Articles Source: The 2015 Consumer Financial Literacy Survey, The National Foundation for Credit Counseling

SEVENTY-FIVE PERCENT OF AMERICANS AGREE THEY WOULD BENEFIT FROM HAVING BASIC FINANCIAL EDUCATION AND INFORMATION.

Welcome to our research center! We’ve put together a library of information on important financial topics that we believe you’ll find helpful.

Simply click on one of the general financial topics below and you’ll find a selection of easy-to-understand information sheets about related financial concepts and strategies. This information is updated regularly to reflect the latest facts, figures, legislation, and economic trends.

Cash Management

  • Is a Home Equity Loan Right for Me? Taxes are becoming an ever-increasing burden to Americans. Through the Tax Reform Act of 1986, Congress reduced or eliminated many of the ways that taxpayers can lower their taxes.
  • How Does Inflation Affect Me? Are you saving for retirement? For your children’s education? For any other long-term goal? If so, you’ll want to know about a sometimes subtle, yet very real threat to your savings: inflation.
  • What Savings Alternatives Are Available? As an investor, it’s important to have a portion of your holdings in savings. Opinions differ, but most financial advisors agree that adequate savings should form the basis of any sound investment strategy. There are a number of savings alternatives that will help you accumulate adequate savings and earn a reasonable rate of return.
  • What About Financial Aid for College? Is the financial aid game worth playing? There’s a tremendous amount of paperwork involved. The rules are obscure and often don’t seem to make sense. And it takes time.
  • What Are Some Smart Ways to Refinance? Recently, fixed mortgages were near their lowest rates in almost 30 years. And if you are one of the many people who took out mortgages in the few years prior to that, you may be wondering if you should look into refinancing.
  • What Is a Reverse Mortgage? Many Americans facing retirement would love to increase their monthly income.
  • What Advantages Does a Biweekly Mortgage Offer? One of the most precious assets that you are likely to possess as you progress through life is your home. Owning their own homes is something that most Americans strive for.
  • How Can I Better Manage My Short-Term Cash? For the vast majority of people, it is essential to keep a portion of their assets in liquid form in order to meet monthly commitments.
  • How Do Money Market Mutual Funds Work? Just like individuals, the government, corporations, and banks often need to borrow money for a short time to make ends meet. Unlike most individuals, however, the scale of this borrowing is phenomenal.
  • What Cash Management Tools Are Available? There are a number of short-term cash management instruments available to the individual establishing a sound cash management program. These alternatives include money market mutual funds, Treasury bills, and certificates of deposit.
  • How Long Will It Take to Double My Money? Before making any investment decision, one of the key elements you face is working out the real rate of return on your investment.
  • How Can I Keep My Money from Slipping Away? As with virtually all financial matters, the easiest way to be successful with a cash management program is to develop a systematic and disciplined approach.
  • Estates & Trusts

  • History of the Federal Estate Tax The history of estate taxes in America has been a long and winding road. Careful estate planning is still one of the most important ways to manage and protect your assets for your heirs.
  • What Is the Best Form of Property Ownership for Me? What Is the Best Form of Property Ownership for Me?
  • Could My Family Benefit from a Family Limited Partnership? Effective estate planning should address wealth transfer from a practical and cost-effective approach. One estate planning strategy that families with closely held businesses should consider is the family limited partnership.
  • How Can I Benefit from a Wealth Replacement Trust? Charitable giving can be a rewarding experience by allowing you to both give and receive. To enjoy the benefits of charitable giving, you can utilize a variety of strategies.
  • How Can I Benefit from a Charitable Remainder Trust? Sometimes it takes tough economic times and natural disasters to unite and bring out the best in people. Natural disasters such as hurricanes and earthquakes have served to bring communities together and impact the nation as a whole. Americans have given generously to rebuild communities and help local residents through these difficult situations.
  • How Can I Benefit from a Charitable Lead Trust? Charitable lead trusts are designed for people who would like to benefit a charity now rather than later. You may have heard about some charitable trust strategies before but decided against them because you wanted to make an immediate gift to charity.
  • What Gifting Strategies Are Available to Me? There are a number of different gifting strategies available for planned giving. Each has its advantages and disadvantages.
  • Can I Benefit from an A-B Trust? Married couples have several ways to potentially avoid any estate tax liability when they leave assets to each other.
