Reference
Financial Glossary
Plain-English explanations of retirement, pension, and tax terms — built for teachers, military families, and self-employed professionals.
Solo 401(k) & Self-Employment
Solo 401(k)A Solo 401(k) — also called an Individual 401(k) or Self-Employed 401(k) — is a retirement savings plan available to self-employed individuals with no full-time employees other than a spouse, allowing contributions up to $70,000 in 2026.Solo 401(k) vs. SEP-IRAA Solo 401(k) and SEP-IRA are both retirement plans for self-employed workers, but a Solo 401(k) allows higher contributions at most income levels because it adds a $23,500 employee deferral on top of the employer contribution.Solo 401(k) Contribution Limits 2026The 2026 Solo 401(k) contribution limit is $70,000 total ($77,500 with catch-up for those 50 or older), combining a $23,500 employee deferral and an employer contribution of up to 25% of net self-employment compensation.Self-Employment TaxSelf-employment tax (SE tax) is the 15.3% tax that self-employed individuals pay to fund Social Security (12.4%) and Medicare (2.9%). It replaces the FICA taxes split between employers and employees in traditional employment.Mega Backdoor RothThe Mega Backdoor Roth is a strategy that allows high-income earners to contribute up to $46,500 in after-tax dollars to a Solo 401(k) — then convert them to Roth — enabling tax-free growth far beyond the standard $23,500 Roth IRA limit.
Teacher Pension
Windfall Elimination Provision (WEP)The Windfall Elimination Provision (WEP) is a Social Security rule that reduces Social Security retirement benefits for workers who also receive a pension from a job not covered by Social Security — primarily public school teachers, state employees, and certain government workers.Government Pension Offset (GPO)The Government Pension Offset (GPO) reduces Social Security spousal or survivor benefits for people who receive a pension from a government job not covered by Social Security — typically public school teachers in certain states.
Military Pension
Blended Retirement System (BRS)The Blended Retirement System (BRS) is the military retirement plan that applies to service members who joined after January 1, 2018, combining a reduced defined benefit pension with government TSP contributions and a mid-career continuation bonus.Military High-3 PensionThe Military High-3 pension is the legacy military retirement system for service members who entered service before January 1, 2018, paying 2.5% of the average of the highest 36 months of base pay per year of service.
Pension Fundamentals
Defined Benefit PlanA defined benefit (DB) plan is a pension that guarantees a fixed monthly income in retirement based on a formula — typically years of service and final average salary — regardless of investment market performance.Vesting in a PensionVesting in a pension means you have earned the right to receive future pension benefits. Before you vest, leaving your job means forfeiting those benefits. Vesting periods in public pensions typically range from 3 to 10 years.COLA (Cost-of-Living Adjustment) in PensionsA COLA (Cost-of-Living Adjustment) is an annual increase to a pension payment designed to help retirees maintain purchasing power as prices rise due to inflation. Not all public pensions include automatic COLA — some require legislative approval each year.