The Learn Library · Glossary
Thirty-five terms that come up in nearly every retirement conversation — defined the way we would explain them across a kitchen table. No jargon defining jargon. Where a 2026 figure matters, it is here; where a concept is timeless, the definition is too.
01 · Accounts & vehicles
Each account type is a different tax deal with the government. Most retirement tax planning is about which deal each dollar gets — and when.
An employer-sponsored retirement account funded through payroll deductions. Contributions to a traditional 401(k) go in before tax, grow tax-deferred, and are taxed as ordinary income when withdrawn. Many employers add a matching contribution, and many plans offer a Roth 401(k) option, which flips the tax treatment: after-tax contributions in, tax-free qualified withdrawals out.
In the libraryThe order you draw down accounts is a tax decision
A savings account paired with a high-deductible health plan. Contributions reduce taxable income, growth is untaxed, and withdrawals for qualified medical expenses are tax-free — the only account in the tax code with all three advantages at once. Used for anything else, withdrawals are taxable, which is why many households treat the HSA as a long-term account earmarked for health costs in retirement.
The movement of money from a traditional IRA or 401(k) into a Roth IRA. The converted amount is taxed as ordinary income in the year of the conversion; in exchange, it then grows tax-free and carries no required minimum distributions during the owner's lifetime. The math turns on the difference between the tax rate paid at conversion and the rate that would otherwise apply to the same dollars later.
In the libraryRoth conversions: when they pay off · Roth & RMDs topic hub
An individual retirement account funded with after-tax dollars. Qualified withdrawals of both contributions and earnings are tax-free, and the account has no required minimum distributions during the owner's lifetime — which also makes it a favored account to leave to heirs. Direct contributions are subject to income limits; conversions are not.
In the libraryRoth conversions: when they pay off
A standard investment account with no special tax treatment and no contribution limits. Interest, dividends, and realized gains are taxed in the year they occur — long-term capital gains at preferential rates. Its flexibility, with no age rules and no withdrawal requirements, is why it plays a distinct role in the order accounts are drawn down.
In the libraryThe order you draw down accounts is a tax decision
An individual retirement account that typically holds pre-tax money — often rolled over from a workplace plan. Contributions may be deductible, growth is tax-deferred, and every dollar withdrawn is taxed as ordinary income. Required minimum distributions begin at age 73 for those born 1951–1959, or 75 for those born in 1960 or later.
In the libraryRMDs: a plain-English guide for 2026
02 · Income
A retirement income plan assembles a paycheck from several sources — Social Security, pensions, and the portfolio — each with its own rules and timing.
A contract with an insurance company that converts a lump sum into a stream of payments, often for life. Conceptually, an annuity transfers longevity risk — the possibility of outliving savings — from the household to an insurer. Contracts vary widely in structure, cost, and flexibility, which is why the details of any specific contract matter far more than the category.
The increase Social Security applies for each month a worker delays claiming past full retirement age, accruing at 8 percent per year until age 70, after which there is no further growth. For someone with a full retirement age of 67, a benefit claimed at 70 is 124 percent of the full amount — a permanently larger check that also receives larger dollar cost-of-living adjustments each year.
In the librarySocial Security claiming: a framework · Claiming estimator
The age at which a worker qualifies for their full, unreduced Social Security benefit — 67 for everyone born in 1960 or later. Claiming earlier permanently reduces the monthly check: at 62, the benefit is 70 percent of the full amount for someone with an FRA of 67. Waiting past FRA earns delayed retirement credits until age 70, where the benefit reaches 124 percent.
In the librarySocial Security topic hub
An employer-funded plan that pays a defined monthly benefit for life, usually based on salary and years of service. A pension shifts investment and longevity risk from the retiree to the employer, which changes the shape of the rest of the income plan. Payout elections — single-life versus joint-and-survivor — are typically irrevocable once made.
A Social Security benefit available to the spouse of a worker, worth up to 50 percent of the worker's full-retirement-age benefit — it applies when that amount exceeds the benefit the spouse earned on their own record. Spousal benefits reach their maximum at the claiming spouse's own full retirement age and, unlike worker benefits, do not grow with delayed retirement credits.
