What Women Need to Know About Retirement - Wiser

Glossary of Terms
Annuity: Provides a regular series of payments, usually monthly, over a specified period of
time, often for life. The purpose is to provide a steady stream of income.
Beneficiary: The person designated to receive pension, life insurance or other benefit payments
if the participant or insured dies first.
Covered: A person who works for an employer who provides a plan, but until or unless certain
requirements are met, such as length of service, she may not be eligible to participate in or
receive benefits from the plan.
Defined Benefit Plan: A traditional pension plan, insured by the government, that pays a certain
specified benefit, usually based on age at retirement, rate of pay, and the number of years
worked. The employer is responsible for the plan and bears the risk.
Defined Contribution Plan: A retirement plan in which contributions are made by the
employee, the employer, or both. The final payout depends on how much is invested and the
success of the investments. This type of plan is not insured by the government, and the employee
bears the risk.
Early Retirement Age: A term used by Social Security, early retirement age, generally 62, is
the earliest age a worker can receive retirement benefits from Social Security.
Employee Retirement Income Security Act (ERISA): The federal law, which took effect in
1976, which regulates private pensions.
401(k) Plan: A voluntary savings plan, named for the section of the tax code that established it.
Employees contribute a portion of their salaries, and employers may match some or all of their
employees’ contributions. Depending on the type of 401(k), it can be tax deferred or tax free at
withdrawal. The employee bears the investment risk.
403(b) Plan: A voluntary savings vehicle for the non-profit sector, also named for the section of
the code. It is similar to the 401(k).
Individual Retirement Account (IRA): An IRA is an individual savings account that gives tax
advantages to those saving money for retirement.
Joint & Survivor Benefit: The worker receives monthly pension benefits for life, and at the
worker’s death, the survivor will continue to receive some portion of those benefits. This option
results in lower monthly payments during the worker’s lifetime.
Lump-Sum Payment: Payment of an entire accrued benefit.
Participation: Whether a worker is included in a company’s pension plan. Employers, for
example can place requirements on participation such as a worker must work more than 1,000
hours in any year, or must have worked for the employer for at least one year.
Pension Integration: Subtraction of part of an individual’s Social Security benefit amount from
the pension benefit amount.
Portability: The ability to take a vested retirement benefit from one employer and roll it either to
a retirement plan with another employer, or to an individual retirement account (IRA).
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