  • How Will I Pay Estate Taxes? Estate taxes. It’s not enough to simply know they exist, and to know strategies to minimize them. When it comes down to it, you need to plan how you and your family will eventually pay them.
  • How Can I Control the Distribution of My Estate? There are a number of ways your estate can be distributed to your heirs after your death. Each allows a different degree of control over distribution, and each poses different challenges and opportunities. If you haven’t taken steps already, it’s important to consider planning now for the distribution of your assets.
  • Understanding Charitable Giving How Can My Charity and I Both Benefit from My Gift?
  • What Are the Pitfalls of Probate? Have you ever wondered what will happen to your estate after you die? How long will it take for your loved ones to receive the estate you’ve left them? Will each receive what you’d like them to have?
  • How Can a Living Trust Help Me Control My Estate? Living trusts enable you to control the distribution of your estate, and certain trusts may enable you to reduce or avoid many of the taxes and fees that will be imposed upon your death.
  • What Key Estate Planning Tools Should I Know About? By taking steps in advance, you have a greater say in how these questions are answered. And isn’t that how it should be?
  • Tax Planning

  • How Can I Upgrade My Insurance — Tax-Free? Responding to the changing needs of consumers, the life insurance industry has developed some alternatives that go much further in satisfying a variety of financial needs and objectives than some of the more traditional types of insurance and annuities.
  • How Can I Keep More of My Mutual Fund Profits? Provisions in the tax code allow you to pay lower capital gains taxes on the sale of assets held more than one year. The long-term capital gains tax rate is 15% for taxpayers in the 25%, 28%, 33%, and 35% tax brackets but increases to 20% for individuals in the 39.6% tax bracket. Lower-bracket taxpayers (0% and 15% brackets) pay zero tax on long-term capital gains.* Short-term gains — those resulting from the sale of assets held for one year or less — are still taxed at your highest marginal income tax rate.
  • Is There Such a Thing as a Tax-Free Investment? The simple answer to this question is “yes.” There are two main types: (1) municipal bonds and municipal bond mutual funds and (2) tax-free money market funds.
  • What Is the Most Tax-Efficient Way to Take a Distribution from a Retirement Plan? If you receive a distribution from a qualified retirement plan such as a 401(k), you need to consider whether to pay taxes now or to roll over the account to another tax-deferred plan. A correctly implemented rollover can avoid current taxes and allow the funds to continue accumulating tax deferred.
  • What Tax-Advantaged Alternatives Do I Have? A strong savings program is essential for any sound financial strategy.
  • What Tax Deductions Are Still Available to Me? Tax reform measures are enacted frequently by Congress, which makes it hard for U.S. taxpayers to know which deductions are currently available to help lower their tax liability. In fact, a former head of the IRS once said that millions of taxpayers overpay their taxes every year because they overlook one of the many key tax deductions that are available to them.1
  • How Can I Benefit from Tax-Advantaged Investments? For many people, tax-advantaged investing is an excellent way to reduce their taxes. And while many of the traditional tax-advantaged strategies have been eliminated, there are still alternatives left that can help you reduce your taxes. Some are described below.
  • What Is Tax Deferral? “Tax deferral” is a method of postponing the payment of income tax on currently earned investment income until the investor withdraws funds from the account. Tax deferral is encouraged by the government to stimulate long-term saving and investment, especially for retirement.
  • What Happens If I Withdraw Money from My Tax-Deferred Investments Before Age 59½? Withdrawing funds from a tax-deferred retirement account before age 59½ generally triggers a 10% federal income tax penalty; all distributions are subject to ordinary income tax. However, there are certain situations in which you are allowed to make early withdrawals from a retirement account and avoid the tax penalty.
  • When Must Taxes Be Paid on IRA and Employer-Sponsored Retirement Funds? Traditional IRAs and most employer-sponsored retirement plans are tax-deferred accounts, which means they are typically funded with pre-tax or tax-deductible dollars. As a result, taxes are not payable until funds are withdrawn, generally in retirement.
  • What Are the Tax Benefits of Charitable Trusts? Americans give freely to support the causes they value, from churches, education, and the arts to medical research. Fortunately, current tax laws encourage and even reward philanthropy. Beyond the basic tax deductions for charitable giving, setting up one or both of the following types of trusts could provide financial advantages in addition to the personal satisfaction that comes from giving.
