Today’s Mission:

Jargon can get confusing. We’ll explore some tricky financial terms you should know, and we’ll help you to better understand them.

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

The Briefing

Strategy Points:

[11:11] – Financial Terms: In-Service Distribution.

  • An in-service distribution allows you to move money directly from the custodian where your 401(k) or 403(b) is held to an IRA. You should consider this if your investment options at work aren’t particularly good or if you want someone to more actively manage your account. This can prove advantageous for you especially if your current investments are riddled with high fees.

[13:09]  – Financial Terms: Roth Conversion.  

  • A Roth Conversion allows you to move money from a pre-tax environment to an after-tax environment. Basically, this includes moving your money from an IRA or 401(k) to a Roth IRA. When you move the money to your Roth, you’ll pay taxes on the money you’re converting. However, you in turn won’t have to pay taxes on any gains you incur from your newly invested wealth. As an example, it’s way easier to pay the tax on a $20,000 investment than it is to pay taxes later on the gains you’ll make. Think what would happen if that account grew into hundreds of thousands of dollars. A Roth account also doesn’t require a minimum distribution, meaning you won’t have to withdraw from your account when you turn 70 and 1/2.

[16:11] – Financial Terms: ETFs.

  • ETFs are Exchange Traded Funds. They’re similar to mutual funds because they’re comprised of bundles of different investments, but they trade like stocks, which gives them better liquidity, lower costs, and a few tax advantages that mutual funds don’t have. But they can sometimes be problematic as a long-term investment because they’re often more volatile than mutual funds.

Other Objectives:  

  • [18:38] – Financial Terms: Fiduciary.
  • [20:49] – Financial Terms: Risk Aversion.
  • [24:04] – Financial Terms: Diversification.

The Grand Plan:

The Spy Kit:

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More Intel:

The host: J’Neanne TheusContact – Call: (443) 718-6310


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