Retirement Investment Dictionary

Last updated: April 9, 2016

*The information on this page is credited to IPT and Kiplinger. Their original materials are made available by the Kansas Securities here.


A lump sum invested with an insurance company in return for monthly payouts for a specific period or for the rest of your life, no matter how long you live.


An interest-bearing security that obligates the issuer to pay a specified amount of interest for a specified time (usually several years) and then repay the bondholder the face amount of the bond.

Central Registration Depository (CRD)

A computerized database that contains information about most brokers, their representatives and the firms they work for.

Certificate of Deposit

Usually called a CD, this is a short- to medium-term instrument (one month to five years) issued by a bank or savings and loan that usually pays interest at a rate higher than that paid by a regular savings account.

Compound Interest

This is really interest paid on interest. When interest is earned on an investment and added to the original amount of the investment, future interest payments are calculated on the new, higher total.


The method of balancing risk by investing in a variety of securities.


Company earnings that are paid out to stockholders.

Exchange-Traded Funds (ETFs):

Mutual funds that trade like stocks on the exchanges. Their portfolios generally track an index that represents a particular market or a slice of a market.

401(k) Plan

An employer-sponsored retirement plan that permits employees to divert part of their pay tax-free into the plan. Money invested in the 401(k) may be matched by the employer, and earnings accumulate tax-deferred until they’re withdrawn. Some companies offer a Roth 401(k) option that permits employees to invest after-tax money, the earnings on which are tax-free in retirement.

Individual Retirement Account (IRA)

A tax-favored retirement plan. Contributions to a traditional IRA may be tax-deductible depending on your income and whether you are covered by a retirement plan at work. Earnings grow tax-deferred, and withdrawals are taxable. Contributions to a Roth IRA are never deductible, but earnings accumulate tax-free and withdrawals are tax-free in retirement.

Money-Market Fund

A mutual fund that invests in short-term corporate and government debt and passes the interest payments on to shareholders.

Mutual Fund

A professionally managed portfolio of stocks, bonds or other investments divided up into shares sold to investors.

North American Securities Administrators Association (NASAA)

Membership organization for State Securities Regulators who work to protect investors’ interests.


An employer-provided retirement benefit paid to eligible workers based on salary and years of service. Pensions can be paid as a monthly benefit for life or as a lump sum.


The collection of all of your investments.


The document that describes a securities offering or the operations of a mutual fund, a limited partnership or other investment.

Risk Tolerance

The degree to which you are willing to risk losing some (or all) of your investment in exchange for a chance to earn a higher rate of return. In general, the greater the potential gain from an investment the greater the risk that you might lose money.

S&P 500 Index

Standard & Poor’s 500-stock index is a basket of stocks that is a widely followed benchmark of the overall U.S. stock-market performance.

State Securities Regulators

Agencies that work within state governments to protect investors and help maintain the integrity of the securities industry.


A share of stock represents ownership in the company that issues it. The price of the stock goes up and down, depending on how the company performs and how investors think the company will perform in the future.

Target-Date Fund

A mutual fund that invests in both stock funds and bond funds to create a diversified portfolio appropriate for your age and retirement timeline. The name contains a date, such as 2020 or 2030, that corresponds to your anticipated retirement date. The fund automatically adjusts the proportions of stocks and bonds in the portfolio to become more conservative, with the goal of protecting your nest egg as you near retirement.


Price swings of a stock or mutual fund. In general, the more volatile the security, the riskier the investment.

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