Glossary & keyword index

The SECURE Act requirement that most non-spouse heirs empty an inherited IRA within 10 years.

A rule of thumb for a sustainable initial withdrawal rate; Bengen's updated 'Universal SAFEMAX' is 4.7%.

Employer-sponsored, tax-advantaged retirement plans funded by payroll deferrals; the 403(b), 457(b), and federal TSP are close cousins of the 401(k).

An income-based subsidy that lowers the monthly premium for a health plan bought on the ACA marketplace — the key tool for affordable pre-Medicare coverage in early retirement.

Legal documents — a living will and a health-care proxy — that state your medical wishes and name who decides for you if you can't communicate.

The amount ($19,000/recipient in 2026) you can gift yearly without touching your lifetime exemption.

An insurance contract that converts a lump sum into guaranteed income for life; a SPIA starts immediately, a QLAC starts later and defers RMDs.

Placing tax-inefficient assets (bonds, REITs, high-turnover funds) in sheltered accounts and tax-efficient ones (index funds, growth stock, munis) in taxable accounts. Distinct from asset allocation, which sets your risk; location only changes the tax bill, and is worth roughly 10–50 basis points a year.

Semi-retirement: the portfolio covers part of your spending (you do withdraw) while part-time work covers the rest, often for the health benefits. Contrast Coast FIRE, where you neither contribute nor withdraw.

Funding a Roth despite income limits by contributing to a non-deductible IRA and converting it.

The pattern of holding appreciated assets, borrowing against them to fund spending, and letting them pass at death, where the step-up in basis erases the unrealized gain. Loan proceeds are never income, so the gain is never taxed to anyone.

The balance that, left entirely untouched, compounds to your full retirement target by a normal retirement age — so you can stop contributing and work only enough to cover current expenses. You neither add to nor withdraw from the pot.

Profit on an investment, taxed only when sold; long-term gains (held 1+ year) get preferential 0/15/20% rates.

A community — also called a Life Plan Community — that bundles independent living, assisted living, and nursing on one campus for an entrance fee plus a monthly fee; contract types A–D set who bears future care costs.

The right to keep your former employer's health plan for up to 18 months after leaving — comprehensive but usually expensive, since you pay the full unsubsidized premium.

The annual Social Security cost-of-living adjustment (2.8% for 2026), tied to CPI-W.

Spreading Roth conversions across several low-tax years to smooth the rate and stay under thresholds.

Inflation indices for all urban consumers, urban wage earners (used for COLA), and the elderly, respectively.

Total debt divided by total assets. Anderson's Value of Debt framework argues for a deliberate 15–35% band near and in retirement; the safer reading measures the ratio against liquid assets only.

An employer plan that pays a formula-based income for life; the employer bears the investment and longevity risk.

The ~8%/year benefit increase for claiming Social Security after FRA, up to age 70.

A loan the lender may call in full at any time, for any reason. Most securities-backed lines and margin loans are demand loans — which is why they can fail exactly when they are needed most.

Your legal permanent home — the state that gets to tax your retirement income. Changing it (not merely owning a second place) is what escapes a former state’s tax.

A document authorizing someone to act for you — over your finances (durable financial POA) or your medical care (health-care proxy) — with authority that survives your incapacity.

The rule that temporarily withholds Social Security benefits if you work while collecting before full retirement age ($1 per $2 over $24,480 in 2026); it vanishes at FRA, and withheld benefits are restored through a higher check.

Money your employer adds to your 401(k) based on your own contributions — an immediate, guaranteed return you should always capture in full.

Low-rate, collateralized, optional borrowing you could repay tomorrow because you hold several times the balance in liquid assets. Contrast oppressive debt, which must be eliminated first.

The extra long-run return stocks deliver over bonds for bearing their volatility.

The amount ($15M/person in 2026) you can transfer free of federal estate tax.

The formula that makes part of each non-qualified annuity payment a tax-free return of principal and part taxable earnings.

Financial Independence, Retire Early — a movement built on saving 50%+ of take-home pay and retiring on ~25× annual expenses. Its durable insight is that time-to-independence depends on your savings rate, not your income. Lean/Fat/Coast/Barista FIRE are community-coined variants with no authoritative definition.

Informal labels for the size of the target: Lean FIRE funds a deliberately frugal life (often under $40,000/yr), Fat FIRE a full one (often $100,000+/yr).

The IRS form that tracks non-deductible (after-tax) IRA basis so it isn't taxed again later.

