FICEP Part 2 Latest Update Graded A

FICEP Part 2 Latest Update Graded A 401k Plan A plan which allows employees to make tax-deferred contributions to retirement savings accounts. Many employers match these contributions at a specified ratio to help retirement savings build faster. Beneficiary The person or persons who are designated to receive the amount of the death benefit if the policyholder dies. Cafeteria Plan Tax-qualified flexible benefit plans that are offered by participating employers. It was created by the internal Revenue Code Section 125 Capital Gains The difference between what you pay for an investment--stock, your home, or another possession-- and what you earn when the item is sold Compound interest The ability of savings to grow when the principal and interest are left untouched. The member earns a return both on the original principal and on all the interest that accrues over time Death benefit the amount that is paid upon the death of the policy-holder deductible the amount that the policy-holder must pay before insurance begins to cover expenses Dividends The amount that stockholders in a company receive. Represents a portion of a company's profits Flexible Spending Plan (FSA) A program offered by employers which allows employees which allows employees to pay for eligible out-of-pocket health care and dependent care expenses with pre-tax dollars. Have a Use-it-or-lose-it provision, which means that any funds that are unused at the end of the plan year are forfeited. Health Savings Act (HSA) A program offered by employers which allows employees enrolled in high-deductible health plans (HDHPs) to save for future qualified medical expenses on a tax-free basis. There is no use it or lose it provisions which means that money that is not spent for medical expenses remains in the account to accuse interest. Indemnification An agreement to hold an individual or business harmless when they are engaged in a specific activity or while they are at a specific location. Individual retirement account (IRA) A retirement investing plan for employees which allows them to contribute before-tax funds to the ___. The money is then taxed when it is withdrawn Insurable Interest The direct monetary interest that the policyholder has in the insured property. Must be sufficient to result in monetary loss should the property be damaged or destroyed. Liquid asset Property or possessions that are easily accessible and can be turned into cash Liquidity The ability to convert the investment to cash Mutual funds A collective investment that pools money from many investors and invest their money in stocks, bond or income funds, and money market funds. Non-Liquid Assest A property or possession that cannot easily be turned into cash Policy Rider An additional feature of a policy. A rider may be used to expand coverage or spell out rights or requirements for policyholders Pooling of risk Combining or sharing risk among insurers or groups of insured individuals. By ______ __ ____, insurers limit their exposure when losses occur Rate of Return The increase in value of your original investment, which is typically measured at specific points in time by the account holder Return The gain in value on the original investment. Risk The chance that you might lose your original investment. Investments with greater risk, such as in the stock market, must promise a higher rate of return Schedule (scheduling) To cover property that has a special value or is not typically covered under a homeowner's policy by adding a rider to the policy Standard of living A level of material comfort as measured by the goods and services available to an individual Tax exemptions An amount that may be subtracted from the taxable income, based on a listed provided by the IRS. an example is the personal exemption given to any taxpayer who cannot be claimed as a dependent by another person. Tax Deductions An expense that may be subtracted from the adjusted gross income when filing a tax return, based on definitions used by the IRS. An example is the ability to deduct contributions to charities when filling an itemized tax return Tax Credits A dollar-for-dollar reduction of taxes for individuals who fall within specific guidelines set by the IRS. Example is the earned income tax credit Taxes A contribution that helps support the operating cost of the government Term The length of time that the asset will be held Volatility The likelihood that a particular type of investment will rise or fall sharply within a specific period of time. Investment with a higher rate of return often have a greater degree of __________, while low-risk investments are typically less _______. Wokers' compensation Benefits that are paid to workers to compensate them for a work-related illness or injury. Most _____ ______ programs are run by state governments and can vary considerably in their provisions. Adjusted rate Mortgage (ARM) A mortgage with an interest rate that changes periodically based on changing market conditions Annual Percentage Rate (APR) The rate of interest a borrower pays on a loan that represents the actual yearly cost of funds over the term of a loan. The includes any fees or additional costs associated with the transactions Credit Score A nummerical score based on an analysis of a person's credit