Every term, defined once, in plain English.
The same controlled vocabulary used across every article and tool on this site — so a term always means exactly one thing here.
Financial Independence
- FI number
- The rough portfolio size at which your savings could support your spending — estimated as (annual spending − guaranteed income) ÷ a safe withdrawal rate. A planning benchmark, not a guarantee.
- Safe withdrawal rate (SWR)
- The percentage of a portfolio withdrawn in year one of retirement (then adjusted for inflation) that research suggests has historically lasted ~30 years. Classic studies used 4%; recent research often frames ~3.9%. An assumption, not a promise.
- Compound growth
- Growth earned on both your original money and its prior growth. Time matters more than amount — which is why starting early is so powerful.
- Rule of 72
- A quick mental shortcut: divide 72 by an annual growth rate to estimate the years for money to double. 72 ÷ 8% ≈ 9 years.
- Emergency fund
- Cash set aside (commonly 3–6 months of expenses) so a job loss, health event, or repair doesn't become debt.
- Savings rate
- The share of income you save each month. The single most controllable lever in building wealth.
Retirement & 401(k) Planning
- 401(k)
- An employer-sponsored retirement account funded by payroll deferrals, often with an employer match. Pre-tax (traditional) or after-tax (Roth) versions exist; 403(b) is the nonprofit cousin.
- Employer match
- Money your employer adds to your 401(k) when you contribute — e.g., '100% of the first 3%'. Not capturing the full match leaves part of your compensation unclaimed.
- Vesting
- The schedule on which employer contributions become permanently yours. Your own contributions are always 100% yours.
- IRA (Individual Retirement Account)
- A retirement account you open yourself, independent of any employer — traditional (pre-tax) or Roth (after-tax).
- Rollover
- Moving retirement money between accounts (e.g., an old 401(k) into an IRA) without taking a taxable distribution — when done correctly.
- Target-date fund
- A single fund that automatically shifts from growth-oriented to conservative as a chosen retirement year approaches. A common 401(k) default.
- Auto-escalation
- A plan feature that automatically raises your contribution rate each year — research shows these 'nudges' meaningfully increase savings.
Tax-Advantaged Retirement Income
- Roth (IRA / 401(k))
- Accounts funded with after-tax dollars: no deduction today, but qualified withdrawals — including growth — are tax-free under current law.
- Traditional (pre-tax)
- Accounts funded with pre-tax dollars: a tax break today, with withdrawals taxed as ordinary income later.
- HSA (Health Savings Account)
- For people with qualifying high-deductible health plans: contributions are deductible, growth is tax-free, and qualified medical withdrawals are tax-free — the only 'triple advantage' account in the U.S. code.
- RMD (Required Minimum Distribution)
- The minimum amount the IRS requires you to withdraw from most pre-tax retirement accounts after a certain age.
- Roth conversion
- Moving pre-tax retirement money into a Roth account and paying tax now in exchange for potentially tax-free growth later. Timing and bracket math matter — a tax-professional conversation.
- Tax diversification
- Holding savings across differently-taxed buckets (taxable, tax-deferred, tax-free) so you have flexibility over which to draw from each year in retirement.
- Policy loan
- A loan taken against a permanent life insurance policy's cash value. Potentially tax-advantaged under current law, but loans reduce cash value and death benefit, and a lapsed policy with loans can trigger taxes.
- IRMAA
- Income-Related Monthly Adjustment Amount — higher Medicare premiums triggered when retirement income crosses certain thresholds.
Life Insurance & Living Benefits
- Term life insurance
- Coverage for a fixed period (e.g., 20 years) — the most affordable way to buy a large death benefit. Like renting protection: nothing back if the term ends.
- Permanent life insurance
- Lifelong coverage (whole life, universal life, IUL) that builds cash value. Costs more than term; the trade-offs deserve plain-English comparison.
- Whole life insurance
- Permanent coverage with guaranteed premiums and guaranteed cash-value growth — guarantees backed by the issuing insurer's claims-paying ability.
- Indexed universal life (IUL)
- Permanent coverage whose cash-value growth is linked to a market index, subject to caps, participation rates, floors, and policy costs — all of which shape real results.
- Cash value
- The savings component inside a permanent policy that can grow over time and be borrowed against. Loans and withdrawals reduce the death benefit.
- Death benefit
- The amount paid to beneficiaries when the insured person dies — generally income-tax-free to the beneficiary under current law.
- Accelerated death benefit (ADB)
- A living benefit: lets a policyholder access part of the death benefit early after a qualifying terminal, chronic, or critical illness. Triggers and limits vary by policy.
- Living benefits
- Riders that pay while you're alive — for critical, chronic, or terminal illness, or long-term care. 'Coverage you don't have to die to use.' Terms vary by policy and state.
- Long-term care (LTC) rider
- A policy add-on that helps pay long-term-care costs by drawing down the death benefit. One of several ways to plan for LTC risk.
- Underwriting
- The insurer's evaluation of your health and history that determines eligibility and pricing. Every policy is subject to it.
Wills, Trusts & Estate Basics
- Will
- A legal document stating who receives your property and who cares for minor children. In California, wills generally pass through probate.
- Revocable living trust
- A legal entity that holds assets during your life and passes them outside probate at death. Drafted by an attorney; commonly used in California to avoid probate.
- Probate
- The court-supervised process of validating a will and distributing an estate — public, and in California often slow and fee-heavy, which is why trusts are common here.
- Beneficiary designation
- The named recipient on accounts like 401(k)s and life insurance. These forms generally override your will — keeping them current is a 15-minute audit that prevents painful surprises.
- Power of attorney (POA)
- A document authorizing someone to act for you financially if you're unable. Pairs with an advance health-care directive.
- Advance health-care directive
- Your written medical wishes plus the person authorized to make health decisions if you can't.
- Guardianship designation
- Naming, usually in a will, who would raise your minor children. Without it, a court decides.
- Intestate succession
- The state formula that decides who inherits when someone dies without a will — which may not match what they would have chosen.
- Asset titling
- How ownership is legally recorded (joint tenancy, community property, trust ownership…). Titling often controls where assets go — sometimes ahead of the will.
Health-Care & Long-Term-Care Planning
- Medicare
- Federal health insurance from age 65 — with real gaps: it generally does not pay for ongoing long-term (custodial) care.
- Long-term care (LTC)
- Help with daily living activities (bathing, dressing, eating) over an extended period — at home or in a facility. It's a common need in later life, and Medicare generally doesn't pay for ongoing custodial care.
Generational Wealth
- Generational wealth
- Assets plus knowledge plus structure passed to the next generation. Money without preparation often disappears — heir education is half the inheritance.
- The Great Wealth Transfer
- The projected ~$124 trillion moving between U.S. generations through 2048 (Cerulli) — the largest transfer in history.
- Family governance
- The habits and structures (family meetings, shared values, documented intentions) that help wealth and wisdom survive the handoff between generations.