) Plan?

  • A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan for certain employees of public schools, employees of certain tax-exempt organizations and certain ministers. Individual accounts in a 403(b) plan can be any of the following types:

    - An annuity contract, which is provided through an insurance company.
    - A custodial account, which is invested in mutual funds.
    - A retirement income account set up for church employees.

    Generally, retirement income accounts can invest in either annuities or mutual funds.

What is a 408(k) Plan?

  • A plan set up by an employer to help employees fund their retirement. The 408(k) plan is a simplified version of the popular 401(k) plan but is intended for smaller companies (those with fewer than 25 employees). It is also available to self-employed individuals. Under the plan, employees can contribute pretax dollars to the account and thus reduce their net incomes for the year. This results in a tax savings for the contributor.

This next one is great for business owners

What is a 412(i) Plan?

  • A defined-benefit pension plan designed for small business owners in the United States. This is a tax-qualified benefit plan, so any amount that the owner contributes to the plan becomes available immediately as a tax deduction to the company. The plan must be funded solely by guaranteed annuities, or a combination of annuities and life insurance.

What is a 419(e) Welfare Benefit Plans?

  • A type of employer-sponsored employee welfare benefit plan. 419(e) welfare benefit plans qualify under paragraph (e) of Section 419 of the Internal Revenue Code. They provide a range of benefits to employees, such as life, health, disability, long-term care and post-retirement medical. These plans can be either target contribution or target benefit in design, and are intended to provide additional financial stability for employees during their retirement years.

What is a 457 Plan?

  • A non-qualified, deferred compensation plan established by state/local governments and tax-exempt governments and tax-exempt employers. Employees can make salary deferral contributions to the 457 plan. Earnings grow on a tax-deferred basis and contributions are not taxed until distribution from the plan

The last number of this hub that I will list is the 529 Plan. It can be called various names, here in the state of WA, its called the GET program.

What is a 529 Plan? Better known as a College savings plan.

  • A plan that allows for the prepayment of qualified higher education expenses at educational institutions.

    You can purchase college credits today for your child to use when they actually go to school in the future, that are inflation protected


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