Retirement Planning Terminology: 10 Terms You Need To Know

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Retirement planning is complicated, with many different terms to know. At the end of the day, it’s about more than just saving money. You also need to think about things such as insurance, individual retirement accounts (IRAs), estate planning, and more.

If you want to enjoy a comfortable retirement, there’s no better time than now to start studying up on the list of terms that you’ll come across as you begin planning for your golden years. With that in mind, here are 10 keywords you should familiarize yourself with as you begin developing your retirement plan.


1. Dollar-Cost Averaging

In an ideal world, you would be able to buy stocks and other assets when their prices are low and sell them when they’re high. But it’s pretty much impossible to time the market correctly for every trade, which is why some investors consider the concept of dollar-cost averaging and buy assets at specific intervals to which may mitigate the effects of volatility.

2. IRA

A traditional IRA enables you to invest pretax dollars to save for retirement. Taxes are due on IRA funds once they’re distributed during retirement. In 2023, most investors can put up to $6,500 away in their IRA, and up to $7,500 if they are at least 50 years old.

3. Roth IRA

A Roth IRA is funded with post-tax dollars. Using this type of account means you don’t have to pay any taxes when you withdraw funds during retirement.

4. 401(k)

A 401(k) plan is among the most common types of retirement accounts. Many employers offer 401(k) plans as part of their benefits portfolio, often matching their employees’ contributions to a certain extent. In 2023, professionals can put up to $22,500 into their 401(k) plan, and individuals over the age of 50 can contribute up to $30,000.

5. Rate of Return

The rate of return refers to how your investment has performed over a certain period of time. If you put in $100 on Jan. 1, for example, and have $200 the following Jan. 1, that’s a 100 percent rate of return. If that $100 turns into $80 after a year, that’s a minus 20 percent rate of return.

6. Beneficiaries

Beneficiaries are the people or entities earmarked to benefit from things such as life insurance policies, wills, and trusts after your death.

7. Revocable Trust

A revocable trust is a trust that can be changed or canceled by the person who creates it. While the creator is alive, income can be distributed to beneficiaries. Once the owner of the trust dies, the property and assets are transferred to the beneficiaries.

8. Social Security Optimization

Did you know that you can decide whether to take Social Security early at a discount, at a “normal” retirement age, or even later to increase your payout? By developing a robust retirement plan, you can optimize your approach to Social Security.

9. Insurance Analysis

How much risk can you assume out of your own pocket? And how much risk should an insurance company carry on your behalf? By conducting an insurance analysis, you can figure out the answers to these questions.

10. Monte Carlo Analysis

A Monte Carlo analysis is a tool you can use to simulate your financial situation, outline your goals, and figure out the probability that the plan you’ve put together will help you get there. This can give you a better understanding of how much risk you can assume.


Ready to Take the Next Step in Retirement Planning?

Suffice it to say that retirement planning is a complicated, arduous process. But you don’t have to go it on your own.

By partnering with a financial advisor who has helped a variety of people, you can leverage the experience of someone who knows these 10 terms inside and out and can work with you to develop a plan that supports your goals.

For more information on how a financial advisor can help you work toward your goals, schedule a consultation with EP Wealth today. You can also check out our free guide, The Retirement Planning Guide for People Who Don’t Want to Work Forever.



EP Wealth Advisors, LLC (“EP Wealth”) makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information presented herein.

Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions. Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice. Please consult a professional before implementing any of the approaches or strategies made referenced directly or indirectly in this communication.

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