Personal Finance Glossary

Roth IRA

A retirement account funded with post-tax dollars, which means the growth is nontaxable. $6,000/year limit, with a $1000/year catch up for those 50 and older (combined limit between Roth & Traditional IRA). Meant to be used after the age 59.5, as there is a penalty to accessing it prior to then (except initial contributions – those can be pulled at any time, penalty free, but should be treated as a last resort because you want those funds to grow and be used for your retirement). 

Traditional IRA

A retirement account funded with pre-tax dollars, which means the balance of the account is taxed when it is pulled out at retirement. $6,000/year limit, with a $1,000/year catchup for those 50 and older (combined limit between Roth & Traditional IRA). Meant to be used after the age of 59.5, as there is a penalty to accessing it prior to then. 

401K

An employer-sponsored retirement account. This type of account is only accessible if your work has a plan. Many companies will “match” the amount contributed up to a certain amount. If this is an option for you, do what you can to at least meet the max – it is free money from your employer for your retirement. $19,500/year limit, with a $6,500 catch up for those 50 and older. Like IRAs, 401ks are accessible after the age of 59.5 and are subject to a penalty before that time. 

Solo 401K

A 401k specifically for the self employed. This type of account is accessible if you work for yourself – a business with employees, or as an individual business with no employees. On the “employee” side, there is a $19,500/year limit, with a $6,500 catch up for those 50 and older. You are also able to contribute on the “employer” side, maxing out at $57,000/year, plus the $1,000/year catch up for those 50 and older. Like IRAs, 401ks are accessible after the age of 59.5 and are subject to a penalty before that time. 

403b Plan

A retirement account specifically for teachers, non-profit employees, and other qualified organizations. $19,500/year limit or 10% compensation, whichever is less. 403b accounts are accessible after the age of 59.5 and are subject to a penalty before that time. 

457 Plan

A retirement account specifically for government employees. $19,500/year limit. 457 accounts are different from other retirement accounts in that you can take out contributions before age 59.5 without penalty if you leave your employer. 

HSA

Health Savings Account. This account is considered to be “triple tax advantaged,” as it is funded with pre-tax income, grows tax free, and you do not pay taxes on withdrawals. Funds can be used at any time to pay for healthcare costs (including things like tampons and other menstrual products!), but you must have the receipt in order to be reimbursed. HSAs are only available if you have a high deductible health insurance plan.

FSA

Flexible Savings Account. Similar to an HSA (Health Savings Account), an FSA is funded with pre-tax income to pay for health care expenses. Unlike an HSA though, funds in an FSA must be used in the same calendar year, or they are forfeited. 

RRSP

Canadian retirement account. Registered Retirement Savings Plan. Similar to the 401K in the United States. 

TFSA

Canadian retirement account. Tax-Free Savings Account. Similar to Roth IRAs in the United States.