A Breakdown of Retirement Terms and What They Mean

Don’t let the retirement industry terms confuse you, or deter you from pursuing your own retirement account. Here are a handful of the must-know terms to help you get your toes into the pool.

Custodian

An IRA custodian is a financial institution like a bank, credit union or trust company that acts as a bank. IRA custodians are regulated by the IRS and rigorously aim to comply with laws and regulations to keep your IRA tax-deferred or tax-free. They hold your retirement account contributions, as they are the only entity that’s allowed to physically hold assets.

REITs

REITs stand for real estate investment trusts, they are an entity that owns income-producing real estate. Most REITs specialize in particular types of property, residential, industrial, commercial, and retail. Some REITs even own real estate-related debt, like mortgages.

Self-Directed IRA

This is an account type for retirement savers, they can be either Roth or Traditional. The difference between regular IRAs and a self-directed IRA is that with a self-directed IRA you’re allowed to invest in alternative assets like gold and silver, real estate, pretty much anything that is a tangible asset. Self-directed IRAs are definitely not for everyone since they require work on behalf of the account holder. 

Required Minimum Distributions

Just as they sound, an RMD is a retirement distribution that you’re required to take. The reason that you’d be required to take the money is that if you have a Traditional IRA, and you turned 70 ½, that’s when you’re required to start taking money. If you have a Roth IRA, there aren’t actually any required minimum distributions.

Annuities

An annuity is a type of insurance that you can buy alongside your 401K or IRA. The idea behind an annuity is that if you outlive the funds that you have in your retirement account, the since money in your annuity will then kick in as income. Annuities give retirement savers peace of mind and help those who outlive their retirement accounts.

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