The appeal to have Medicare use current (lower) income after a life-changing event.

A credit recovering the tax foreign countries withhold on dividends paid to US investors (typically 7–8% of the dividend on a broad developed-markets fund). It works only in a taxable account — inside an IRA or 401(k) there is no US tax to credit it against, so the withholding is a permanent leak. A mild argument for holding international equity in taxable.

The age (67 for those born 1960+) at which you receive your full, unreduced benefit.

Spending rules (e.g., Guyton-Klinger) that adjust withdrawals up or down to protect the portfolio.

High-Deductible Health Plan — required coverage to contribute to an HSA.

The person you name — via a durable power of attorney for health care — to make medical decisions for you if you can't; also called a health-care agent or surrogate.

The ~5–6% annual rise in medical costs that outpaces general inflation over a retirement.

Home Equity Conversion Mortgage — the FHA-insured reverse mortgage for homeowners 62+; non-recourse, with a lump-sum, line-of-credit, term, or lifetime tenure payout.

Health Savings Account — the only triple-tax-advantaged account: pre-tax in, tax-free growth, tax-free medical withdrawals (federally; California and New Jersey don't conform and tax contributions and growth).

Inflation-indexed U.S. savings bonds ($10,000/person/year) whose rate resets with inflation every six months.

A Japanese concept — roughly "a reason to get up in the morning" — a sense of purpose linked in research to lower mortality and healthier aging.

A stripped-down deferred variable annuity with no income or death-benefit riders, used purely as an uncapped tax-deferral wrapper (Fidelity's charges 0.25%, or 0.10% at $1M+). No RMDs and no forced annuitization, but all gains come out as ordinary income with no step-up — so it suits bonds, not stocks.

Inherited pre-tax account dollars that are taxed as ordinary income to the heir, with no step-up.

Income-Related Monthly Adjustment Amount — an income-based surcharge on Medicare Part B and D premiums.

Ongoing help with the everyday activities of living (bathing, dressing, meals, mobility); about 70% of 65-year-olds will need some, and Medicare does not cover the custodial kind. Costs and funding are in Chapter 10; where it happens (housing settings, CCRCs) is in Chapter 31.

The risk of outliving your money — the master risk that magnifies inflation, healthcare, and sequence risk.

Modified Adjusted Gross Income — AGI plus tax-exempt interest; the figure that drives IRMAA and many phase-outs.

A lender's demand that you post more collateral or repay part of a securities-backed loan after the pledged portfolio falls in value — typically within two or three days, after which the firm may sell your securities without further notice.

Using after-tax 401(k) contributions (up to the $72,000 combined limit) converted to Roth, if the plan allows.

Bonds issued by states and municipalities whose interest is exempt from federal tax (and often state tax for residents). They yield less because of the exemption, so they belong only in a taxable account — held in an IRA you accept the low yield and still pay ordinary income on withdrawal.

High-rate borrowing — credit cards, payday and title loans, high-rate auto and personal loans — whose balance compounds faster than any return you can reliably earn. It is eliminated first, before any other strategy applies.

Pension Benefit Guaranty Corporation — the federal insurer that backstops private defined-benefit pensions up to an annual cap (~$93,477 at 65 in 2026).

Your Social Security benefit at full retirement age, computed from your 35 highest earning years.

A revolving line of credit secured by a taxable brokerage account. Priced at a floating benchmark plus a spread — roughly 6–8% APR in 2026 — with advance rates around 50–65% on equities and higher on bonds and Treasuries. Retirement accounts cannot be pledged.

A surviving spouse's ability to use a deceased spouse's unused estate-tax exemption.

The ACA subsidy that caps a marketplace plan's cost as a percentage of your income; larger at lower MAGI, which makes managing income in early retirement especially valuable.

The rule that taxes a conversion across all your pre-tax and after-tax IRA money proportionally — the main backdoor-Roth trap.

Qualified Charitable Distribution — a tax-free gift from an IRA (70½+) that counts toward your RMD.

Qualified Longevity Annuity Contract — a deferred annuity that hedges a long life and lowers RMDs.

A loan that converts home equity into cash for owners 62+ with no monthly payments; the balance grows and is repaid when you sell, move out, or die.

Required Minimum Distribution — the mandatory taxable withdrawal from pre-tax accounts, starting at age 73.

The Roth option inside a workplace plan — no income limit, and (since 2024) no required distributions.