In the librarySocial Security claiming: a framework
When one spouse dies, the survivor steps up to the higher of their own Social Security benefit or what the deceased was receiving — including any delayed retirement credits. The household keeps the larger check and loses the smaller one. This is why the higher earner's claiming decision functions as longevity insurance for the couple, not just for one person.
In the librarySocial Security claiming: a framework
The percentage of a portfolio withdrawn in a year to fund spending — the working answer to the question of how much a portfolio can sustainably pay out. Research on withdrawal rates studies how a starting rate, adjusted for inflation each year, would have held up across historical market sequences, including the bad ones.
In the libraryWithdrawal rates: what the research actually says
03 · Taxes
In retirement, taxes stop being automatic. The timing and source of each withdrawal determines the rate it pays — these are the moving parts.
The profit on an investment sold for more than its cost basis. Gains on assets held longer than one year are long-term and taxed at preferential rates; gains on assets held a year or less are short-term and taxed as ordinary income. In retirement, the timing of realized gains interacts with Social Security taxation and Medicare premiums, so a sale is rarely just a sale.
What was originally paid for an investment, adjusted for items like reinvested dividends. Basis determines how much of a sale is taxable gain versus untaxed return of principal. Inherited assets generally receive a step-up: basis resets to the value at the original owner's death, which can erase embedded gains for heirs.
Short for income-related monthly adjustment amount — a surcharge added to Medicare Part B and Part D premiums for higher-income households. In 2026 it begins when modified adjusted gross income exceeds $109,000 for single filers or $218,000 for joint filers, measured from the tax return two years prior. IRMAA is a cliff, not a slope: crossing a threshold by a single dollar triggers the full surcharge for that tier.
In the libraryMedicare and IRMAA · Medicare topic hub
Adjusted gross income with certain items added back — the income measure that drives IRMAA surcharges and several other thresholds in the tax code. Roth conversions, IRA withdrawals, and realized capital gains all raise MAGI, which is how a decision made in one part of a plan can surface two years later as a higher Medicare premium.
In the libraryMedicare and IRMAA
The marginal rate is the tax on the next dollar of income — the rate of the bracket that dollar lands in. The effective rate is total tax divided by total income, and it is always lower, because earlier dollars were taxed in lower brackets. Decisions like sizing a Roth conversion turn on the marginal rate, not the effective one, because they are decisions about the next dollar.
In the libraryThe order you draw down accounts is a tax decision
A transfer made directly from an IRA to a qualified charity by an owner age 70½ or older — up to $111,000 per person in 2026. The amount counts toward the year's required minimum distribution but never lands in adjusted gross income, which also keeps it out of the formulas behind Social Security taxation and IRMAA. The transfer must go directly from the IRA custodian to the charity.
In the libraryRMDs: a plain-English guide for 2026
The amount that must be withdrawn each year from most pre-tax retirement accounts once the owner reaches RMD age — 73 for those born 1951–1959, 75 for those born in 1960 or later. The amount is the prior year-end balance divided by an IRS life-expectancy factor, and it is taxed as ordinary income whether or not the money is needed. Roth IRAs have no lifetime RMDs.
In the libraryRMDs: a plain-English guide for 2026 · Roth & RMDs topic hub
A range of taxable income taxed at a single rate. The federal system is progressive — seven brackets running from 10 to 37 percent in 2026 — and only the income inside each bracket is taxed at that bracket's rate. Crossing into a higher bracket never reduces take-home income; only the dollars above the line pay the higher rate.
In the libraryThe order you draw down accounts is a tax decision · Tax bracket tool
The spike in effective tax rate that occurs when additional income pulls previously untaxed Social Security benefits into taxable income. Because up to 85 percent of benefits can become taxable as provisional income rises, one extra dollar of IRA withdrawal can bring up to 85 cents of Social Security into taxable income alongside it. Withdrawal sequencing is largely the craft of steering around this zone.
In the libraryThe order you draw down accounts is a tax decision
04 · Risk & portfolio
Retirement portfolios face a different problem than accumulation portfolios: they are being spent from while they take risk.
