Money Glossary - Bills & Beans

Glossary · Money

Thirteen terms, each with what it means, a worked figure from the 2026 numbers, and the term it is usually mixed up with.

Most money mistakes are vocabulary mistakes: a marginal rate read as an effective rate, an AGI where a MAGI belongs, an APR taken for an interest rate. Every entry below is anchored, so a piece can link straight to the term it uses, and every figure comes from The Money Numbers or one of the calculators, with the source named. Illustrative examples say so.

A to Z

Adjusted gross income (AGI): Your total income for the year — wages, interest, dividends, business income, capital gains — minus a short list of “above-the-line” adjustments such as deductible IRA and HSA contributions and student-loan interest. It is the line most income-tested rules key off, and it is calculated before the standard deduction.; Worked example The 2026 saver’s credit is allowed up to an AGI of $80,500 filing jointly, $60,375 as head of household and $40,250 for everyone else (IRS Notice 2025-67, released 13 November 2025). A couple with $82,000 of wages and a $2,000 deductible IRA contribution has an AGI of $80,000 — inside the line; the same couple with no IRA contribution is outside it.; Commonly confused with: Taxable income, which is AGI minus the standard or itemized deduction, and gross income, which is everything before adjustments.; Read next: The Money Numbers: retirement limits
Amortization: Paying a debt down on a schedule where each payment first covers the interest accrued since the last one and the remainder reduces the balance. Early payments are mostly interest because the balance is largest then; the split reverses as the balance falls.; Worked example A $5,000 card balance at the G.19 rate of 22.15%, paid at $150 a month: month one is $92.29 interest and $57.71 principal; the balance is gone in 53 months after $2,834 of interest (illustrative balance and payment; the calculator prints the whole schedule).; Commonly confused with: Depreciation, which is the accounting word for spreading an asset’s cost, and “paying down”, which people use for any reduction — a payment that does not cover the interest is not amortizing anything.; Read next: Credit card payoff calculator
Annual percentage rate (APR): The yearly cost of borrowing stated as a percentage, as defined by Regulation Z. On a credit card the interest charged each month is APR ÷ 12 applied to the balance; a card rarely compounds at exactly the APR because it charges monthly.; Worked example The Federal Reserve’s G.19 release (7 August 2026) puts the average rate on credit-card accounts assessed interest at 22.15% for the second quarter of 2026, and the average stated APR across all accounts at 20.94%. At 22.15%, the monthly rate is 1.8458%, so a $5,000 balance draws $92.29 of interest in its first month (illustrative balance).; Commonly confused with: APY, the annual percentage yield, which includes compounding and is the figure a savings account quotes; and the nominal interest rate, which on a loan excludes the fees that APR must include.; Read next: Credit card payoff calculator The Money Numbers: consumer credit
Catch-up contribution: An extra amount older savers may contribute above the regular limit. There are now three tiers in workplace plans: the age-50 catch-up, a higher catch-up for people who reach 60, 61, 62 or 63 in the year, and a Roth-only requirement for higher earners’ catch-ups.; Worked example For 2026: the 401(k) employee limit is $24,500, the age-50 catch-up $8,000, and the 60–63 catch-up $11,250; the IRA limit is $7,500 with a $1,100 catch-up at 50 and over. Catch-ups for anyone whose 2025 FICA wages exceeded $150,000 must be made as Roth contributions (all IRS Notice 2025-67).; Commonly confused with: The employer contribution, which counts toward the $72,000 section 415(c) total but never toward the employee deferral limit; and “making up” missed years, which the code does not allow.; Read next: The Money Numbers: retirement limits
Effective tax rate: Total federal income tax divided by income — the average rate paid. Because the first dollars are taxed at the lowest rates, the effective rate is always below the marginal rate for anyone above the first bracket.; Worked example The single filer above with $43,900 of taxable income pays 10% on the first $12,400 ($1,240) and 12% on the next $31,500 ($3,780): $5,020 of tax. Against $60,000 of wages that is an effective federal income-tax rate of 8.4%, while the marginal rate is 12%. Illustrative; brackets from Rev. Proc. 2025-32.; Commonly confused with: The marginal rate, and the total payroll burden — the 7.65% employee FICA rate (SSA, Social Security and Medicare tax rates) is separate from income tax and is not in either figure.; Read next: The Money Numbers: Social Security
Employer match: Money your employer adds to your retirement account in proportion to what you contribute, up to a cap written in the plan document — “50 cents on the dollar up to 6% of pay” is the common shape. It is the only guaranteed return in personal finance, and it is paid the month you contribute.; Worked example On a $60,000 salary, a 50% match on the first 6% of pay is worth $1,800 a year, collected by contributing $3,600 (illustrative). Skipped for 30 years and compounded at the 10-year Treasury yield of 4.77% (H.15, 3 September 2026), the forgone match comes to about $115,000 — the employer match calculator shows the arithmetic.; Commonly confused with: Profit-sharing or non-elective contributions, which the employer makes whether or not you contribute; and vesting, which decides whether the match is yours if you leave.; Read next: Employer match calculator

