A growing trend in which employees are automatically enrolled in a 401(k) plan by their employer. Employees can opt out by filing a request. With an automatic 401(k), the contribution rate and investments are usually preset by the employer, but employees have the right to change them.
Letter: A
Asset allocation
The division of your investments among different types of assets–stocks, bonds and cash—to reduce your risk of losses. Your specific asset allocation will depend largely on how close you are to retirement and your risk tolerance. Through the years you should periodically rebalance your asset allocation, moving more of your money away from stocks (high risk) and into bonds and cash (lower risk) as you get closer to retireme
Annuity
A type of investment that is a contract between you and an insurance company. You make a lump-sum investment and the insurer makes guaranteed periodic payments to you, beginning immediately or at some future date.