What’s The Difference Between These Important Financial Terms?

Today’s Prep:

Do you know the difference between a Roth contribution and a Roth conversion? What about individual bonds and bond funds? Eric explains the difference between these important financial terms so you can decide what should be included in your financial plan.

(Click the featured times below to jump forward in the episode)

 

Equipping Points:

One of these things is not like the other so let’s play a game called, “What’s the difference?” Do you know the difference to these similar sounding but incredibly different financial terms? On this episode of Retirement Ready, you’ll learn the differences as well as some of the benefits of each financial tool.

What’s the difference between Roth contributions and Roth conversions? Start by understanding what a Roth contribution is and what your limits are. Can you do both a Roth contribution and Roth conversion in the same year? And while we’re talking about all things Roth, Eric explains the Roth 401(k), too.

It’s often important to have some form of life insurance. Should you have term life insurance or universal life insurance though? One is for a set period of time whereas the other is ongoing and paid out when needed. What are the pros and cons?

What are qualified accounts vs. non-qualified accounts? Qualified accounts are protected gains and not subject to income tax until you pull money out of those. Non-qualified accounts can be through a brokerage and you’ll pay taxes on it every year or sometimes even insurance products such as annuities. You don’t want all of your money in a qualified bucket, you want a balance.

When choosing between variable and fixed annuities, while they are both considered annuities, they can be very different. One is going to change with no guarantees and a lot of fees, while the other one has no fees but it’s a fixed rate.

Have you ever encountered the need to do a rollover? You can only do one 60-day rollover in a year and you only have 60 days to put it into an IRA. A trustee to trustee transfer can happen as often as you want in a year and doesn’t count toward a rollover. Why is that?

Finally, when you near retirement, you may have heard to have more of your money in bonds. Well, does that mean individual bonds or bond funds? Eric talks through the difference and helps you understand which will prove to be a better investment for you.

[1:06] – What’s the difference: Roth contributions vs. Roth conversions?

[5:08] – What’s the difference: term life and universal life insurance?

[7:23] – What’s the difference: qualified account vs. non-qualified accounts?

[9:12] – What’s the difference: variable annuity and fixed annuity?

[11:26] – What’s the difference: 60-day rollover vs. trustee to trustee rollover?

[13:59] – What’s the difference: individual bonds and bond funds?

 

Related Resources:

The Fool’s Gold of Retirement Planning

Making Home Renovations and Protecting Your Retirement Income

Dealing With The Death Of A Spouse

More From Eric:

The host: Eric Peterson - Contact - Call: (515) 226-1500

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