Annualized Return
A multi-year return restated as a compound rate per year.
What is Annualized Return?
Converts a holding period return into its per-year equivalent: (1 + total return)^(1 / years) - 1. Makes investments held for different periods comparable.
Annualized Return: a worked example
A 28% three-year return annualizes to about 8.6% a year.
More terms in Retirement Plans, Accounts & Trading
IRA Rollovers vs. Transfers
60-day rollovers are limited to one a year; direct transfers are unlimited.
10% Early Withdrawal Penalty & Exceptions
Distributions before 59 1/2 cost 10% extra, unless an exception applies.
Solo 401(k)
A 401(k) for a self-employed owner with no employees other than a spouse.
Defined Benefit Plan
A pension promising a specific benefit; the employer bears the investment risk.
Defined Contribution Plan
An individual account plan whose payout depends on contributions and returns.
403(b) Plan
A salary-deferral plan for public schools and 501(c)(3) nonprofits.
457 Plan
Deferred compensation for state and local government employees.
SIMPLE IRA
A low-cost plan for employers with 100 or fewer employees.
All Retirement Plans, Accounts & Trading terms · Full glossary