Retirement Terms and Definitions: FICA, Social Security, 401(k)s, and More, Quizzes of Financial Management

Download Retirement Terms and Definitions: FICA, Social Security, 401(k)s, and More and more Quizzes Financial Management in PDF only on Docsity! TERM 1 retirement DEFINITION 1 The time in life when the major sources of income change from earned income to employer based retirement benefits, private savings and investments, income from Social Security, and perhaps part-time employment TERM 2 Federal Insurance Contribution Act DEFINITION 2 Act that authorizes Social Security and Medicare tax withdrawals from employee paychecks; amounts withheld go into SocialSecuritytrust fund accounts, which pay benefits to current retirees TERM 3 maximum taxable yearly earnings DEFINITION 3 The maximum amount to which the FICA tax is applied. TERM 4 Social Security credits DEFINITION 4 Accumulated quarterly credits to qualify for Social Security benefits obtained by paying FICA taxes. TERM 5 fully insured Social Security status DEFINITION 5 Requires 40 credits and provides workers and their families with benefits under retirement, survivors, and disability programs; once status is earned, it cannot be taken away even if the eligible worker never works again. TERM 6 basic retirement benefit/primary insurance amount DEFINITION 6 Amount of Social Security benefits a worker would receive at his or her full-benefit retirement age, which is 67 for those born after 1960 TERM 7 full-benefit retirement age DEFINITION 7 Age at which a retiree is entitled to full Social Security benefits; 67 for those born in 1960 or later. TERM 8 Social Security Statement DEFINITION 8 A document that the Social Security Administration periodically sends to all workers, which includes earnings history, Social Security taxes paid, and an estimated benefit amount. TERM 9 retirement savings goal DEFINITION 9 Total amount of accumulated savings and investments needed to support desired retirement lifestyle. TERM 10 after-tax money DEFINITION 10 Funds put into regular investment accounts; subject to income taxes. TERM 21 graduated vesting DEFINITION 21 Schedule under which employees must be at least 20% vested after 2 years of service and gain an additional 20% of vesting for each subsequent year until, at the end of year 6, the account is fully vested. TERM 22 retirement plan contribution credit/saver's tax credit DEFINITION 22 Program to encourage low-income individuals to save for retirement, this tax credit ranges from 10-50% of every dollar they contribute to an IRA or employer-sponsored retirement plan up to $2000. TERM 23 defined-benefit retirement pan DEFINITION 23 Employer-sponsored retirement plan that pays lifetime monthly annuity payments to retirees based on a predetermined formula. TERM 24 pension DEFINITION 24 Sum of money paid regularly as a retirement benefit. TERM 25 disability benefits DEFINITION 25 Substantially reduced benefits paid to employees who become disabled prior to retirement. TERM 26 joint and survivor benefit/survivor's benefit DEFINITION 26 Annuity whose payments continue to a surviving spouse after the participant's death; often equals at least 50% of participant's benefits. TERM 27 spousal consent requirement DEFINITION 27 Federal law that protects surviving rights of spouse or ex- spouse to retirement or pension benefits unless the person signs a waiver of those rights. TERM 28 cash-balance plan DEFINITION 28 Defined-benefit plan funded solely by an employer that fives each participant an interest-earning account credited with a percentage of pay on a monthly basis. TERM 29 employee stock-ownership plan DEFINITION 29 Benefit plan in which employers make tax-deductible gifts ofcompanystock into trusts, which are then allocated into employee accounts. TERM 30 profit sharing plan DEFINITION 30 Employer-sponsored plan that allocates some of the employer profits to employees in the form of end-of-year cash or common stock contributions to employees' 401(k) accounts. TERM 31 individual retirement account (IRA) DEFINITION 31 Personal retirement account to which a person can make annual contributions that provide tax-deferred growth and then decide how to invest the funds within the IRA TERM 32 traditional IRA DEFINITION 32 Account that offers taxdeferredgrowth; the initial contribution may be tax deductible for the year that the IRA was funded TERM 33 spousal IRA DEFINITION 33 Account set up for spouse who does not work for wages; offer tax-deferredgrowthand tax deductibility TERM 34 Roth IRA DEFINITION 34 IRA funded with after-tax money that grows on a tax- deferred basis; withdrawals are not subject to taxation. TERM 35 Keogh DEFINITION 35 Tax-deferred retirement account designed for self-employed and small-business owners.