files to represent the creditworthiness of that person. Credit Report A report that includes information on where a borrower lives, how he or she pays bills, and whether they have been sued, arrested, or filed bankruptcy Installment loan A loan that's repaid with a fixed number of periodic, equal-sized payments Revolving loans Loans, such as credit cards, that have a balance that varies with purchases Subprime lenders lenders who lend to borrowers who don't qualify for the best market interest rates because of the deficient credit history. Risky to both borrowers and lenders due to high interest rates, poor credit history, and difficult financial situations often associated with subprime applications 529 plans investment plans, named after section 529 of the internal Revenue Code and administered by state agencies and organizations, that allow parents and grandparents to save for the future education expenses of the children named as beneficaries Addiction Feeling compelled to continue a habit or practice that is psychological or physically habit forming to the point that cessation may cause severe trauma American Opportunity Credit Federal income tax credit of $2500 per student annually for up to four years of postsecondary education tuition and course material expenses for families who meet income guidelines. Community Property System of dividing property in divorce, observed in 11 states, in which all belongings re classified as either separate property owned by one spouse or community property acquired during the marriage and held equally by both spouses; at divorce, community property is generally divided equally between both parties Compounding Earning interest on interest that remains in savings accounts, which increases the return on savings; also applies to loans, so that paying off loans more quickly reduces total interest paid Compulsive buying/spending Excessive, repetitive purchasing that may be difficult to control and result in serious financial problems; at its extreme, this behavior is described as a shopping addiction Coverdell Educational Savings Accounts (ESAs) Specialized accounts that permit parents to dave up to $2000 per year for future education cost for K-12 schooling, college, and education for people with special needs. Equitable Distribution System of dividing property in divorce, observed in 39 states, in which the judge is charged with dividing marital property fairly and equitably, but not necessarily 50-50 Expected Family Contribution (EFC) Calculation by the office of Federal student aid of the dollar amount students and their families are expected to pay for a college education based on the information submitted in their free applications for Federal Student Aid. Free Application for Federal Student Aid (FAFSA) Application that must be completed by students and their parents to determine whether they qualify for federal grants, loans, and work-study programs; most colleges and universities use the information on these forms to make their financial aid decisions as well. Federal Student Loans Loans underwritten by the federal government at a lower-than-market interest rate and rewarded based on financial need, typically without a credit review or cosigner; the government pays the interest on the principal on direct subsidized loans as long as students are enrolled at least half time. Direct Unsubsidized loans available to undergraduate and graduate students without the requirement to demonstrate financial need; interest on these loans accrues while students are in school. Financial denial A behavior in which people choose not to open their account statements and credit card bills to avoid thinking about their money troubles Financial infidelity lying about or attempting to hide the true state of the family's finances from one's spouse or partner Great Recession The steep decline in economic activity in the united states from 2007 through 2009, generally considered the largest downturn since the Great Depression of the 1930s. Heuristics Mental shortcuts relying simple rules of thumb to aid in decision making; in financial decisions, however, _____ may not be reliable in leading members to the wisest choices Hoarding Excessive acquisition of material goods and inability to dispose of those goods Individual development accounts (IDAs) savings accounts for low income individuals in which participants' savings are matched by federal, state, or local government sources with the aim of supporting greater financial security; participants save for specific goals, such as buying a home, starting a business, and receive financial education as a part of the program Lifetime Learning Credit Federal Income tax credit up to $2000 for qualified education expenses; since many undergraduate students and their parents claim the American Opportunity Credit for their first four years of college, the Lifetime Learning Credit is more often claimed by graduate and part-time students Money avoidance Dysfunctional response to personal finances based on the view that money is evil or underserved; "avoiders" see money as a source of fear or disgust and avoid earning, saving, or spending it Money status Association of wealth with self-worth, a dysfunctional view of mown that emphasizes materialism Money Vigilance Perceived need for