Letter: E

The cost of owning a mutual fund that is deducted from your 401(k) account. Basically, it’s the amount you pay each year to the fund to cover operating expenses and management and 12b-1 fees. Expressed as a percentage of the net asset value of your investment in the fund. Expense ratios vary across the different types of funds.

Look for the expense ratios in your 401(k) account statement, summary plan description, summary annual report, or your plan’s website. They also appear in the fund’s prospectus.

The Employee Retirement Income Security Act of 1974 (ERISA). A federal law that set standards for plan sponsors and plan administrators in order to protect the rights of plan participants. ERISA is enforced by the U.S. Department of Labor.

Ownership in a company through the purchase of stock. When you buy shares of stock in a company, you have equity in the company. Equity investments are generally considered riskier than fixed-income investments.

An amount of money contributed to your 401(k) account each pay period by your employer. Also called the “employer match” or “company match,” it is offered by many companies as an incentive for employees to participate in a retirement plan. You have to contribute your own money to get the match.

Most commonly, employers will match part or all of your contribution, up to a maximum percentage of your salary (usually 6%). Matching contributions may vest over time, meaning they don’t belong to you until after a specific period.

A branch of the U.S. Department of Labor that oversees workforce issues, including retirement plans such as 401(k)s. The EBSA website offers a wealth of consumer information on retirement plans at: http://www.dol.gov/ebsa/consumer_info_pension.html

The 10% penalty tax you must pay to the IRS on any 401(k) distributions taken before you reach age 59 ½. In addition to this penalty, you will also pay regular income taxes on any money you withdraw.