1035 exchange – a tax-free exchange of funds from an existing life insurance policy to a new one, from an existing annuity to a new one, or from an existing life insurance policy to a new annuity

401k – an employer-sponsored retirement account that allows employees to contribute a percentage of their paycheck into the account, often have a portion of the contribution matched by the employer, and usually be able to deduct the contribution from their taxable income; the amount grows tax-deferred until it’s withdrawn

403b – basically the same type of account as a 401k, except it’s offered by employers that are tax-exempt organizations

Accumulation Period – the financial period of your life where you’re working and contributing towards retirement savings, rather than drawing income from them (decumulation period)

Activities of Daily Living (ADLs) – the 5 or 6 activities (eating, dressing, bathing, toileting, transferring, and continence) you perform daily that are used as criteria to determine your need for custodial, or long-term, care; you are said to qualify for custodial care if you can’t perform 2 of the 5 or 6 ADLs

Adjusted Gross Income (AGI) – your total amount of taxable income minus certain specified deductions and exemptions

Annual Indexed Monthly Earnings (AIME) – the amount used to calculate your Primary Insurance Amount (PIA), in regards to your Social Security income; AIME can be calculated by indexing (increasing) each year’s earnings prior to age 60, totaling up your top 35 years, and dividing by 420 (rounding down to the nearest dollar)

Annuitization – the (typically) irreversible process of converting an annuity’s account value into an income stream to be paid out over a specified period of time, usually for the rest of the annuitant's life and possibly their spouse's life too

Annuity – an insurance product that can be funded with after-tax dollars, or with tax-deferred or tax-free dollars by using various retirement account funds; an annuity can be used for accumulation (grow your funds tax-deferred), annuitization (convert funds into an income stream), or both, while providing certain financial guarantees

Asset allocation – the proportion in which your total investment assets are divided among major asset classes like stocks, bonds, cash, REITs, commodities, etc.; major asset classes can be further sub-divided to give more detail (e.g. stocks divided into large cap, small cap, and international)

Asset location – where and in what proportion your investment assets are located within your various different tax-type accounts such as taxable, tax-deferred, and tax-free.

Assignment – when doctors or other health care providers agree to accept Medicare-approved amounts as payment for the treatments, tests, and other services they perform

Basis – also known as tax basis; the amount determined as the purchase price of a certain quantity of securities used to calculating the gain (or loss) of those securities at either the current price or selling price

Bend points – the numbers used in the formula to calculate your PIA using your AIME; the bend points used are determined by the year in which you turn 62, or die or become disabled prior to 62; they are the dollar values in the PIA formula where the percentage of the AIME used to add up to the total PIA changes from 90% to 32% to 15%

Beneficiary – can either refer to someone being the recipient of the benefits of Medicare or Social Security, or can refer to someone who is selected to receive all or a portion of a retirement account or life insurance policy once the owner/insured dies

Benefit period – the length of time used by Medicare Part A when determining your coverage under the Part A deductible; the Part A benefit period starts the day you’re admitted to the hospital as an inpatient and ends when you have not had any inpatient care for at least 60 days in a row

Best interest – a term used in the Department of Labor's "Fiduciary" Rule which requires that any investment advice given to a holder of a retirement account be in the client's best interest and does not include any payments which create a conflict of interest. There is a specific exemption provided under the Rule which permit disclosed payments to be made under a "Best Interest of Client" Exemption agreement.

Broker-Dealer - an investment firm that provides financial services to clients usually on a commission-based structure; representatives of the firm must meet a standard of "suitability" to the client when considering what investments they recommend

Co-insurance – your share of a payment made together with an insurance company for a claim covered under your policy; this is typically given as a percentage and usually applies once you’ve already met your deductible

Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) – the cost of a basket of goods and services consumed by working people in a metropolitan area; this index is the basis that the Social Security Administration uses to determine the annual cost-of-living adjustment for Social Security benefits

Copay – the amount due for your share of a service covered under your insurance policy typically owed at the time of, or upfront to, the service being provided

Cost-Of-Living Adjustment (COLA) – the annual percentage amount of an increase in Social Security benefits based on any year-over-year increase in the CPI-W

Custodial care – also known as long-term care and is generally defined as care provided by a non-medically trained person to assist you with your activities of daily living (ADLs) whether at your residence or in a long-term care facility

Death benefit – the amount payable to the beneficiary of a life insurance policy or certain annuities; also known as the face amount on life insurance policies

Decumulation Period – the financial period of your life where you’re drawing income from retirement savings

Deductible – the payment amount you have to meet by paying all or a portion of a claim, or claims, covered by your insurance policy before the insurance company will begin to share at all in the payment

Donut Hole – also known as the Coverage Gap; this refers to the phase in Part D coverage where the insured is responsible for 45% of the cost of brand name prescriptions and 58% of the cost of generic prescriptions (in 2016); this is generally the phase of Part D coverage where your costs increase, sometimes substantially