secrecy about the state of one's financial affairs, which may lead to problems with personal relationships as well as deepening financial troubles Money Worship Belief that money is synonymous with happiness and success; dysfunctional responses of money worshippers may include workaholism and compulsive hoarding, gambling, or spending. Plus loans Student loans available to graduate or professional degree students and parents of dependent undergraduate students through colleges participating in the federal Direct Loan Program Private student loans Education loans available to students and their parents from credit unions, banks, and other lenders affiliated with their colleges; unlike federal student loans, private loans are subject to credit reviews and are typically offered at higher rates Rate of thirds Rule of thumb for paying for college; typically, one third of tuition and room-and-board is covered family and individual savings, one-third is paid for through grants and tax benefits, and one-third is financed through student to family loans and/or out of pocket. Savings lottery Incentive program to encourage members to save by offering a chance to win a cash prize for every deposit they make sure a set period Shopping addiction compulsive buying divorced from need and the limits of one's personal finances; sometimes referred to as oniomania Student aid report (SAR) Notification in response to submission of the free application for federal student aid (FAFSA) that informs students of their expected family contribution and eligibility for federal grants, loans, and other forms of aid Values Deeply held principles on the standards of behavior, a judgement of what is important in life; the tools people use to make rational judgments about important aspects of their lives, including their financial priorities 403(b) a retirement plan similar to 401K thats only available to employees of nonprofit organizations, such as schools, public hosptials, colleges, universities, and churches Con artist Confidence tricksters who attempt to fain credibility and a members trust in order to commit financial fraud Durable Power of Attorney for health care A document appointing another person to assure an individual's medical wishes and decisions are carried out as they prefer. Also known as a living will Fiduciary An agent legally appointed to manage the financial affairs for another person Fraud A deception made for personal gain. Specific legal definitions of fraud may vary under state and local laws Guardian A person or agency appointed by a court to assume responsibility for an individual's personal needs, interest, and financial affairs. There are two types of guardian of the person and guardian of the estate Identity theft A crime in which an individual obtains sensitive personal information that can be used to assume another person's identity. The theft uses information to make financial transactions or even acquire a job. Individual Retirement Account (IRA) An investment account in which a person can set aside income each year and deduct the contributions from taxable income, the contributions and interest are tax-deferred until retirement. pensions A steady income given to an employee after retirement. The income is paid by the employer at regular intervals to employee or to their surviving dependents in consideration of past services. Unlike 401(k)s employees don't contribute to their pensions Pharming A crime that looks for security flaws in the web servers of legitimate organizations to redirect users to a spoofed or imitation site. Once users are on this site, their password or account information is collected and used for identity theft or fraud Phishing A crime involving creation of e-mails that appear to be from a legitimate organization. The emails are used to build trust and persuade the recipient to share personal information Power of Attorney (POA) A legal Document appointing someone to act on behalf of another person. Three types general or durable, limited, and springing Probate A process to prove the will of a deceased person is valid or, if there is no will, defines the responsibility and process to be followed for dealing with an estate Skimming A theft of credit card or atm pin information. a common practice involves wait staff at restaurants who take advantage of customers who pay for meals with credit or debit cards. The waiter copies the card number and uses it to purchase goods online or over the phone Social engineering Techniques used to manipulate people into performing actions or volunteering personal information. Spamming A practice that involves sending junk e-mail for the purpose of getting people to click a hyperlink. The link takes consumers to spoofed websites that mislead them into sharing personal information Spoofing The practice of spying a legitimate website for the purpose of redirecting traffic. Consumers think they are clicking a hyperlink to an online merchant, but will be sent to a copycat site that collects their personal information Sustainable draw An investment term referring to the amount you can withdraw without depleting assets below the level required to sustain you for the remainder of your anticipated life-span Will A legal Document detailing how you would like your assets distributed after you pass away.