Glossary

Retirement and money terms, known plain. Each definition links to a fuller explainer.

Sequence-of-returns risk: The danger that the order of investment returns — not just the average — hurts you when you're withdrawing. A bad decade early in retirement does far more damage than the same decade later, because you're selling shares at low prices to fund spending.
Safe withdrawal rate (SWR): The percentage of a portfolio you can withdraw each year (adjusted for inflation) with a high chance the money lasts a full retirement. It's a planning heuristic, not a guarantee — 4% is the classic starting figure.
The 4% rule: A planning rule from William Bengen (1994) and the Trinity study: withdrawing about 4% of a starting portfolio, adjusted for inflation, survived most historical 30-year periods. A useful first pass, sensitive to fees, horizon, and returns.
Present bias: The tendency to weigh a reward now far more heavily than a bigger reward later — a form of hyperbolic discounting. It's why 'I'll save more next month' rarely compounds, and why automating savings beats willpower.
Loss aversion: The finding (Kahneman & Tversky) that losses feel about twice as painful as equivalent gains feel good. In bear markets it drives panic-selling — turning a temporary paper loss into a permanent one.
Glide path: A pre-set plan for shifting a portfolio's stock/bond mix over time — typically holding more bonds near retirement to cushion the fragile early years, then easing back. Target-date funds follow a glide path automatically.
Roth conversion (Roth ladder): Moving money from a tax-deferred account (traditional IRA/401k) into a Roth and paying tax now, so future growth and withdrawals are tax-free. Doing it in steps over several low-income years is a 'Roth ladder.'
Required minimum distribution (RMD): The amount the IRS requires you to withdraw from tax-deferred accounts each year starting at age 73 (under SECURE 2.0). Miss it and you face a penalty, so RMDs shape the order you draw down accounts.
Cost-of-living adjustment (COLA): An annual increase that keeps income in step with inflation. Social Security applies a COLA each year, which is a big reason its guaranteed income is so valuable over a long retirement.
Full retirement age (FRA): The age at which you receive your baseline Social Security benefit — 67 for anyone born in 1960 or later. Claim before it and your benefit is permanently reduced; wait past it and it grows.
Delayed retirement credits: The roughly 8%-per-year increase in your Social Security benefit for each year you delay claiming between full retirement age and 70 — a guaranteed, inflation-adjusted return that's hard to beat elsewhere.
Compounding: Earning returns on your past returns, not just your original contributions. It's why starting early matters so much — and why a late start leans harder on savings rate than on market growth.
Diversification: Spreading money across many investments so no single one can sink the plan. It doesn't eliminate risk, but it smooths the ride and is a core defense against bad luck in any one asset.
Rebalancing: Periodically resetting your portfolio back to its target mix — selling what's grown and buying what's lagged. Done on a schedule, it forces you to buy low and sell high without relying on emotion.
Target-date fund: A single fund that holds a diversified mix and automatically follows a glide path toward a chosen retirement year. It's the plainest 'default' for people who freeze on investment choices.