Exchange Traded Fund (ETF) – a security traded in the secondary market whose price is based on a group of underlying securities; this group of securities could be a specific stock or bond index, or a certain basket of securities

Exclusion ratio – the percentage used to determine the amount of each periodic annuity payment that is considered return of premium, rather than a taxable gain, and therefore not taxed

Face amount – the amount payable to the beneficiary of a life insurance policy; also known as the death benefit

Full retirement age (FRA) – the age at which Social Security beneficiaries are entitled to 100% of their primary insurance amount (PIA); claiming at this age or later entitles the beneficiary to choose whether to claim their own benefit or a spousal benefit only; also, any amount collected at this age or later is not subject to the earnings limit, which would otherwise require you to give back a portion of your Social Security if your earned income exceeded certain amounts

General account – the account of an insurance company that life insurance and fixed annuity premiums are deposited into; it is the insurance company’s responsibility to invest monies in this account to achieve necessary gains to pay their obligations

Guaranteed Lifetime Withdrawal Benefit (GLWB) – this is the amount of each annual payment guaranteed to be paid over the lifetime of an annuitant for either a single or joint covered life; this feature is added to an annuity by purchasing a rider, often for an additional annual fee

Health Savings Account (HSA) – an account that is funded by the insured with dollars that are tax-deductible in the year they’re contributed, can be invested and grow tax-deferred, and are withdrawn tax-free when used toward qualifying medical expenses for high-deductible health insurance plans

Health Maintenance Organization (HMO) – a type of managed health care plan provided by a group of doctors and hospitals that typically requires insureds to get referrals from a primary doctor before they can see a specialist; also this plan does not cover health care services provided by a non-network health care provider except in the case of urgent care or an emergency

HMO-POS – basically the same as an HMO but offers some coverage out-of-network for certain basic services

Human capital – the total amount of any future earned income considered as an asset when looked at in the context of retirement income planning

Income Related Monthly Adjustment Amount (IRMAA) – the additional amount a Medicare beneficiary has to pay separately for both Part B and Part D because their Modified Adjusted Gross Income (MAGI) is above $85,000 for an individual or $170,000 for a joint household; the income amounts considered in determining the IRMAA are based on the last tax return filed with the IRS when the current calendar year started (e.g. MAGI in 2014 determines IRMAA for 2016)

Investment Advisor Representative (IAR) – a financial advisor who is a representative of a regulated investment advisor firm and has a fiduciary responsibility to their clients to do what is in the client’s best interest; a Series 65 license or one of five specified credentials, is necessary to hold this license

Individual Retirement Arrangement (IRA) – sometimes referred to as an Individual Retirement Account; an account funded by tax-deductible contributions that holds investments of various asset classes whose gains grow tax-deferred, but are taxed as ordinary income upon withdrawal; however, sometimes not all of the original funds were tax-deductible going in, and thus were after-tax contributions; in this case, a portion of each withdrawal will not be taxed

Last-In-First-Out (LIFO) – refers to the tax treatment of non-qualified annuities where any amount withdrawn from an annuity with an account value higher than the original premium will be considered taxable gains first, then original premium once all gains are withdrawn; any gains are taxed as ordinary income

Late Enrollment Penalty (LEP) – the Part D penalty charged to Medicare beneficiaries who did not have creditable prescription coverage for a period more than 63 days any time after they first became Medicare eligible; the LEP is calculated by multiplying 1% of the “national base beneficiary premium” ($34.10 in 2016) by the number of months you didn’t have creditable coverage, although you only have to pay this penalty whenever you have Part D coverage in the future

Lifetime reserve days – a total of 60 days that a Medicare Part A beneficiary can use over their lifetime; these days start once a benefit period of an inpatient hospital stay lasts for 90 days; in 2016, the patient’s coinsurance responsibility is $644 per day

Longevity risk – this is the risk of outliving your financial assets in retirement

Long-term capital gains – a tax rate that applies to qualifying securities and other types of property that are held for a minimum of 12 months and sold for a gain; these sales are given favorable tax treatment when compared to short-term capital gains

MA – Medicare Advantage plan, typically without Part D prescription coverage

MAPD – Medicare Advantage plan including Part D prescription coverage

Market risk – in the retirement context, the potential risk of depleting retirement assets due to a downturn in financial markets

Maximum-Out-Of-Pocket (MOOP) – the yearly limit of the total amount of medical expenses the insured is responsible for in deductibles, copays, and coinsurance; monthly premiums are not included towards this amount, and neither are prescription out-of-pocket expenses for MAPDs

Mortality, Expense, and Administration (ME&A) fees – these fees are charged as part of insurance contracts like life insurance and annuities; they are the insurance company’s expenses for providing the basic insurance features of these types of contracts as well as the company’s overhead costs

Medicare beneficiary – the person eligible for and receiving Medicare benefits

Modified Adjusted Gross Income (MAGI) – Adjusted Gross Income plus certain other adjustments added back into it like non-taxable Social Security income and tax-exempt municipal bond interest