  • What Is a Required Minimum Distribution? A required minimum distribution (RMD) is the annual amount that must be withdrawn from a traditional IRA or a qualified retirement plan (such as a 401(k), 403(b), and self-employed plans) after the account owner reaches the age of 70½. The last date allowed for the first withdrawal is April 1 following the year in which the owner reaches age 70½. Some employer plans may allow still-employed account owners to delay distributions until they stop working, even if they are older than 70½.
  • How Much Money Can I Put into My IRA or Employer-Sponsored Retirement Plan? IRAs and employer-sponsored retirement plans are subject to annual contribution limits set by the federal government. The limits are periodically adjusted to compensate for inflation and increases in the cost of living.
  • What Is the Gift Tax? The federal gift tax applies to gifts of property or money while the donor is living. The federal estate tax, on the other hand, applies to property conveyed to others (with the exception of a spouse) after a person’s death.
  • What Is the Estate Tax? The estate tax is a tax on property that transfers to others upon your death. Estate taxes are assessed on the total value of your estate — your home, stocks, bonds, life insurance, and other assets of value — that is over the applicable exemption amount. Everything you own, whatever the form of ownership and regardless of whether the assets have been through probate, is subject to estate taxes.
  • What Is the Capital Gain Tax? Capital gains are the profits realized from the sale of capital assets such as stocks, bonds, and property. The capital gain tax is triggered only when an asset is sold, not while the asset is held by an investor. However, mutual fund investors could be charged capital gains on investments in the fund that are sold by the fund during the year.
  • Retirement

  • Save Now or Save Later? Most people have good intentions about saving for retirement. But few know when they should start and how much they should save.
  • What Is a Roth IRA? Roth IRAs are tax-favored financial vehicles that enable investors to save money for retirement. They differ from traditional IRAs in that taxpayers cannot deduct contributions made to a Roth. However, qualified Roth IRA distributions in retirement are free of federal income tax and aren’t included in a taxpayer’s gross income. That can be advantageous, especially if the account owner is in a higher tax bracket in retirement or taxes are higher in the future.
  • What Is a 401(k) Plan? A 401(k) plan is a self-directed, qualified retirement plan established by an employer to provide future retirement benefits for employees. Employee contributions are made on a pre-tax basis, and employer contributions are often tax deductible.
  • How Should I Manage My Retirement Plan? Employer-sponsored retirement plans are more valuable than ever. The money in them accumulates tax deferred until it is withdrawn, typically in retirement. Distributions from a tax-deferred retirement plan such as a 401(k) are taxed as ordinary income and may be subject to a 10% federal income tax penalty if withdrawn prior to age 59½. And contributions to a 401(k) plan actually reduce your taxable income.
  • What Is a Traditional IRA? Traditional individual retirement accounts (IRAs) can be a good way to save for retirement. If you do not participate in an employer-sponsored retirement plan or would like to supplement that plan, a traditional IRA could work for you.
  • Retirement Plan Distributions When it comes to receiving the fruits of your labor — the money accumulated in your employer-sponsored retirement plan — you are faced with a few broad options. Should you take the payout as systematic payments, a lifetime annuity, or a lump sum?
  • What Is a Self-Employed Retirement Plan? A self-employed retirement plan is a tax-deferred retirement savings program for self-employed individuals. In the past, the term "Keogh plan" or "H.R. 10 plan" was used to distinguish a retirement plan established by a self-employed individual from a plan established by a corporation or other entity. However, self-employed retirement plans are now generally referred to by the name that is used for the particular type of plan, such as SEP IRA, SIMPLE 401(k), or self-employed 401(k).
  • Indexed Annuities If you want to participate in the potentially attractive returns of a market-driven investment but would also like a guaranteed return, an indexed annuity might be worth checking out.
  • Will Social Security Retire Before You Do? People have traditionally seen Social Security benefits as the foundation of their retirement planning programs. The Social Security contributions deducted from workers’ paychecks have, in effect, served as a government-enforced retirement savings plan.
  • Social Security Income Social Security Income
  • What Are My Retirement Planning Options? There are a variety of retirement planning options that can meet your needs. Your employer funds some; you fund some. Bear in mind that, in most cases, early withdrawals before age 59½ may be subject to a 10% federal income tax penalty. The latest date to begin required minimum distributions is usually April 1 of the year after you turn age 70½. In most cases, withdrawals are taxed as ordinary income. This list describes 10 of the most common planning options.
