Retirement Terms

Automatic contribution arrangement

A feature in a plan whereby a covered employee’s compensation is reduced by an amount specified in the plan and contributed to the plan on the employee’s behalf unless the employee makes an affirmative election to have a different amount or no amount contributed to the plan. In the case of a 401k plan with […]


Increase in the value of an investment over time.

Annual defined contribution limit

The maximum 401k contribution limit that applies to all employee and employer 401k contributions in a calendar year. This limit is the lesser of 100% of the employee’s total pre-tax compensation or a fixed amount that can change annually.

Defined Contribution Pension

A defined contribution pension scheme is one in which an employer, and sometimes the employee too, contributes an amount or a percentage of the employee’s earnings into an investment fund that’s then used to buy a pension when the employee retires.


An annuity is a product that can provide you with a lifetime income, typically on retirement. Annuities are viewed as a way to hedge against longevity risk, or the potential for one to outlive one’s invested assets. Social Security and/or defined pension benefits are prominent examples of annuities.

Retirement Accounts

Trading a 401k or an IRA account is fairly common. This is often where traders have already amassed a reasonable amount of capital. Many firms will allow you to trade a retirement account but there are some restrictions. 1. No Shorting 2. No Leverage 3. Margin is only for trades to settle immediately, not for […]


Vesting is ownership. Vesting refers to the money in your plan that actually belongs to you rather than your employer. Your employer may have a program where he or she matches the dollar amount that you’ve reserved for retirement, but your employer’s money won’t automatically be yours. If this is the case, you’ll likely have a vesting schedule […]

Defined Contribution Plan

Employees and employers make scheduled payments toward defined contribution plans, like a 401(k). When the employee retires, his or her benefit package depends on its return on investment.

Defined Benefit Plan

This type of plan offers a set benefit amount to an employee when he or she retires based on factors such as income and the number of years served at a company. Defined benefit plans, such as pensions, are funded almost entirely by employers.


An annuity is an investment resulting in regular payments from an insurance company that can be a retirement saving strategy. Insurance companies may pay you back immediately (immediate annuities) or over the course of multiple years as your tax-deferred investment grows from interest (deferred annuities). Annuities may take the form of bonds earning a fixed interest rate […]