Definitions

B Bond

A debt investment, which involves an investor loaning money to a company or government for a defined period of time while the lender earns interest

C CD (Certificate of Deposit)

A savings certificate that has a maturity date and a fixed interest rate. It can be issued in any denomination.

M Money Market Fund

A mutual fund that invests in short-term debt instruments.

M Mutual Fund

A fund that gives individual investors -- through pooling their money with other investors -- access to a well-diversified portfolio of equities, bonds or other securities.

S Stock

A type of security, representing ownership in a corporation that can rise or fall in value

Group Pensions/401(k)

What is a 401(k)?

A 401(k) is an employer-sponsored qualified retirement plan, which offers employees a variety of investment options. Employees can contribute to the plan through payroll deduction (or deferral). These contributions are tax-sheltered until withdrawn at retirement.^*

Because there is a limit to what you can contribute annually to a 401(k), you can't make up lost ground with large, last-minute contributions. So the earlier you start contributing, the greater the potential for having the retirement you've always dreamed about.

Why would I want it?

Because you want to live comfortably in retirement and Social Security will probably not provide you with enough income to do so. A 401(k) -- with its potential for long term investment growth -- may provide an easier way to save for retirement.

In addition to quality investment options and employer contribution match (if available), you get tax advantages. You contribute to your account with pre-tax dollars. This lowers your taxable income. At the same time, your investment is tax-deferred, which means no taxes are paid until you make withdrawals.

Withdrawals of taxable amounts will be subject to ordinary income tax and, if taken prior to age 59 1/2, a 10% IRS tax penalty may apply. For plan sponsors. If you are a business owner, providing a 401(k) can be a great incentive for attracting and retaining top employees.