401K / 403B are employer sponsored tax advantaged retirement account. 401K accounts are used for employees in the private sector and 403B accounts are used for certain employees of public schools and tax-exempt organizations such as teachers, school administrators, professors, government employees, nurses, doctors, and librarians.
ETF (Exchange Traded Fund) is an index fund that is traded on stock exchanges, much like stocks.
Financial Independence (FI) is the status of having enough income (from investments, passive businesses, real estate, etc.) to pay for one’s reasonable living expenses for the rest of one’s life without having to rely on formal employment.
Household Budget is a financial plan of income and expenses for a defined period, typically a month.
Health Savings Account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a qualifying High Deductible Health Plan.
High Deductible Health Plan (HDHP) is a health insurance plan with lower premiums and higher deductibles than a traditional health plan.
Index Fund is a type of mutual fund or ETF whose holdings match or track a particular market index.
Individual Retirement Accounts (IRAs) see Roth IRA & Traditional IRA.
Opportunity Cost is the loss of potential gain from other alternatives when one alternative is chosen.
Retirement is leaving one’s job and ceasing to work formally.
Roth IRAs (Individual Retirement Accounts) allow individuals to contribute post-tax dollars to a retirement account where investments grow tax-free until withdrawal during retirement, as long as the account has been open for at least 5 years and withdrawals are made after the age of 59 1/2.
SEP IRAs (Simplified Employee Pension Plan Individual Retirement Accounts) is a traditional IRA for business owners and their employees and follows the same investment, distribution, and rollover rules as traditional IRAs.
Tax Advantaged refers to any type of investment, financial account, or savings plan that is either exempt from taxation, tax-deferred, or that offers other types of tax benefits. The 3 main categories of tax-advantages are tax deductible, tax deferred, and tax free.
Tax Deductible is money that is able to be deducted from taxable income when calculating income tax due.
Tax Deferred is when taxpayers delay paying taxes to some point in the future.
Tax Free is when paying taxes is legally avoided.
Traditional IRAs (Individual Retirement Accounts) allow individuals to contribute pre-tax dollars to a retirement account where investments grow tax-deferred until withdrawal during retirement.