Retirement Plans, Accounts & Trading
Series 65 Section III: qualified and nonqualified plans, ERISA, education and custodial accounts, ownership and beneficiary rules, how trades are executed, and how returns are measured.
32 terms in this unit.
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.
SEP IRA
An employer-funded IRA plan, up to 25% of compensation.
Nonqualified Plans (Deferred Compensation)
Plans outside ERISA's qualified rules, typically for executives.
ERISA
Federal law governing private-sector employee benefit plans and their fiduciaries.
Qualified Default Investment Alternative (QDIA)
Where contributions go when a participant makes no choice.
Investment Policy Statement (IPS)
The written plan for how a portfolio will be invested and monitored.
Prohibited Transactions (Plans & IRAs)
Self-dealing between a plan or IRA and a disqualified person.
Coverdell Education Savings Account
$2,000 a year per beneficiary for education, subject to income limits.
UTMA / UGMA Custodial Accounts
Accounts a custodian manages for a minor, who owns the assets outright.
Joint Tenants with Right of Survivorship (JTWROS)
At death, the owner's share passes automatically to the surviving co-owners.
Tenants in Common (TIC)
Each owner's share - which can be unequal - passes to their own estate.
Tenancy by the Entirety & Community Property
Marital ownership forms: TBE protects against one spouse's creditors; community property splits marital assets.
Transfer on Death (TOD) / Payable on Death (POD)
A registration that passes an account to named beneficiaries outside probate.
Per Stirpes vs. Per Capita
Whether a deceased beneficiary's share goes to their descendants or to the survivors.
Qualified Domestic Relations Order (QDRO)
A court order dividing a retirement plan in a divorce.
Donor-Advised Fund
Give now, get the deduction now, recommend grants later.
Principal vs. Agency Trades
Dealer trading from inventory (markup) versus broker executing for a client (commission).
Markups & Markdowns
The dealer's profit on a principal trade.
Payment for Order Flow
Market makers paying brokers to route customer orders to them.
Market Makers, Exchanges & Clearing Firms
Who quotes, who matches, and who holds and settles.
Best Execution
The duty to seek the most favorable terms reasonably available.
Holding Period Return
Total return over the whole time an investment was held.
Annualized Return
A multi-year return restated as a compound rate per year.
Expected Return
The probability-weighted average of possible returns.
After-Tax Return
What is left of a return after taxes.