  • Don’t Bank Your Retirement on Your Business Investing in your own business makes sense. Many businesses achieve significant growth each year. However, when you consider that many small businesses fold every year, it becomes clear that banking your retirement solely on the success of your business might not be the best idea. There is no guarantee that your business will continue to grow or even maintain its current value. If your business is worth less than you were counting on at the time you planned to retire, you could be forced to continue working or sell it for less than what you were expecting.
  • Unforgettable Birthdays Birthdays may seem less important as you grow older. They may not offer the impact of watershed moments such as getting a driver’s license at 16 and voting at 18. But beginning at age 59, there are several key birthdays that can affect your tax situation, health-care eligibility, and retirement benefits.
  • What Is a 1035 Exchange? Named after Section 1035 of the Internal Revenue Code, a 1035 exchange allows life insurance policy owners (and annuity contract owners) to exchange an old policy (or contract) for a new one from a different insurance company without tax consequences. Of course, the exchange must meet the requirements of Section 1035 in order for the transaction to be tax-free. This strategy can be especially beneficial to a person who purchased a life insurance policy or annuity contract many years ago that has less favorable contract stipulations than those available today.
  • A New Chapter for Retirement John F. Kennedy once said, “Change is the law of life. And those who look only to the past or present are certain to miss the future.” This is certainly true of preparing for retirement. If we continue to expect that the ways of the past will see us through to our futures, we will be left behind. The methods that helped prepare us for retirement are quickly disappearing, and we must start using others.
  • How Much Do I Need to Save? Many Americans realize the importance of saving for retirement, but knowing exactly how much they need to save is another issue altogether. With all the information available about retirement, it is sometimes difficult to decipher what is appropriate for your specific situation.
  • Annuity Living Benefits Many variable annuity contracts offer “living benefit” guarantees. For an additional cost, the contract holder may be able to purchase guarantees regardless of the account value.
  • Split-Annuity Strategy A split-annuity strategy involves purchasing two types of annuity contracts: immediate and deferred. The immediate annuity would provide a current income stream during the early years of retirement, and the deferred annuity would have the potential to provide a future income stream.
  • Why Do People Buy Annuities? Annuities are insurance-based financial vehicles that can provide many benefits sought by retirement-minded investors. There are a number of reasons why people buy annuities.
  • What Is a 403(b) Plan? A 403(b) plan is a special tax-deferred retirement savings plan that is often referred to as a tax-sheltered annuity, a tax-deferred annuity, or a 403(b) annuity. It is similar to a 401(k), but only the employees of public school systems and 501(c)(3) organizations are eligible to participate in 403(b) plans.
  • Money Purchase Pension Plans A money purchase plan is a type of defined-contribution plan that is similar to a profit-sharing plan, except that the contribution amounts are fixed rather than variable. Thus, employers are required to make annual contributions to each employee’s account regardless of the company’s profitability for the year. These plans can be used in conjunction with profit-sharing plans to achieve the maximum contribution levels allowed each year.
  • Profit-Sharing Plans Profit-Sharing Plans
  • What Is a Roth 401(k)? The arena of employer-sponsored retirement plans has been dominated by 401(k) plans that are funded with pre-tax contributions, which effectively defers taxes until distributions begin. However, the recently created Roth 401(k) is funded with after-tax money just like a Roth IRA, allowing retirees to enjoy qualified tax-free distributions once they reach age 59½ and have met the five-year holding requirement.
  • What Is an IRA Rollover? If you leave a job or retire, you might want to transfer the money you’ve invested in one or more employer-sponsored retirement plans to an individual retirement account (IRA). An IRA rollover is an effective way to keep your money accumulating tax deferred.
  • What Is a “Stretch” IRA? Finding a method to leave a lasting legacy to your loved ones without increasing their tax burdens can be difficult and complicated. A “stretch” IRA may be a useful approach that can benefit your heirs for generations to come.
  • What Is a SIMPLE? What Is a SIMPLE?
  • What Are SEP IRAs? A simplified employee pension plan (SEP) is a deferred-compensation arrangement that is similar to a profit-sharing plan. It can be set up by employers and self-employed individuals, as well as sole proprietorships and partnerships. Employers receive tax deductions for plan contributions made to employees’ accounts, and employees do not pay taxes on SEP contributions until they begin taking distributions (generally, in retirement). Thus, SEPs can be attractive to both the employer and the employee.