The total of your own direct Roth IRA contributions; because it was already taxed, it comes out first under the ordering rules — at any age, tax- and penalty-free — ahead of conversions and earnings.

Moving pre-tax IRA/401(k) money to Roth and paying tax now for tax-free growth later.

Converting a slice of a pre-tax account to Roth each year so that, after each conversion's own 5-year clock, the converted principal can be withdrawn penalty-free before 59½ — the main way to fund an early retirement from pre-tax money.

An account funded with after-tax dollars that grows and is withdrawn tax-free, with no lifetime required distributions.

Penalty-free access to your current employer's 401(k) if you leave the job at age 55 or later.

Substantially Equal Periodic Payments — penalty-free retirement-account withdrawals before 59½.

The highest historical withdrawal rate that survived the worst retirement sequence in the data.

The generic name for a pledged asset line. Lets you raise cash without selling — so no capital gain, no addition to AGI, and no IRMAA exposure — at the cost of a variable rate and the lender's right to call the loan.

A 20% deduction that applies to qualified REIT dividends (among other income), unconstrained by the wage and property tests that limit business owners. The One Big Beautiful Bill Act made it permanent from 2025, dropping a top-bracket investor's rate on REIT dividends from 37% to 29.6% — but only in a taxable account.

A temporary $6,000-per-person (65+) OBBBA deduction for tax years 2025–2028.

Simplified Employee Pension — an employer-funded IRA for the self-employed, allowing up to 25% of compensation (about 20% of net self-employment income), capped at $72,000 in 2026.

The danger that poor returns early in retirement do permanent damage while you're withdrawing.

Savings Incentive Match Plan for Employees — a small-business IRA (≤100 employees) with employee deferrals up to $17,000 in 2026 plus a required employer match or 2% contribution.

Units earned by working (up to four per year); 40 credits (~10 years) qualify you for retirement benefits.

A one-participant 401(k) for a self-employed person with no employees (a spouse aside); you contribute as both employee and employer, up to $72,000 in 2026 — more than a SEP allows at the same income.

Single-Premium Immediate Annuity — pay a lump sum, receive guaranteed lifetime income starting right away.

A benefit of up to 50% of the higher earner's PIA, which tops up a lower-earning spouse.

A rule letting a low- or non-earning spouse fund a full IRA using the working spouse's income, when filing jointly.

The reset of an asset's cost basis to date-of-death value, erasing a lifetime of capital-gains tax for heirs.

A larger 401(k) catch-up ($11,250 in 2026) for savers ages 60–63 under SECURE 2.0.

What a surviving spouse keeps — up to 100% of the deceased's benefit, including delayed-retirement credits.

The spike in effective tax rate caused when extra income makes more of your Social Security taxable.

Morningstar's measure of how many percentage points of a fund's annual return are lost to taxes in a taxable account. Roughly 0.05% for muni funds and 0.7% for equity ETFs, versus 1.6% for core bond funds and 3.3% for high-yield — the spread that makes asset location worth doing.

What a taxable bond would have to yield to match a tax-free muni: muni yield ÷ (1 − your marginal rate). A 4% muni is worth 5.26% to someone in the 24% bracket.

A reverse-mortgage option paying a fixed monthly amount for as long as you live in the home — the annuity-like way to draw home equity.

Treasury Inflation-Protected Securities — marketable Treasuries whose principal rises with the CPI.

An individual retirement account you open yourself; contributions may be tax-deductible depending on income and workplace-plan coverage.

U.S. government bills, notes, and bonds; interest is exempt from state and local tax.

A person you name on a brokerage account whom the firm may contact — and for whom it can briefly hold suspicious withdrawals — if it suspects fraud or that you've lost capacity; they can't trade or control the account.

Operating-business income that makes a tax-advantaged account itself owe tax. An IRA holding MLPs past $1,000 of UBTI must file Form 990-T and pay from IRA assets, at compressed trust rates — a tax bill with no withdrawal. Hold MLPs in taxable instead.

The IRS table of factors used to compute each year's RMD.

The schedule over which employer contributions become fully yours; leaving before you vest can forfeit that money.

Buying a substantially identical security within 30 days either side of selling it at a loss, which disallows the loss. The trap: under Rev. Rul. 2008-5, repurchasing in your IRA or Roth IRA forfeits the loss permanently — unlike a normal wash sale, no basis adjustment gives it back.

The order you draw from taxable, tax-deferred, and Roth accounts to minimize lifetime tax.