Personal Finance Glossary # to B: Plain-English Definitions

About this page

Finance is full of terms that sound simple until you have to use them. This page is a plain-English glossary for Personal Finance, covering entries such as 10-Year Rule (Inherited Retirement Accounts), 12b-1 Fee, 20/4/10 Rule, 4% Rule, 401(k), each with a short definition and a pointer to the part of the volume where it is explained.

Keep it open while you read, or use it to settle an argument about what a term really means. Every entry is written to stand on its own, with no jargon left undefined, and the part number beside it tells you where to read more. Use it as a quick reference whenever a term trips you up.

A sample of the entries (56 terms on the full page)

12b-1 Fee — An annual charge inside a mutual fund’s expense ratio that pays for distribution and shareholder service, often to the selling firm. FINRA Rule 2341 caps the service fee at 0.25% and the asset-based sales charge at 0.75% a year. (Part 7.9)

4% Rule — A retirement-withdrawal guideline: withdraw 4% of a portfolio in year one, adjusting for inflation thereafter; it survived every 30-year U.S. period since 1926 in Bengen’s 1994 study, but Morningstar’s late-2025 research put a safe starting rate at 3.9%, and flexible rules such as guardrails (Part 10.7) allow more. (Part 10.2)

403(b) / 457(b) — Employer retirement plans for nonprofit/education (403(b)) and government (457(b)) employees; a 457(b) can often be stacked alongside a 401(k)/403(b) for double the tax-advantaged space. (Part 6.2)

529 Plan — A state-sponsored, tax-advantaged education savings account; 2026 rules doubled the annual K-12 withdrawal cap to $20,000 and expanded qualified expenses. (Part 4.4)

ABLE Account — A tax-advantaged account for a person whose disability began before age 46 (from 2026); contributions are capped at the annual gift exclusion ($19,000 in 2026) plus extra for a working beneficiary, and the first $100,000 is ignored for SSI. (Part 12.3)

Account Compromise (Account Takeover) — Someone else gaining control of your bank, card, email or phone accounts; reports go to IdentityTheft.gov (the FTC’s site, which produces an official Identity Theft Report) and to the FBI at ic3.gov. The response order is to close the doors an attacker can still use — cards, email, phone number, passwords — before cleaning up what was done. (Part 13.4)

Acknowledged Power of Attorney — A power of attorney signed before a notary. Under the Uniform Power of Attorney Act, it triggers a bank’s protection for good-faith reliance and its duty to accept or respond within 7 business days. (Part 12.2)

Additional Child Tax Credit — The refundable portion of the Child Tax Credit: 15% of earned income above $2,500, up to $1,700 per child for 2026. (Part 9.4)

Adjustable-Rate Mortgage (ARM) — A mortgage with a fixed introductory rate (commonly 5, 7, or 10 years) followed by periodic rate adjustments tied to a market index. (Part 5.4)

Adult Protective Services (APS) — State- or county-run agencies that investigate abuse, neglect and financial exploitation of older and vulnerable adults; the Justice Department’s National Elder Fraud Hotline (833-372-8311) helps people 60 and older report fraud. (Part 13.5)

After-Tax Cost of Debt — A debt’s interest rate × (1 − marginal tax rate) when the interest is deductible, or the rate itself when it is not. It is the rate to compare with an investment’s after-tax return. (Part 1.8)

AGI — Adjusted Gross Income — Gross income minus specific above-the-line adjustments (deductible IRA and HSA contributions made outside payroll, student loan interest, half of self-employment tax); the base figure many tax thresholds and phase-outs are calculated against. (Part 9.1)

Annual Additions Limit — The cap on all money, employee deferrals plus employer contributions, added to one person’s defined contribution accounts in a year from plans maintained by the same employer: $72,000 in 2026, or 100% of compensation if less, with catch-up contributions allowed on top (IRC §415(c)). (Part 6.8)

Annuity — A contract in which you pay an insurer money and it promises payments back; types range from income annuities (longevity insurance) to fixed, variable and fixed indexed annuities (savings or investment products inside an insurance wrapper). (Part 10.10)

APR — Annual Percentage Rate — The yearly cost of borrowing, including certain fees, expressed as a percentage; used to compare loans and credit cards on a common basis. (Part 3.3)

APY — Annual Percentage Yield — What a deposit actually earns in a year once interest compounds: APY = (1 + r ÷ n)^n − 1. Banks must disclose it under Regulation DD; compare APY when saving, while APR (which excludes compounding) is the borrowing measure. (Part 2.7)