The division of a portfolio among asset classes — stocks, bonds, cash — in proportions matched to goals, time horizon, and tolerance for decline. Allocation is the primary lever controlling how far a portfolio can fall in a bad year and how much it can grow over a good decade; the selection of individual investments operates within the range allocation sets.
A set of individual bonds or Treasuries scheduled to mature at staggered intervals, so a known amount of cash arrives on a known date each year. Ladders match predictable expenses with predictable income, no matter what markets do in between. Unlike a bond fund, a ladder held to maturity delivers defined cash flows regardless of interim price swings.
In the libraryWithdrawal rates: what the research actually says
Spreading investments across holdings, sectors, and asset classes so that no single failure determines the outcome. Diversification does not prevent losses in a broad downturn; its job is narrower and more valuable — removing the risks specific to any one company or bet, leaving only the market risk an investor is actually compensated for taking.
The danger that poor market returns early in retirement, combined with ongoing withdrawals, permanently impair a portfolio — even if long-run average returns turn out fine. Two retirees can earn the same average return in a different order and end up in very different places. It is the reason the first years of retirement carry outsized weight in income planning.
In the libraryWithdrawal rates: what the research actually says
05 · Planning & protection
A few legal and structural terms decide who acts, who inherits, and whose interests come first.
The instruction on a retirement account, insurance policy, or transfer-on-death account naming who inherits it. Designations override a will — the account passes by contract, not through probate — which is why an out-of-date form can quietly undo an otherwise careful estate plan. Designations are reviewed against the will and trust documents as a set, not in isolation.
A compensation model in which an advisor is paid solely by the client — a flat fee, an hourly rate, or a percentage of assets — and accepts no commissions from products sold. The model removes the incentive to favor whatever pays the seller most. “Fee-based” is not the same thing; it typically means fees plus commissions.
On this siteAbout the firm behind this platform
A legal duty to act in the client's best interest, placing the client's interests ahead of the advisor's or the firm's. Registered investment advisers owe this duty across the whole relationship. Other standards, like suitability, ask only whether a product is acceptable for someone in the client's position — not whether it is the best available option.
On this siteAbout the firm behind this platform
A written analysis that connects resources — savings, income sources, benefits — to goals, and specifies what happens in what order: when to claim, which account to spend from, how much risk to hold, which taxes to manage in which years. A plan is distinct from a portfolio; the portfolio is one input among several.
A legal document authorizing someone to act on another person's behalf — for finances, for health care, or both. A durable power of attorney remains effective through incapacity, which is the scenario it primarily exists for. Without one, families typically need a court proceeding to manage an incapacitated person's affairs.
06 · Medicare
Medicare is not one program — it is several parts with separate premiums, rules, and enrollment windows.
The hospital-insurance piece of Medicare, covering inpatient hospital stays, skilled nursing facility care after a hospital stay, and hospice. Most beneficiaries pay no Part A premium, having funded it through payroll taxes across a working career.
In the libraryMedicare and IRMAA
The outpatient medical-insurance piece — physician visits, outpatient procedures, preventive services, and durable medical equipment. Part B carries a monthly premium, $202.90 standard in 2026, which rises with income through IRMAA surcharges. Enrolling late without other creditable coverage adds a permanent penalty to the premium.
In the libraryMedicare and IRMAA · Medicare topic hub
The prescription-drug piece of Medicare, delivered through private plans. Premiums vary by plan and, like Part B, carry an income-based IRMAA surcharge at higher income levels. Enrolling late without creditable drug coverage adds a permanent penalty that grows with each month of delay.
In the libraryMedicare and IRMAA
Two different ways to fill the gaps in original Medicare. Medigap (supplement) policies work alongside Parts A and B, covering deductibles and coinsurance while preserving access to any provider who accepts Medicare. Medicare Advantage (Part C) replaces original Medicare with a private plan that often bundles drug coverage and extra benefits, typically in exchange for provider networks and prior-authorization rules. The choice shapes both costs and flexibility for years, and switching back is not always simple.
In the libraryMedicare and IRMAA
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