RICP key terms

A structured sequence - set goals, gather client data, analyze resources and gaps, design a withdrawal strategy, implement it, and monitor over time - used to convert accumulated savings into dependable lifetime income.

The share of pre-retirement income a household needs in retirement to keep a similar standard of living; commonly estimated at 70 to 80 percent of final pay for middle-income retirees.

The shortfall between the spending a household needs in retirement and the income it can count on from guaranteed sources such as Social Security, pensions, and annuity payments.

The portion of essential retirement spending covered by predictable guaranteed sources - Social Security, pensions, and income annuities - so that market returns never threaten basic needs.

A spending split between non-negotiable costs such as housing, food, and health care that must be funded in any market, and optional outlays such as travel that can be reduced when returns disappoint.

A strategy of taking scheduled distributions, set as a fixed dollar amount or a percentage of the portfolio, while keeping the remaining assets invested rather than converting them to guaranteed income.

The initial percentage of a portfolio that can be withdrawn, with annual inflation increases, over a stated horizon with high confidence of not running out; the classic illustration is 4 percent.

The danger that weak investment returns early in retirement permanently harm a portfolio, because shares are sold to fund income while values are depressed and cannot fully recover.

The risk that a retiree or couple lives longer than the planning horizon assumed, so assets are exhausted in later years when part-time work and other fallback options are gone.

The risk that rising prices shrink the purchasing power of a fixed income stream over a retirement that may last 30 years or more.

Dividing retirement assets into time-segmented portfolios - often short-term cash, medium-term bonds, and long-term growth assets - so near-term spending is met without selling stocks in a downturn.

A projection method that runs thousands of randomly generated market scenarios to estimate how often a withdrawal plan lasts, producing a probability of success instead of one fixed outcome.

The percentage of simulated scenarios in which a retirement plan funds every year of planned spending through the end of the horizon without depleting the portfolio.

Predetermined portfolio-value boundaries that trigger a spending increase or cut, so withdrawals flex with market results instead of following a fixed inflation-adjusted dollar amount.

The age set by birth year, 66 to 67 for today's workers, at which a person receives 100 percent of their Social Security primary insurance amount with no early-claiming reduction or delayed credit.

The monthly Social Security retirement benefit payable at full retirement age, computed from a worker's 35 highest years of indexed earnings using a progressive replacement formula.

Increases of about 8 percent per year added to a Social Security benefit when a worker postpones claiming beyond full retirement age, with the credits stopping at age 70.

A rule that temporarily withholds part of the benefit of a claimant below full retirement age whose earnings exceed an annual limit; withheld amounts are later restored through a benefit recomputation.

A Social Security benefit of up to half of a worker's primary insurance amount, paid to a spouse only if it exceeds the spouse's own benefit and reduced if claimed before the spouse's full retirement age.

A Social Security payment to a widow or widower based on the deceased worker's record, as much as 100 percent of the deceased's benefit, subject to the survivor's age and claiming choices.

An employer plan that promises a specified monthly income at retirement, usually based on salary and years of service, with the employer carrying the investment risk.

The retiree's choice between a lifetime monthly payment from a defined benefit plan and a lump sum that can be rolled to an IRA, weighed against mortality, interest rates, and survivor options.

The smallest amount that must be withdrawn each year from traditional IRAs and most employer plans, starting at age 73 (75 for those born in 1960 or later) and based on a life-expectancy factor.

A direct transfer from an IRA to a qualifying charity, permitted from age 70½ up to an indexed annual limit, that counts toward required minimum distributions yet is excluded from taxable income.

Moving money from a traditional IRA or employer plan into a Roth IRA, reporting the taxable amount as ordinary income now in exchange for tax-free future growth and no lifetime required distributions.

The irrevocable exchange of a lump sum for a guaranteed series of payments, often for life, under a contract with an insurer, shifting longevity and investment risk to the insurer.

A deferred income annuity held inside a retirement account that may begin payments as late as age 85 and is excluded from required minimum distribution math up to a dollar limit.

An insurance contract whose value rises and falls with investment subaccounts but that guarantees a minimum lifetime withdrawal amount, pairing market participation with protected income.

An FHA-insured reverse mortgage letting homeowners 62 and older turn equity into a lump sum, monthly payments, or a growing credit line that is generally repaid when the borrower leaves the home.

The order in which taxable, tax-deferred, and Roth accounts are drawn down, chosen to reduce lifetime income taxes, Medicare surcharges, and the tax burden passed to heirs.

Intentionally filling lower tax brackets with IRA withdrawals or Roth conversions in low-income years so that larger, forced distributions later do not push the household into higher brackets.

Income-related monthly adjustment amounts: extra Medicare Part B and Part D premiums charged when modified adjusted gross income exceeds annual thresholds, based on tax returns from two years earlier.

Periodically returning a portfolio to its target asset mix, typically by selling assets that have grown and buying those that have lagged, keeping the plan's risk level in line with its assumptions.

The risk that an extended period of frailty or cognitive decline requires costly custodial care that Medicare does not cover, draining the assets meant to produce retirement income.

The written instruction naming who receives an account or policy at the owner's death; it generally overrides a will and determines whether heirs may spread distributions over time.

The SECURE Act requirement that most non-spouse beneficiaries empty an inherited IRA within ten years of the owner's death, with annual distributions also required in some cases.

The ongoing review of a retirement income plan against actual spending, portfolio values, health, tax law, and goals, with adjustments to withdrawals or allocation when results diverge from assumptions.