Retirement-planning Glossary

An interim calculation used in computing income tax liability. It is computed by subtracting certain allowable adjustments from gross income.

Rule regarding eligibility to contribute to a Traditional IRA. An individual must be under age 70� for the entire year to make a regular contribution to an IRA.

An investment where the investor provides cash to the vendor, typically an insurance company, in exchange for the promise to pay a series of periodic, usually monthly, payments in return. An immediate annuity begins to pay back right away, other annuities might not pay back for many years. The money invested in an annuity grows tax-deferred.

The process of determining how investment funds will be apportioned among different asset classes, such as stocks, bonds, and cash reserves. Many financial advisers believe that the mix of asset classes has a greater impact on long-term portfolio results than does the performance of any individual investment.

An automatic investment plan (AIP) allows for the easy execution of a dollar cost averaging strategy by enabling the investor to save a set amount over a specific time interval. Examples: You can set up an AIP with your custodian whereby you invest $50 every week in a specific mutual fund.