Glossary of Terms

401k

An employer retirement plan that allows employees to set aside a certain percentage of their income before taxes have been paid.

403b

An employer retirement plan that may only be established by certain tax-exempt, non-profit organizations, such as churches and public school systems allowing employees to set aside a certain percentage of their income before taxes have been paid.

457

A non-qualified retirement plan that may only be established by state and local government entities and certain non-profit organizations (Governmental and non governmental) allowing employees to set aside a certain percentage of their income before taxes have been paid.

4% Rule

A traditional guideline used to determine how much money someone can safely withdraw/spend from their retirement accounts each year without depleting the account.

AGI

AGI (Adjusted Gross Income) is your total taxable income after certain deductions, but before taking standard or itemized deductions. It is a key figure used to determine: Your tax bracket, eligibility for tax credits & deductions, contribution limits for IRAs & Roth IRAs, phaseouts for certain benefits

ACA

ACA (Affordable Care Act) is a U.S. healthcare reform law passed in 2010 to make health insurance more accessible and affordable. It is also known as Obamacare. If your state runs its own ACA marketplace → You must apply through your state’s official marketplace.

If your state uses the federal marketplace (HealthCare.gov) → You apply through HealthCare.gov. You can also buy ACA-compliant plans directly from private insurers, but subsidies & cost reductions are only available through ACA marketplaces.

Annuity

An agreement between an individual (contract owner) and an insurance company. The contract owner gives the company a specific amount of money and, in exchange, the company agrees to provide an individual(s) with income.

Asset allocation

Asset Allocation is the process of dividing your investments among different asset classes (stocks, bonds, cash, real estate, etc.) to balance risk and return based on your financial goals.

Asset class

Class of investment such as; equity securities (e.g., large-cap, mid-cap, and small-cap stocks), debt securities, cash or cash equivalents (e.g., Treasury bills), commodities, and real estate insurance

Backdoor Roth

A method of contributing to Roth for individuals above the income limit.

Beneficiary

An individual designated to receive the income of an estate, account, or insurance policy.

Capital gains

Gains incurred as a result of selling shares above their cost basis.

Capital gains tax rates

Preferential tax rates for long term capital gains.

Catch up contributions

Increased allowable contributions for individuals over the age of 50.

COLA

Cost of living adjustment.

Compound interest

Interest calculated on investment interest or returns.

Cost basis

The original value of an asset for tax purposes.

DAF

Donor advised fund. An investment account for supporting charitable organizations.

Default account (Boldin)

You may see an account labeled “Other Savings” on your charts. The tool will automatically default to choose "Other Savings" for your excess income. You have the ability to select any of your after-tax accounts instead of the default account in My Plan> Money Flows > Excess Income.

Deficit

Once all of your savings are depleted, the Planner will resort to modeling debt. We refer to this as a deficit.

Direct transfer

Common method of rolling over investment accounts.

Disbursement

Disbursements are a way to account for planned large expenses funded from a specific account on a specific date. Disbursements can be annual and tax deductibility: Disbursements allow you to model large expenses as tax deductible.

Diversification

An investment strategy that encourages investors to own multiple investment types to lower risk.

Dividend

A sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves).

Dollar cost averaging

Dollar cost averaging refers to investing the same dollar amount on a regular basis, as opposed to a lump sum all at once.

Earnings limit

The amount of income an individual may incur without a decrease in their Social Security benefit.

Effective tax rate

Effective Tax Rate (ETR) is the percentage of your total income that you actually pay in taxes. It represents your overall tax burden, unlike marginal tax rates, which apply only to income within specific tax brackets.

Emergency fund

3 to 6 months of expenses to serve as a buffer in the event of job loss.

Employer Match

A practice where a company contributes a "matching" percentage of the employee contribution to an employee's 401k.

Estate

Assets and liabilities that remain after one's death.

ESOP

Employer Stock Options

ETF

Exchange Traded Funds

Excess income (Boldin)

Excess income is money that is not earmarked in your plan to be saved or spent and can be accessed through My Plan > Money Flows > Excess Income

Financial Independence

FICA

Tax taken out of workers’ paychecks for Social Security and Medicare.

Financial wellness

Having a clear financial plan focused on goals relative to how individuals want to spend their time, what’s important to them, their values and their lifestyle, knowing they will have the income they need to support their dreams.

FIRE

A lifestyle movement where people aggressively save and invest to achieve financial independence early, allowing them to retire decades before the traditional age of 65.

Full retirement age

Age when one may claim their full Social Security retirement benefit.

Funded Gap

You will have a funded gap when your income does not meet your expenses and the software models shortfall withdrawals to cover the gap.

Future value

The future value formula estimates what an investment will be worth at a point in the future.

Gap

The gap calculation we use to determine withdrawals is Income - Savings/Contributions - Expenses.

Geo-arbitrage

Relocating to take advantage of the lower costs of a city/country.

Gross pay

Total amount of money made before taxes and other deductions.

HSA

HSAs are health savings accounts that offer tax-free contributions, tax-free growth, and tax-free withdrawals when used for qualified medical expenses.

Inflation

A rise in the general level of prices of goods and services.

In-kind transfer

A method of transferring securities such as stocks, bonds or mutual fund shares directly to another account without selling.

