US Financial Glossary

An employer-sponsored retirement savings plan. You contribute pre-tax dollars (Traditional 401k) or after-tax dollars (Roth 401k), and many employers match a percentage. 2025 contribution limit: $23,500 ($31,000 if 50+). Withdrawals before 59½ incur a 10% penalty.

Free money from your employer that matches your 401(k) contributions up to a certain percentage — commonly 50% match on the first 6% of salary, or dollar-for-dollar on the first 3-4%. Not contributing enough to get the full match is leaving money on the table.

Moving money from a Traditional IRA or 401(k) to a Roth IRA. You pay income tax on the converted amount now, but future growth and withdrawals are tax-free. Strategic in low-income years or when tax rates are expected to rise. No income limits on conversions.

Individual Retirement Account funded with after-tax dollars. Contributions grow tax-free and withdrawals in retirement are tax-free. 2025 limit: $7,000 ($8,000 if 50+). Income limits apply — in 2025, phase-out begins at $150,000 (single) or $236,000 (married filing jointly). No Required Minimum Distributions.

A federal program providing retirement, disability, and survivor benefits. Funded by a 6.2% payroll tax (matched by employer) on earnings up to $176,100 (2025). Full retirement age is 67 for those born 1960+. You can start at 62 (reduced) or delay to 70 (increased by 8%/year).

Individual Retirement Account funded with pre-tax dollars (contributions may be tax-deductible). Grows tax-deferred — you pay ordinary income tax on withdrawals. 2025 limit: $7,000 ($8,000 if 50+). Required Minimum Distributions start at age 73.

Investing a fixed dollar amount at regular intervals regardless of market price. You buy more shares when prices are low and fewer when prices are high. Reduces the impact of volatility and eliminates the need to time the market. Your 401(k) contributions already do this automatically.

Exchange-Traded Fund — a basket of securities that trades on an exchange like a stock. Popular US ETFs: VOO (S&P 500), VTI (total market), QQQ (Nasdaq-100), BND (bonds). Lower fees than mutual funds, tax-efficient, and instantly diversified.

A mutual fund or ETF that tracks a market index (S&P 500, total market, etc.). Pioneered by Vanguard founder Jack Bogle. Known for low fees (as low as 0.03%), broad diversification, and consistently outperforming most actively managed funds over the long term.

An index tracking the 500 largest US publicly traded companies. Considered the benchmark for the overall US stock market. Average annual return since 1957: ~10.7%. You can invest in it through index funds like VOO, SPY, or IVV.

A family of tax forms for non-employment income. 1099-NEC: freelance/contractor income. 1099-INT: interest income. 1099-DIV: dividends. 1099-B: brokerage sales. 1099-MISC: miscellaneous income. You're responsible for paying self-employment tax (15.3%) on 1099-NEC income.

Tax on profit from selling an asset. Short-term (held ≤1 year): taxed as ordinary income (up to 37%). Long-term (held >1 year): taxed at 0%, 15%, or 20% depending on income. Qualified dividends also get long-term rates. Losses can offset gains (up to $3,000/year against income).

Health Savings Account — a triple-tax-advantaged account for people with High Deductible Health Plans (HDHPs). Contributions are pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. 2025 limits: $4,300 (individual), $8,550 (family). After 65, withdrawals for any purpose are penalty-free (taxed as income).

Selling investments at a loss to offset capital gains and reduce your tax bill. You can deduct up to $3,000 of net losses against ordinary income. Must follow the 'wash sale rule' — can't repurchase the same or substantially identical investment within 30 days.

A tax form your employer sends showing your annual wages and taxes withheld. Used to file your income tax return. Shows federal income tax, Social Security tax (6.2%), and Medicare tax (1.45%) withheld. You receive it by January 31 each year.

The percentage of your available credit you're currently using. Calculated as: total balances ÷ total credit limits. Keeping utilization under 30% is recommended; under 10% is optimal for your credit score. High utilization signals risk to lenders.

A credit score ranging from 300-850 used by 90% of top lenders. Based on: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), credit mix (10%). 670+ is 'good', 740+ is 'very good', 800+ is 'exceptional'. Affects mortgage rates, credit card approvals, and insurance premiums.

High Deductible Health Plan — a health insurance plan with lower premiums but higher deductibles. In 2025, minimum deductible is $1,650 (individual) or $3,300 (family). Required to qualify for an HSA. Out-of-pocket max: $8,300 (individual), $16,600 (family).

Federal health insurance for people 65+. Part A (hospital): usually premium-free. Part B (medical): ~$185/month in 2025. Part D (drugs): varies. Most people enroll during their Initial Enrollment Period (3 months before/after turning 65). Late enrollment incurs permanent premium penalties.

A withdrawal guideline suggesting you can safely withdraw 4% of your portfolio in the first year of retirement, then adjust for inflation each year, with a high probability of your money lasting 30+ years. Based on the Trinity Study. Example: $1M portfolio = $40,000/year.

Cash savings to cover unexpected expenses (job loss, medical bills, car repairs). Financial experts recommend 3-6 months of essential expenses. Keep it in a high-yield savings account (currently 4.5-5% APY) — accessible but earning interest. This is your financial safety net.

Financial Independence, Retire Early — a movement focused on aggressive saving (50-70% of income) and investing to achieve financial independence decades before traditional retirement age. Variations: LeanFIRE (<$40K/year), FatFIRE (>$100K/year), BaristaFIRE (part-time work covers expenses).

Total assets minus total liabilities. Assets: cash, investments, retirement accounts, property, vehicles. Liabilities: mortgage, student loans, credit card debt, auto loans. Track this monthly to measure your financial progress. The median US household net worth is ~$192,900 (Fed SCF 2022).

Public Service Loan Forgiveness — forgives remaining federal student loan balance after 120 qualifying payments (10 years) while working full-time for a qualifying employer (government, non-profit). Must be on an income-driven repayment plan. The forgiven amount is tax-free.

Federal loans (Direct Subsidized/Unsubsidized, PLUS) and private loans for education. Federal loan interest rates in 2025: 6.53% (undergraduate). Income-driven repayment plans (SAVE, IBR, PAYE) cap payments at 5-10% of discretionary income. Public Service Loan Forgiveness (PSLF) forgives remaining balance after 10 years.