Expense ratio: The annual cost of owning a fund, expressed as a percentage of the money invested and deducted from the fund’s assets before the return you see. It is charged whether the fund goes up or down.; Worked example On $10,000, a fund with a 0.03% expense ratio costs $3 a year and one with a 1.00% ratio costs $100; the gap compounds, because the fee comes out of the balance next year’s return is earned on. Illustrative arithmetic — the ratios are examples, not any fund’s.; Commonly confused with: A sales load (a one-time charge on the way in or out), an advisory fee (charged by a person or platform on top of the fund), and the bid–ask spread on an ETF.
Health savings account (HSA): A tax-advantaged account available only to people covered by a qualifying high-deductible health plan: contributions are deductible, growth is untaxed, and withdrawals for qualified medical expenses are untaxed — three tax breaks where a 401(k) has two.; Worked example For 2026 the contribution limit is $4,400 for self-only coverage and $8,750 for family coverage, plus $1,000 at 55 and older; a qualifying plan must carry a deductible of at least $1,700 (self-only) or $3,400 (family) and out-of-pocket exposure of no more than $8,500 or $17,000 (Rev. Proc. 2025-19, IRB 2025-21, 19 May 2025; IRS Publication 969).; Commonly confused with: A health FSA, which is employer-owned, capped at $3,400 for 2026 with at most a $680 carryover (Rev. Proc. 2025-32), and an HRA, which is funded by the employer alone.; Read next: The Money Numbers: health savings accounts
Marginal tax rate: The rate on the next dollar of taxable income — the bracket you are in, not the average you pay. It is the right rate for a decision at the margin: one more dollar of pre-tax contribution, one more dollar of side income.; Worked example For 2026 the single-filer brackets begin at $0 (10%), $12,400 (12%), $50,400 (22%), $105,700 (24%), $201,775 (32%), $256,225 (35%) and $640,600 (37%) (Rev. Proc. 2025-32). A single filer with $55,000 of taxable income has a marginal rate of 22%, but only the last $4,600 is taxed at it. Joint brackets are exactly double the single ones through the 35% floor and then diverge: 37% starts at $768,700 joint against $640,600 single.; Commonly confused with: The effective tax rate, below. A 22% bracket does not mean 22% of your income goes to federal tax; for this filer it is about 12% of taxable income.; Read next: Roth vs. Traditional calculator
Modified adjusted gross income (MAGI): AGI with certain deductions and exclusions added back. Which items are added back depends on the rule using it — the Roth IRA definition, the Traditional-IRA-deduction definition and the premium-tax-credit definition are three different MAGIs — which is why the word “modified” is doing real work.; Worked example For 2026, direct Roth IRA contributions phase out between a MAGI of $153,000 and $168,000 for single filers and heads of household, and between $242,000 and $252,000 filing jointly (IRS Notice 2025-67). A single filer at $160,000 is inside the phase-out and can contribute only part of the $7,500 limit.; Commonly confused with: AGI. For most wage earners with no foreign income or excluded interest the two are the same number, which is how people learn the difference only when a Roth contribution gets recharacterised.; Read next: Roth vs. Traditional calculator the Roth vs. Traditional piece
Present bias: The tendency to weight a reward or cost available now far more heavily than the same thing a little later — and to keep doing so as “now” moves forward. It is why a plan made for next month is easy and the same plan for today is hard.; Worked example The employer match is the cleanest case: contributing $3,600 this year costs about $2,808 of take-home pay at a 22% marginal rate and collects $1,800 immediately, yet the calculator’s 30-year forgone figure runs to about $115,000 at a 4.77% growth rate. The cost is felt this month; the loss is never billed.; Commonly confused with: Simple impatience, and the time value of money — a dollar now being worth more than a dollar later is rational; valuing today’s dollar more than tomorrow’s and then tomorrow’s more than the next day’s, on the same terms, is the bias.; Read next: Employer match calculator
Standard deduction: A fixed amount every filer may subtract from AGI instead of itemizing. Itemizing only pays when mortgage interest, state and local taxes (capped) and charitable gifts add up to more than it.; Worked example For tax year 2026: $32,200 married filing jointly, $24,150 head of household, $16,100 single or married filing separately (Rev. Proc. 2025-32). An additional $1,650 applies to a filer who is 65 or older or blind, or $2,050 if also unmarried and not a surviving spouse.; Commonly confused with: The itemized deduction, which is the alternative rather than an addition, and the additional amounts for age and blindness, which stack on top of it.; Read next: The Money Numbers: brackets and the standard deduction
Taxable income: The number the brackets are applied to: AGI minus the standard deduction (or itemized deductions) and any other below-the-line deductions. Every bracket threshold in the tax tables is a taxable-income figure, not a salary figure.; Worked example A single filer with $60,000 of wages and no adjustments takes the 2026 standard deduction of $16,100 (Rev. Proc. 2025-32, released 9 October 2025) and has taxable income of $43,900. The 22% bracket begins at $50,400 of taxable income, so this person never reaches it.; Commonly confused with: Gross income — the salary on the offer letter — which is what most people plug into a bracket table by mistake.; Read next: The Money Numbers: brackets and the standard deduction

The short version

The bracket is not the rate, and the limit is not the plan. Read a number with its definition beside it — marginal against effective, AGI against MAGI, APR against APY — and most of the arithmetic in the Money guide stops being surprising.

Terms used across the guide: the Money Guide. Every figure on this page was read on 7 September 2026; the reference pages it cites are updated in place.

Article sources

IRS, Notice 2025-67 (released 13 November 2025) — retirement limits, catch-ups, saver’s credit AGI ceilings, IRA phase-outs.
IRS, Rev. Proc. 2025-32 (released 9 October 2025) — 2026 brackets, standard deduction, health FSA limit.
IRS, Rev. Proc. 2025-19 (IRB 2025-21, 19 May 2025) and Publication 969 — HSA and HDHP figures.
Federal Reserve, G.19 Consumer Credit (7 August 2026) and H.15 Selected Interest Rates (4 September 2026).
Social Security Administration, Social Security and Medicare tax rates.
Bills & Beans, The Money Numbers That Change Every January — every figure above with its quote and read date.