  • Risk Management

  • What Are the Basic Types of Life Insurance? One of the best ways to protect against the financial consequences of a primary wage earner’s premature death is life insurance. However, only about 6 out of 10 Americans actually own life insurance and 30% believe they do not have enough.1 However, choosing from the many types of life insurance policies that are available can be a difficult process. A few main categories are described here to help you search for a life insurance policy that is appropriate for you.
  • What Does Medicare Cover? Medicare is the federal health insurance program for elderly persons and certain disabled individuals. In 1965, Medicare was enacted to provide a “safety net” of health-care coverage for qualifying individuals.
  • Am I Prepared for Long-Term Care Expenses? In general, Americans are not sufficiently prepared to pay for long-term care. Many of them go through their lives simply hoping that they won’t ever need it. Unfortunately, in the event that you or a loved one does need long-term care, hope won’t be enough to protect you from potential financial ruin.
  • How Can I Determine the Financial Strength of My Insurance Company? How do you compare life insurance companies? What features do you examine? What criteria do you use? How do you know what to look for? Making sure that your insurance company is financially sound is an important part of helping to ensure family security.
  • What Is the Difference Between an HMO and a PPO? Selecting health insurance is often one of the most important decisions you will make. Health maintenance organizations (HMOs) and preferred provider organizations (PPOs) are types of managed health-care plans and can cost much less than comprehensive individual policies.
  • How Can I Extend My Liability Coverage? In this litigious society, no one is immune from potential lawsuits. Anyone with significant assets might need protection from the devastating effects of a liability lawsuit.
  • What Types of Health Coverage Are Available? Rising health-care costs have driven the demand for, and the price of, medical insurance sky-high. The availability of group coverage through employment has helped many Americans face such costs. However, people who are not currently covered by their employers have few affordable sources for group coverage currently. However, as a result of the Patient Protection and Affordable Care Act, state and/or regional exchanges will offer coverage to individuals and some small businesses.
  • Do I Need Disability Income Insurance? Although most of us are aware of the need for health insurance coverage when determining our risk-management needs, many of us fail to consider the possibility that we could become disabled. A disability income insurance policy can help replace income lost because of an injury or illness. Few people would have an adequate “war chest” for an extended battle with a loss of income.
  • How Can You Protect Your Home? Your home is one of your greatest assets, and it should be well protected. It is startling to consider that an estimated 60% of American homes are inadequately insured by an average of 17%.1
  • How Can You Insure Your Future? Long ago, people realized that there is strength in numbers. For hundreds of years, we have been joining forces against all kinds of calamities — including financial troubles.
  • Maximizing Your Insurance Benefits Understanding the threat of estate taxes on your life insurance proceeds is the first step in protecting these funds from unnecessary taxation. The next steps are determining the appropriate ownership of your policy and selecting a proper beneficiary. Although there are other alternatives, a life insurance trust can help avoid potential threats to the policy’s proceeds.
  • Making an Insurance Claim When it is time to make an insurance claim, the more prepared you are, the more smoothly it will go. Be familiar not only with your policies but also with the steps you should take to file a claim.
  • Auto Insurance Four main types of auto insurance are available: liability, uninsured or underinsured motorist, collision and comprehensive, and personal injury. Most states require drivers to carry certain types of insurance.
  • What Is Variable Life Insurance? The insurance industry has introduced different types of insurance to meet consumers’ needs. For example, universal life insurance was created to provide a solution for many of the perceived shortcomings of whole life insurance and term life insurance. (See “What Is Universal Life Insurance?”)
  • What Is Universal Life Insurance? Universal life insurance was developed in the late 1970s to overcome some of the disadvantages associated with term and whole life insurance. As with other types of life insurance, you pay regular premiums to your insurance company, in exchange for which the insurance company will pay a specific benefit to your beneficiaries upon your death.
  • What Is Whole Life Insurance? Most people are familiar with whole life insurance. For many years, whole life policies were the predominant type of life insurance sold in America.
  • What Is Term Life Insurance? Term life insurance is “pure” insurance. It offers protection only for a specific period of time. If you die within the time period defined in the policy, the insurance company will pay your beneficiaries the face value of your policy.
