Glossary
Plain-English definitions of the terms used in the planner and this manual.
- Adjusted gross income (AGI)
- Total income minus certain adjustments (Form 1040 line 11a). In the planner it equals total income. See taxes.
- Asset class
- A group of similar investments - domestic stocks, international stocks, bonds, municipal bonds, gold, cash. Every investment needs one. See asset classes.
- Auto
- The planner's standard way to pay a bill: from Savings, then Brokerage, IRA, 401(k) and finally Roth. See withdrawals and Auto.
- Cash account
- The account that receives Social Security and RMDs: the first Savings account with an investment, else the first Checking, else the first Brokerage.
- Capital gain or loss
- The difference between what an investment sold for and what it cost (its basis). Long-term gains are taxed at 0%, 15% or 20%.
- COLA (cost-of-living adjustment)
- The yearly increase in Social Security benefits. The planner uses the general inflation rate.
- Cost basis
- What you paid for an investment, plus reinvested dividends. Only the amount above the basis is a taxable gain when you sell.
- Down and flat market
- A market scenario that replays real 2000-2026 history starting at the worst point for your holdings. See normal and down markets.
- Effective tax rate
- Total tax divided by income - the average rate you pay.
- Filing status
- Single or married filing jointly. One tax payer files single, two file jointly; a surviving spouse files single from the year after the first death.
- Full retirement age (FRA)
- The age at which you get your full Social Security benefit: 67 if born in 1960 or later, between 66 and 67 for earlier births (the planner uses 66).
- Growth
- The change in an investment's price, in percent per year. Taxed only as a capital gain when sold from a taxable account.
- IRMAA
- Income-Related Monthly Adjustment Amount: extra Medicare Part B and Part D premiums for higher incomes, based on MAGI from two years earlier. See Medicare and IRMAA.
- Life expectancy
- The age you plan to live to. Year of birth plus life expectancy is the last year of that tax payer's income and benefits (
YODTP1/YODTP2). - MAGI (modified adjusted gross income)
- For Medicare IRMAA, AGI plus tax-exempt interest. Shown in the clarity box 11a.1.
- Marginal tax rate
- The tax rate on your next dollar of income - the rate that matters for decisions about extra income such as a Roth conversion.
- Milestone (year code)
- A start or end year tied to an event, such as
YORTP1(tax payer 1's retirement). See plan milestones. - Mix
- How new money paid into an account is split between its investments. Must total 100% per account.
- Municipal (muni) bonds
- Bonds from state and local governments. Their interest is free of federal income tax but counts for the Social Security worksheet and IRMAA.
- The total of all your accounts at the end of a year.
- Normal market
- A market scenario where every investment earns its own growth and yield, or its asset class's long-run average, every year.
- Optimizer
- Runs the plan for every combination of retirement ages, claim ages, Roth buckets and markets, and picks the best down-market result. See optimizer.
- Plan horizon
- The number of years from now to the end of the plan (the last life expectancy year).
- Qualified dividends
- Most stock dividends; taxed at the lower capital gain rates (line 3a).
- Required minimum distribution (RMD)
- The amount you must withdraw each year from IRAs and 401(k)s from age 72, 73 or 75. See RMDs.
- Roth bucket
- A tax bracket the planner fills with Roth conversions each year. See Roth buckets.
- Roth conversion
- Moving money from a traditional IRA or 401(k) to a Roth account. It is taxed now, then grows and is withdrawn tax free.
- SECURE 2.0 Act
- The 2022 law that set the current RMD start ages (73, rising to 75 for people born in 1960 or later).
- Senior deduction
- An extra $6,000 deduction per person 65 or older for 2025-2028, phased out at higher incomes (line 13b). See taxes.
- Sequence of returns risk
- The danger that bad market years early in retirement, while you are withdrawing, do lasting damage even if the market later recovers.
- Social Security adjustment factor
- The share of your estimated benefit you expect to be paid (85% to start, planning for a possible 15% cut).
- Social Security benefits worksheet
- The IRS worksheet that works out how much of your benefits is taxable (0% to 85%). See Social Security.
- Standard deduction
- A fixed amount of income that is not taxed: $16,100 single and $32,200 married in 2026, plus an extra amount for each person 65 or older.
- Stitching
- Repeating the 27-year market history so it covers plans of up to 75 years, with every asset class repeating in step.
- Taxable income
- AGI minus deductions (line 15) - the amount the tax brackets apply to.
- Today's dollars
- Amounts at today's prices. You enter amounts in today's dollars; the planner inflates them each year.
- Total return
- Growth plus yield - everything an investment earned in a year.
- Trustee
- The owner of an account: a tax payer or Joint.
- Uniform Lifetime Table
- The IRS table of divisors used to calculate RMDs, in the planner's RMD Table.
- Yield
- The income an investment pays - dividends or interest - in percent per year. In a taxable account it is taxed every year.