IPS

Investment Policy Statement.

IRA

Individual retirement account that allows you to put money aside for when you retire; you set it up on your own using a bank or broker.

IRMAA

A Medicare surcharge incurred by individuals above a certain income limit.

LCOL and HCOL

Low cost of living, High cost of living area.

Lifetime debt

Lifetime debt is a concept we use in our planner when your total expenses for a year exceed your income and you've used up all your available savings. It represents the amount of debt you'd theoretically accumulate if you were living beyond your means. In other words, when we can't fund your expenses from your income or savings, we model this shortfall as debt in your plan. This helps you see potential financial gaps in your future and adjust your plan accordingly.

Long-term care

Services such as independent living, assisted living, and skilled nursing to meet the medical needs or daily activities for an individual who is older, disabled or chronically ill.

Lump sum pension

One option for receipt of a pension or other retirement benefit.

MAGI

MAGI (Modified Adjusted Gross Income) is your Adjusted Gross Income (AGI) with certain additions and subtractions used to determine eligibility for tax credits, deductions, and benefits (like ACA subsidies or IRA contributions).

Marginal income tax rate

The tax bracket into which the last dollar earned falls.

Medicaid

The US public health insurance program that offers health care coverage to low-income families and individuals who qualify.

Medicare

The US Federal health insurance program that offers health care coverage to people 65 or older, some younger people with disabilities, and other individuals who qualify.

Mega backdoor Roth

Method of utilizing an eligible Employer Plan to increase Roth savings.

Monte Carlo Simulations

Monte Carlo simulations use random sampling and probabilistic models to generate thousands (or millions) of possible future outcomes. Monte Carlo simulations help in decision-making by modeling uncertainty and risk, allowing you to evaluate thousands of possible future outcomes, helping you make informed choices based on probabilities rather than single estimates.

Mutual fund

A “basket” that holds a variety of funds, instead of a single stock or bond.

Net savings drawdown

Net Savings Drawdowns are withdrawals that reduce your account balances for a particular year. They occur when your income isn't enough to cover your expenses. Our Planner automatically creates these drawdowns to fund any gaps between your income and expenses.

One time expense

One-time expenses are a way to account for planned large expenses funded from a specific account on a specific date.

Passive Income

Money you earn in a way that requires little to no daily effort to maintain; examples include rental properties, royalties, investment returns, interest, etc.

Premium tax credits

Credits available for ACA participants who meet certain qualifications.

Present value

What an investor needs to invest today (i.e., in the present) to have a future value.

QBI

Qualified business Income deduction.

QCD

A tax deduction for charitable distributions available to individuals after age 70.5 and often used to mitigate the tax on RMDs.

Rollover

Method of transferring one retirement account to another. Often used to consolidate workplace accounts after retirement into a "rollover IRA."

Roth Conversion

Strategy for moving your money from a tax-deferred account, such as a 401(k), into a Roth IRA.

Roth conversion ladder

Strategy for moving your money from a tax-deferred account, such as a 401(k), into a Roth IRA with the intention of withdrawing the converted funds from the Roth IRA after five years.

Roth IRA

An individual retirement account that allows individuals to set aside a certain percentage of their income after taxes have been paid with no tax on investment returns if certain conditions are met.

RMD

Required minimum distributions. The annual amount the IRS requires individuals to withdraw from their qualified retirement plans after age 70.5 or later depending upon their birthdate.

Rule of 55

Method of accessing qualified plan funds prior to age 59.5. The Planner allows withdrawals prior to age 59.5, and does not apply a penalty.

Rule 72t (SEPP)

Method of accessing qualified plan funds prior to age 59.5. The Planner allows withdrawals prior to age 59.5, and does not apply a penalty.

Savings Rate

Percentage of gross income that an individual saves. To calculate your savings rate, divide your savings by your income.

Secure income

Income from sources such as Social Security, annuities and pensions that you will receive through your longevity age.

Shortfall (Boldin)

Any gap between the expenses you’ve entered in your plan and new income coming in from sources such as work, pensions, Social Security and RMDs.

Side hustle, side gig

Part time work

Social Security

US federal insurance program that provides benefits to retired people and those who are unemployed or disabled who qualify.

Social Security spousal benefit

Social Security benefit available to spouses. Under certain circumstances the spousal benefit will increase the lower earning spouse's benefit to 50% of the higher earning spouse's benefit.

Stocks

Type of investment that allows shareholders (investors) to own a small piece of a company.

Sudden wealth event

Unexpected receipt of a substantial amount of money or other assets. Windfall.

Survivor benefit

Social Security benefit available to survivors under certain conditions.

Step up basis

Increase in cost basis for certain inherited assets.

Traditional or pre-tax IRA

An individual retirement account that allows individuals to set aside a certain percentage of their income before taxes have been paid.

Trust An account created by a grantor for the benefit of another (beneficiary) and managed by a trustee. Commonly used as a tax strategy.

Turnover Rate Internal capital gains incurred by trading.

Unfunded Gap

You will have an unfunded gap when your income does not meet your expenses and insufficient savings to fund the gap.

IRS Form 1040(s) IRS tax return form for individuals.

IRS Form 1099 - Int IRS form that reports annual interest paid.

IRS Form 1099 - R IRS form that reports annual distributions from retirement plans.