Multi-Year Guaranteed Annuity (MYGA) – a fixed annuity that gives a guaranteed rate-of-return over the contract period

Old Age, Survivor, and Disability Insurance (OASDI) – the official name for Social Security benefits

Participation rate – the allowable amount of the percentage increase of an index (e.g. S&P 500) over a period of time known as an indexed annuity’s crediting term (e.g. 1 year) which is calculated from policy anniversary date to anniversary date; this allowable amount is typically less than 100% of the index’s percentage gains, which are then credited to the indexed annuity’s account value

Pension maximization – the strategy of a recent retiree choosing among several pension annuity options at retirement where they can take a larger monthly income with little to no survivorship benefit for the spouse and use the extra income to buy a life insurance policy, or take a smaller monthly income with a generous survivorship benefit for the spouse

Primary Insurance Amount (PIA) – the monthly Social Security income amount each beneficiary is entitled to which is based on their own work record; a Social Security beneficiary is entitled to 100% of their PIA at their full retirement age; claiming of Social Security either before or after this age results in either a lower or higher monthly benefit calculated from the PIA, respectively

Preferred Providers Organization (PPO) – a type of managed health care plan provided by a network of doctors and hospitals; these plans give the insured the freedom to go out-of-network to receive health care services, but pay higher cost-sharing in order to do so

Premium – the monthly amount due from the insured in order to keep an insurance policy in force, whether or not it’s used to file claims

Primary Care Physician (PCP) – the main doctor that a person sees who coordinates their ongoing checkups and treatment; the PCP is usually not a specialist, and some health plans like HMOs require a referral from a patient’s PCP before he or she can see a specialist

Provisional income – the income amount calculated and used in determining the percentage of Social Security income that is taxable in a given year

Required Minimum Distribution (RMD) – the minimum withdrawal amount from an IRA required to begin the year in which a person reaches the age of 70.5; the amount required is based on the person’s age and account balance; the penalty for not taking this withdrawal is 50% of the RMD amount due; there are RMDs on inherited IRAs too, which are calculated slightly differently

Risk tolerance – the willingness of investors to tolerate losses in their portfolio in order to achieve potential gains

Roth conversion – the transfer of money from a traditional IRA to a Roth IRA; this amount is considered taxable income in the year of the conversion

Securities – various classes of debt or ownership investments that may be traded in financial markets

Short-term capital gains - applies to tax which qualifying securities or other property that are held for less than 12 months and sold for a gain; these sales are not given favorable tax treatment like long-term capital gains are

Skilled Nursing Facility (SNF) – an inpatient facility that provides medically necessary care, and not (just) custodial care; also known as inpatient rehab, or a post-hospital stay

Single Premium Immediate Annuity (SPIA) – a type of annuity whose initial premium is turned into an income stream within 12 months of the time the contract is issued; the income stream can be over a certain time frame or an indefinite time frame such as the life of the annuitant or joint lives of the annuitant and spouse; it may or may not include any refund provisions

Spread – the amount subtracted from the percentage increase of an index (e.g. S&P 500) over the period of time known as an indexed annuity’s crediting term (e.g. 1 year) which is calculated from policy anniversary date to anniversary date; the spread reduces the amount credited to the indexed annuity’s account value, and is generally no larger than the index annuity’s percentage gains, meaning a spread cannot cause an index annuity’s return to be negative in a given term

Strategic asset allocation – typically a longer-term “buy and hold” investing strategy employed by financial advisors at broker/dealer firms

Sub-accounts – the investments inside a variable annuity’s separate account that are similar to mutual funds and represent a basket of securities; the VA owner bears the risk of loss

Suitability - a standard applied to recommended investments by a registered representative of a broker-dealer; it requires that the rep determine that, given the client's financial status, and his or her investment goals and objectives the recommended purchase or sale be "suitable" or appropriate for the client.

Surrender charge – the amount of fees, or penalty, charged to insureds when they surrender a life insurance policy or annuity during the surrender period, or make a withdrawal larger than the allowable amount in the surrender period

Surrender period – the number of years in a life insurance or annuity contract where there is a penalty for surrendering the policy entirely or for making a withdrawal larger than the allowed penalty-free amount

Taxable account – the type of investment account funded with after tax money; can be otherwise known as a non-qualified account

Tax-advantaged – a broad scope of investment accounts that involve some type of tax benefit such as being funded with tax-deductible funds, growing funds tax-deferred, or withdrawing funds tax-free

Tax-deferred – the type of investment account that is funded with dollars which are tax-deductible to the investor in that calendar year of contribution; taxes will be paid when the monies are withdrawn

Tax-free – the type of investment account where both the initial contributions and gains can be withdrawn tax-free, with certain restrictions

Time horizon – the length of time determined by investors when making an investment of when they will need to start withdrawing some or all of the funds

Underwriting – the investigative process an insurance company performs on insurance applicants, usually involving looking into health history, to determine whether they can qualify and be approved for the insurance policy, any increases in premiums they will pay, or whether there will be any restrictions on their policy due to such findings

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