Retirement Planning: Accumulations & Distributions

This set of flashcards covers key concepts and definitions related to retirement planning, including work life expectancy, retirement life expectancy, and various financial planning methods.

Work Life Expectancy (WLE)

The period of time a person is expected to be in the workforce.

Retirement Life Expectancy (RLE)

The time period beginning at retirement and extending until death that necessitates proper financial planning.

Wage Replacement Ratio (WRR)

An estimate of the amount of money needed in retirement, expressed as a percentage of income earned prior to retirement.

Pre-Tax Planning

Budgeting and financial planning primarily using pre-tax dollars before any tax deductions.

After-Tax Planning

Planning that uses income after taxes have been deducted.

Capital Needs Analysis

Calculating the amount of investment capital needed at retirement to maintain the pre-retirement lifestyle.

Accumulation of Unequal Deposits

Accumulation of funds based on varying annual contributions over different time periods.

Sensitivity Analysis

An assessment to evaluate how different variables affect the project outcomes, such as differing the inflation rate or work life expectancy.

Monte Carlo Analysis

A statistical method used to understand the probabilities and possibilities in financial planning scenarios.

4% Per Year Approach

A guideline suggesting that retirees withdraw 4% of their retirement portfolio annually to minimize the risk of outliving their funds.