CRPC key terms

Structured conversation and data-gathering phase in which the planner collects facts about assets, income, obligations, goals, health, family, and attitudes before any recommendation is made.

A client's willingness and emotional ability to accept investment losses or uncertainty in exchange for potentially higher returns; it is distinct from the financial capacity to bear risk.

A standard requiring a professional to act in the client's best interest, disclose conflicts, and avoid or manage compensation arrangements that could bias the advice given.

The percentage of pre-retirement gross income a retiree needs to maintain a comparable lifestyle, commonly estimated between 70 and 85 percent for moderate-income households.

A projection that estimates the capital required at retirement by comparing anticipated spending with guaranteed income sources such as Social Security, pensions, and annuity payments.

The assumed annual rate of price growth used to convert today's spending into future dollars and to project how much retirement assets must earn above inflation.

An employer-funded pension that promises a specified monthly benefit at retirement, usually based on salary and years of service, with the employer bearing the investment risk.

A retirement account such as a 401(k) in which the balance depends on contributions and investment results, leaving the employee rather than the employer to bear investment risk.

The schedule determining how much of an employer's contributions and their earnings a worker permanently owns; an employee's own deferrals are always fully vested immediately.

An employer contribution tied to the employee's own deferrals, often a stated percentage of pay up to a limit; it is the highest-priority savings target because it is free money.

A salary-deferral plan offered by private employers allowing pre-tax or Roth contributions, subject to annual limits and to required minimum distributions later in life.

A federal corporation that insures certain private defined benefit pension benefits, up to statutory limits, when the sponsoring employer terminates an underfunded plan.

An individual retirement account funded with pre-tax or after-tax money whose growth is tax-deferred; withdrawals are taxed as ordinary income and required minimum distributions apply.

An individual retirement account funded with after-tax dollars that offers tax-free qualified withdrawals; no lifetime required minimum distributions apply to the original account owner.

Moving money from a traditional IRA or pre-tax employer plan into a Roth account, producing taxable income now in exchange for tax-free future growth and withdrawals.

A simplified employer plan for self-employed people and small businesses that allows large, discretionary, tax-deductible contributions, with eligible employees funded at the same percentage of pay.

A retirement plan for businesses with 100 or fewer employees featuring salary deferrals plus either a matching or nonelective employer contribution, with lower cost and simplified administration.

A contract that accumulates funds on a tax-deferred basis for later payout; it may be fixed or variable and can offer optional living or death benefit riders.

A contract purchased with a lump sum that begins paying income almost at once, often for life, converting a pool of assets into a guaranteed stream of payments.

The risk that a retiree outlives their assets because the planning horizon is longer than expected or because returns fall short of assumptions.

The division of a portfolio among asset classes such as stocks, bonds, and cash; it is the primary driver of long-term return and of portfolio volatility.

The length of time until money is needed; longer horizons generally support more equity exposure, while short horizons call for stable, liquid holdings.

Periodically returning a portfolio to its target weights by selling overweighted positions and adding to underweighted ones, which restores the intended level of risk.

The danger that poor investment returns in the early years of withdrawals permanently reduce a portfolio's value more than the same returns occurring later.

An initial percentage of a portfolio that can be withdrawn annually, adjusted for inflation, with a high probability of lasting a stated number of years.

A programmed schedule of regular withdrawals from an investment portfolio used to produce retirement income; unlike an annuity, it does not guarantee lifetime payments.

Dividing retirement assets into time-segmented pools, such as short-term cash, medium-term income, and long-term growth, so withdrawals during a downturn need not sell equities.

The minimum amount that must be withdrawn annually from most tax-deferred retirement accounts once the owner reaches the statutory age, calculated using IRS life expectancy tables.

The irrevocable conversion of an annuity's accumulated value into a series of guaranteed income payments, typically lasting for life or for a chosen number of years.

The age, set by birth year and ranging from 66 to 67, at which a worker receives 100 percent of the primary insurance amount with no reduction or delay credit.

Increases to a Social Security benefit for each month the worker postpones claiming past full retirement age, up to age 70, raising the benefit roughly eight percent per year.

Optional medical insurance covering physician services, outpatient care, and preventive services, funded by premiums and general revenue; enrolling on time avoids permanent late penalties.

A private plan approved by Medicare that delivers Part A and Part B benefits, often with drug coverage, in exchange for the standard premium plus possible copays and network rules.

Private supplemental insurance that pays some of the deductibles, coinsurance, and copays left by Original Medicare; it cannot be paired with a Medicare Advantage plan.

A policy that reimburses or pays for services such as home care, assisted living, or nursing home care when the insured cannot perform a required number of activities of daily living.

The process of paying for long-term care out of pocket until assets fall below state eligibility limits, at which point Medicaid may cover ongoing custodial care.

A form naming who receives an account or policy at the owner's death; it generally overrides a will and should be reviewed after marriages, divorces, births, and deaths.

The adjustment of an inherited asset's cost basis to its fair market value at the date of death, reducing capital gains tax when heirs later sell the asset.

A direct transfer of funds from an IRA to a qualified charity, available after age 70 and a half, that counts toward required minimum distributions and is excluded from taxable income.

Deliberately spreading income sources such as Roth conversions, IRA withdrawals, and capital gains across years to keep marginal rates and Medicare premium surcharges low.