Glossary for Retirees

Asset Allocation – Diversifying investments among asset classes to manage risk.
Asset Class – A type of investment such as stocks, bonds, cash, or real estate.
Assets Under Management (AUM) – The total market value an advisor manages on behalf of clients.
Beneficiary – The person designated to receive assets upon death.
Bond – A loan investment where the issuer pays interest and repays principal at maturity.
Brokerage Account – An investment account used to buy and sell securities.
Capital Gain – Profit from selling an investment for more than its purchase price.
Capital Loss – Loss from selling an investment for less than its purchase price.
Cost Basis – The original value of an asset used to calculate capital gains tax.
Certified Financial Planner (CFP) – A professional designation for financial planners.
Compound Interest – Interest earned on principal plus previous interest.
Custodial Account – Investment account managed for a minor until adulthood.
Dividend – Portion of company profits paid to shareholders.
Diversification – Spreading investments to minimize risk of loss.
Dollar-Cost Averaging – Investing equal dollar amounts regularly regardless of price.
Estate Plan – Organizing asset distribution at death.
Executor – Individual appointed to administer a will.
Fiduciary – A professional legally required to act in the client’s best interest.
Fixed Income – Investments providing regular interest or dividends.
Fixed Annuity – An annuity with a guaranteed interest rate and payments.
Inflation – Rising prices diminishing purchasing power.
Inflation Risk – The risk that rising prices reduce the value of income.
Index Fund – A fund that tracks a market index like S&P 500.
IRA (Individual Retirement Account) – A tax-advantaged personal retirement account.
Roth IRA – An IRA with after-tax contributions and tax-free withdrawals.
Traditional IRA – An IRA with tax-deferred contributions and taxable withdrawals.
Liquidity – How easily an asset converts to cash without losing value.
Longevity Risk – Risk of outliving one’s retirement assets.
Market Volatility – Fluctuation in investment prices.
Medicare – Federal health insurance for individuals 65+ or disabled.
Medicare Part A – Hospital insurance coverage.
Medicare Part B – Medical insurance covering doctors and outpatient care.
Medicare Part C (Medicare Advantage) – Alternative to Original Medicare via private insurers.
Medicare Part D – Prescription drug coverage under Medicare.
Mutual Fund – Investment fund pooling money from investors.
Net Worth – Total assets minus total liabilities.
Portfolio – Collection of an individual’s investments.
Principal – Original amount invested or borrowed.
Required Minimum Distribution (RMD) – Mandatory withdrawals from retirement accounts.
Return on Investment (ROI) – Profit compared to investment cost.
Risk Tolerance – An investor’s willingness to endure loss.
Tax Bracket – Category determining tax rate based on income.
Tax-Deferred – Taxes postponed until later withdrawals.
Tax-Free – Income exempt from taxation.
Taxable Income – Income subject to federal or state tax.
Trust – Legal arrangement for holding assets for beneficiaries.
Volatility Index (VIX) – Measures market volatility expectations.
Wealth Transfer – Passing assets to heirs or beneficiaries.
Yield – Income return as a percentage of investment value.
Estate Tax – Tax on the transfer of wealth at death.
Inheritance Tax – Tax paid by beneficiaries on inherited assets.
Gift Tax – Tax on transferring assets without compensation.
Step-Up in Basis – Adjustment of cost basis at death to reduce capital gains.
Probate – Court-supervised estate distribution process.
Power of Attorney – Document authorizing someone to act on another’s behalf.
Health Care Directive – Document outlining medical care wishes.
Living Will – Legal document expressing end-of-life care preferences.
Revocable Trust – Trust that can be changed during the creator’s lifetime.
Irrevocable Trust – Trust that cannot be modified once established.
Charitable Remainder Trust – Trust providing income, with remaining assets donated later.
Asset Protection Trust – Designed to shield assets from creditors.
Long-Term Care Insurance – Coverage for assistance with daily living needs.
Hybrid LTC Policy – Life insurance with long-term care benefits.
Immediate Annuity – Annuity where payments begin within one year.
Deferred Annuity – Annuity with payments beginning at a future date.
Variable Annuity – Annuity allowing investment in sub-accounts.
Indexed Annuity – Annuity tied to stock market index performance.
Income Rider – Contract feature guaranteeing lifetime income.
Surrender Charge – Fee for early withdrawal from an annuity.
Guaranteed Minimum Income Benefit – Ensures annuity income regardless of market.
Medigap Policy – Supplemental insurance for Medicare costs.
COBRA – Temporarily extends employer health coverage post-employment.
Form 1099-R – Reports retirement plan or annuity distributions.
IRA Rollover – Moving funds from a retirement account to an IRA.