  • Disability Income Insurance for Business Owners One of your greatest assets is the ability to earn an income. If you were to lose that ability due to a disabling accident or illness, how would you pay your bills, send your kids to college, and save for retirement?
  • Last-Survivor Life Insurance Last-survivor life insurance has been a popular estate conservation tool for couples who want to help ­protect their legacy from estate taxes. Because this type of policy pays a benefit after the death of the last-surviving insured individual, it can provide heirs with much-needed cash to help cover final expenses, probate costs, and estate taxes.
  • Split-Dollar Life Insurance Life insurance can be an important part of a business owner’s financial strategy. It can also be a great benefit to offer to key employees. However, sometimes the cost can be prohibitive. With split-dollar life insurance, the cost of life insurance can be managed by splitting it up.
  • Life Insurance for Business Owners If you own your own business, chances are you’ve at least thought about the conditions under which you will make your departure from the business and who is going to take over after you leave. Business continuation is difficult enough under normal circumstances, but if it has to take place following the unexpected death of a key person or owner, the complications can increase exponentially.
  • Do I Need a Business-Owner Policy? Your business may be running smoothly. You could be making money hand over fist. But don’t be lulled into thinking that a catastrophe could never hit your business. Disasters can strike in many ways; even a minor one could wipe out a lifetime of hard work.
  • What Is Property and Casualty Insurance? Property-casualty insurance practices in the United States are based on British practices and started with marine insurers located in major U.S. ports. Even when our nation was young, we were concerned with protecting ourselves and our property and not much has changed since then. Property-casualty insurance is specifically designed to help protect your possessions from theft or destruction and your assets from being depleted through disaster or litigation claims brought against you.
  • Why Are Annuities Considered an Insurance Product? Annuities are financial vehicles that can be sold only by insurance companies. Basically, an annuity is a contract between you and an insurance company, which promises to pay you a future income in exchange for the lump-sum payment or premiums that you pay. The payments specified in the annuity contract will be paid to you during your retirement (or, in some situations, to your beneficiaries after your death).
  • Why Purchase Life Insurance? We’ve all heard about the importance of having life insurance, but is it really necessary? Usually, the answer is “yes,” but it depends on your specific situation. If you have a family who relies on your income, then it is imperative to have life insurance protection. If you’re single and have no major assets to protect, then you may not need coverage.
  • Investing

  • 529 Lesson Plan: High Scores for 529 College Savings Program Looking for a tax-advantaged college savings plan that has no age restrictions and no income phaseout limits — and one you can use to pay for more than just tuition?
  • What Is Dollar-Cost Averaging? Every investor dreams of buying into the market at a low point, just before it hits an upswing, and garnering a large profit from selling at the market’s peak. But trying to predict market highs and lows is a feat no one has ever fully mastered, despite the claims by some that they have just the right strategy that enables them to buy and sell at the most opportune times.
  • What Stock and Bond Alternatives Do I Have? Many prudent investors may have at least some of their holdings in stocks, corporate bonds, or both. In fact, when most people think of “investing,” they think of Wall Street and the stock markets.
  • What College Investment Options Do I Have? As tax laws change, college investment planning becomes increasingly complex. The most beneficial strategies for creating a college fund are quite similar to other investment tactics. Investment products that are tax deferred, tax exempt, or transferable without tax consequences can be especially advantageous.
  • How Can I Save for My Child’s College Education? Once you’ve determined how much it could cost to send your children to college, your next prudent step is to develop a systematic investment plan that may help you to accumulate the necessary funds.
  • What Is Asset Allocation? Lewis Carroll, the author of Alice’s Adventures in Wonderland, once said, “If you don’t know where you’re going, any road will get you there.” This is certainly true when it comes to investing: If you don’t know where you’re headed financially, then it is not as vital which investments make up your portfolio. If you do have a monetary destination in mind, then asset allocation becomes very important.
  • What Are the Different Classes of Assets? When it comes to investing their money, many people are content to take a random approach.
  • What Investment Risks Should I Know About? Taken by itself, the word "risk" sounds negative. But broken down into what it really stands for in terms of investing, it begins to be a little more manageable. By understanding the different types of risk and keeping an eye on your investments, you may be able to manage your money more effectively. Remember, strategic investing doesn’t mean "taking chances" so much as "making decisions." Long-term investing and diversification may be some of the most effective strategies you can use to help manage investment risk; however, neither guarantees against investment loss.