Qualified Plan – Retirement plan meeting IRS guidelines.
Non-Qualified Plan – Employer plan not meeting ERISA requirements.
ERISA – Law governing employer retirement benefits.
Social Security – Government retirement and disability income program.
Spousal Benefit – Social Security benefit for a qualifying spouse.
Survivor Benefit – Social Security benefit to widows and widowers.
Full Retirement Age (FRA) – Age eligible for full Social Security benefits.
Delayed Retirement Credits – Increased Social Security benefits for delaying claim.
COLA (Cost of Living Adjustment) – Social Security increase for inflation.
Pension – Employer-sponsored defined benefit retirement income.
Defined Benefit Plan – Provides guaranteed lifetime pension payments.
Defined Contribution Plan – Employee and employer contribute, no guaranteed benefit.
Plan Sponsor – Company or organization offering a retirement plan.
Distribution – Withdrawal from a retirement account.
Early Withdrawal Penalty – Fees for withdrawals before age 59½.
Safe Withdrawal Rate – Estimated annual withdrawal without exhausting savings.
Bucket Strategy – Segregating assets into time-based withdrawal buckets.
Sequence of Returns Risk – Risk of early retirement losses harming long-term income.
Asset Preservation – Protecting assets from taxes and market loss.
Capital Preservation – Strategy focused on maintaining original investment.
Fixed Income Ladder – Staggering bond maturities to manage risk.
Equity – Ownership stake in a company via stock.
Inflation Hedge – Asset expected to maintain value during inflation.
Real Estate Investment Trust (REIT) – Company owning or financing properties.
Treasury Bond – Long-term government debt security.
Municipal Bond – State or local government-issued bond, often tax-free.
Corporate Bond – Debt issued by companies to raise capital.
Junk Bond – High-yield bond with increased risk.
Credit Risk – Risk of borrower defaulting.
Duration Risk – Risk from changes in interest rates.
Interest Rate Risk – Interest rate changes impacting investment values.
Market Risk – Risk of losses due to market fluctuation.
Principal Risk – Risk of losing original investment.
Diversifiable Risk – Risk reduced by diversification.
Non-Diversifiable Risk – Market-wide risk that cannot be avoided.
Estate Freeze – Strategy to reduce estate tax on appreciating assets.
Living Benefits Rider – Insurance feature allowing early use of death benefit.
Cash Value Life Insurance – Policy with savings component.
Universal Life Insurance – Flexible premium permanent insurance.
Whole Life Insurance – Permanent insurance with fixed premiums and guarantees.
Securities – Financial instruments such as stocks, bonds, or ETFs.
ETF (Exchange Traded Fund) – Fund traded like a stock, tracking an index.
Custodian – Institution holding financial assets for safekeeping.
Rebalancing – Adjusting portfolio to maintain target allocation.
Rollover IRA – IRA created to receive employer-plan funds.
Estate Liquidity – Ability to pay estate expenses without selling assets.
Inheritance – Assets received from a deceased person.
Wealth Preservation – Strategies designed to protect wealth long-term.
Spousal Rollover – Surviving spouse moves assets into their own IRA.
Non-Spouse Beneficiary – Heir not legally married to the account owner.
Ten-Year Rule – Inherited IRAs must generally be distributed within 10 years.
Generation-Skipping Transfer – Passing assets to grandchildren to reduce taxes.
Portability – Ability to transfer a deceased spouse’s estate tax exemption.
Probate Avoidance – Structuring assets to bypass court distribution.
Charitable Giving – Donations to nonprofit organizations.
Donor-Advised Fund – Account for managing charitable contributions.
Qualified Charitable Distribution (QCD) – IRA withdrawal donated tax-free.
Tax-Loss Harvesting – Selling losing investments to offset gains.
Capital Appreciation – Increase in asset value over time.
Deferred Compensation – Earnings paid at a future date.
Income Rider (Annuity) – Feature guaranteeing lifetime income.
Indexed Universal Life (IUL) – Life policy tied to stock index performance.
Survivorship Life Insurance – Policy covering two lives, paying upon second death.
Umbrella Insurance – Additional liability protection beyond standard policies.
Medicaid Planning – Structuring finances to qualify for needs-based coverage.
Elder Law Attorney – Lawyer specializing in legal issues of aging.
Solo 401(k) – Retirement plan for self-employed retirees with business income.
Actuarial Table – Statistical life expectancy estimates.
Roth Conversion – Moving assets from traditional IRA to Roth to reduce future tax impact.
Income Tax Credit – Reduction in tax owed, dollar for dollar.
Itemized Deduction – Expense allowable to reduce taxable income.
Standard Deduction – Flat dollar amount reducing taxable income.