  • What Is the Difference Between a Fixed Annuity and a Variable Annuity? An annuity is a contract with an insurance company in which you make one or more payments in exchange for a future income stream in retirement. The funds in an annuity accumulate tax deferred, regardless of which type you select. Because you do not have to pay taxes on any growth in your annuity until it is withdrawn, this financial vehicle has become an attractive way to accumulate funds for retirement.
  • What Is an Annuity? An annuity is a contract with an insurance company that is funded by the purchaser and designed to generate an income stream in retirement. It is a flexible financial vehicle that can help protect against the risk of living a long time because it provides an option for a lifetime income.
  • What Is a Mutual Fund Load? Mutual fund transactions can be complicated, especially with the fees and expenses that accompany the process. It’s important to understand mutual fund load, or sales, charges, and exactly what they entail so you can make informed investing decisions.
  • What Is a Closed-End Fund? Closed-end funds have been around since 1893, more than 30 years before the first mutual fund (also known as an open-end fund) was created in the United States. However, closed-end funds are much less common than open-end funds. There are fewer than 600 closed-end funds on the market, whereas there are more than 8,000 mutual funds available.
  • What Is a Mutual Fund? Since the creation of the first modern-day mutual fund, the Massachusetts Investors Trust, in 1924, there has been a steady growth of mutual funds. Today there are over 8,000 mutual funds.1 Because of their convenience and flexibility, you might want to consider including mutual funds in your investment portfolio.
  • How Do Mutual Funds and Stocks Differ? Whether you’re a first-time stock investor or a seasoned veteran, you should understand what differentiates single stock investments from mutual fund investing.
  • What Is a Stock Index? In 1884, Charles Henry Dow averaged the closing prices of 11 stocks he considered representative of the strength of the U.S. economy in a paper that preceded The Wall Street Journal. By 1896, The Wall Street Journal was publishing this average on a regular basis, and the most famous indicator of stock market performance was born: the Dow Jones Industrial Average (DJIA or Dow).
  • What Do Bond Ratings Mean? Bond ratings gauge a bond issuer’s financial ability to repay its promised principal and interest payments. Ratings are based on an analysis of the issuer’s financial condition and creditworthiness. In essence, the higher the rating, the more likely it is that a bondholder will receive his or her principal again when the bond matures.
  • What Is a Bond? What Is a Bond?
  • What Types of Bonds Are Available? Bonds are issued by federal, state, and local governments; agencies of the U.S. government; and corporations. There are three basic types of bonds: U.S. Treasury, municipal, and corporate.
  • What Is Diversification? What Is Diversification?
  • Zero-Coupon Bonds Zero-coupon bonds (“zeros”) represent a type of bond that does not pay interest during the life of the bond. Instead, investors buy these bonds at a steep discount from the “face value” (the amount a bond will be worth when it matures). When the bond matures, investors will receive single payments equal to their initial investments plus the accrued interest.
  • What Is Stock? Most people know something about the stock market, but many investors who see stock as a way to get rich quick might not understand exactly what stock is and how it works. Before jumping feet-first into investing in stocks, it is important to understand some of the basics and the risks involved in owning stocks.
  • How Are Mutual Funds Taxed? Many people have heard the Benjamin Franklin quote, “In this world nothing is certain but death and taxes.” Mutual fund taxes can be onerous. However, if you understand the complexities of mutual fund taxes and are prepared when tax season comes around, you may be able to lessen the blow.
  • Growth Stocks vs. Value Stocks Investors are often confused about the differences between growth stocks and value stocks. The main way in which they differ is not in how they are bought and sold, nor is it how much ownership they represent in a company. Rather, the difference lies mainly in the way in which they are perceived by the market and, ultimately, the investor.
  • What Is an Exchange-Traded Fund? Exchange-traded funds (ETFs) are just one of the many types of investment funds available, but they have some qualities that are unique and set them apart from other vehicles. ETFs are securities that attempt to track all types of indexes, industries, or commodities. For example, an ETF might be made up of securities representative of the technological industry or of the S&P 500.*
  • What Are Dividends? When considering the profit they make on stocks, many investors assess the gains they have obtained based on the appreciation of the stock on the open market or the gains they obtained after selling the stock for more than the original purchase price. However, it’s also wise to include the income acquired from stock dividends, if any.