What is Recharacterization? Recharacterization is a term used in the field of retirement planning to describe the process of undoing a contribution or conversion made to an individual retirement account (IRA) or Roth IRA. It allows individuals to correct or reverse certain financial decisions related to their retirement savings. Definition … …
What is a Qualified Automatic Contribution Arrangement (QACA) and How Does it Impact Retirement Planning? A Qualified Automatic Contribution Arrangement (QACA) is a retirement plan feature that encourages employees to save for retirement by automatically enrolling them in the plan and increasing their contribution rate over time. This arrangement is … …
What are Other Post-Employment Benefits (OPEB)? Other Post-Employment Benefits (OPEB) are benefits that employers provide to their retired employees, other than pensions. These benefits can include healthcare coverage, life insurance, disability insurance, and other similar benefits. OPEB is an important consideration for both employers and employees, as it can have … …
What is Graded Vesting? Graded vesting is a mechanism used in retirement planning to gradually distribute ownership of employer-contributed retirement benefits to employees over a certain period of time. It is a way for employers to incentivize employees to stay with the company for a longer duration. Under a graded … …
What are Actual Deferral & Actual Contribution Percentage Tests? The Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) tests are important compliance tests that must be performed by employers who offer a 401(k) or other similar retirement plans. These tests are designed to ensure that highly compensated employees (HCEs) … …
The Concept of Retirement Planning Retirement planning is a crucial financial strategy that individuals undertake to ensure a secure and comfortable retirement. It involves setting aside funds and making investment decisions to achieve specific retirement goals. The concept of retirement planning revolves around the idea of preparing for the future … …
The Greatest Generation: Defining and Identifying Its Key Characteristics One of the key characteristics of The Greatest Generation is their strong work ethic. They grew up during a time of economic hardship and learned the value of hard work and perseverance. Many of them experienced poverty and had to work … …
Advantages of Supplemental Executive Retirement Plan (SERP) A Supplemental Executive Retirement Plan (SERP) offers numerous advantages for executives and high-level employees. This retirement plan is designed to provide additional benefits and income beyond what is typically offered through traditional retirement plans. Here are some key advantages of a SERP: 1. … …
What is a Risk Profile? A risk profile is an assessment of an individual or company’s willingness and ability to take on risk. It involves evaluating various factors such as financial goals, time horizon, investment knowledge, and risk tolerance to determine the appropriate level of risk for an investment portfolio … …
Retirement Planning: Steps, Stages, and Key Considerations Step 1: Assessing Current Financial Situation Step 2: Setting Retirement Goals Once you have assessed your financial situation, the next step is to set retirement goals. This involves determining the lifestyle you want to have during retirement and estimating the amount of money … …
What is a Qualifying Investment? A qualifying investment refers to an investment that meets certain criteria set by a specific program or institution. These criteria are typically designed to encourage investment in certain areas or industries, and in return, investors may receive certain benefits or incentives. The definition of a … …
Qualified Distribution Definition A qualified distribution refers to a withdrawal made from a retirement plan that meets certain requirements set by the Internal Revenue Service (IRS). These requirements are designed to ensure that the funds are used for retirement purposes and not for other non-retirement expenses. How Plans Work Retirement … …
What is a Government-Sponsored Retirement Arrangement (GSRA)? A Government-Sponsored Retirement Arrangement (GSRA) is a retirement savings plan that is sponsored and administered by the government. It is designed to provide individuals with a way to save for retirement and ensure financial security in their later years. GSRAs are similar to … …
What are Other Post-Retirement Benefits? Other Post-Retirement Benefits (OPRB) refer to the benefits that an employer provides to its retired employees, in addition to the regular pension plan. These benefits are designed to support retirees in maintaining their quality of life and ensuring their well-being after they have stopped working. … …
Nest Egg: Definition, Importance, How To Invest A nest egg is a sum of money that has been set aside for a specific purpose, typically for retirement. It is a financial cushion that provides individuals with a sense of security and peace of mind for the future. Building a nest … …
What is the Needs Approach? The needs approach is a method used in retirement planning to determine the financial requirements of individuals during their retirement years. It focuses on identifying and prioritizing the specific needs and goals of retirees, taking into account their lifestyle, health, and other factors that may … …
The Definition and Causes of Lifestyle Creep Lifestyle creep refers to the gradual increase in spending and expenses as an individual’s income increases. It is a phenomenon that occurs when people start earning more money and subsequently upgrade their lifestyle to match their new income level. As a result, they … …
What is KSOP and How Does it Work? KSOP, or Key Employee Stock Ownership Plan, is a retirement plan that allows employees to become owners of the company they work for. It is a type of employee benefit plan that provides employees with the opportunity to acquire company stock as … …
Overview of KIPPERS Kids in Parents’ Pockets Eroding Retirement Savings (KIPPERS) is a term used to describe the financial burden that parents face when their adult children continue to rely on them for financial support, thus eroding their retirement savings. This phenomenon has become increasingly common in recent years, as … …
Heroes Earned Retirement Opportunities Act: Providing Retirement Benefits for Heroes The Heroes Earned Retirement Opportunities Act (HERO Act) is a legislation aimed at providing retirement benefits for heroes who have served in the military or as first responders. This act recognizes the sacrifices and contributions made by these individuals and … …
What is Financial Independence Retire Early (FIRE)? FIRE is not about sacrificing your present happiness for a future retirement; it’s about finding a balance between enjoying your life now and planning for a secure future. The movement encourages individuals to live frugally, save aggressively, and invest wisely to build a … …
What is an Employee Stock Ownership Plan (ESOP)? An Employee Stock Ownership Plan (ESOP) is a type of retirement plan that allows employees to become owners of the company they work for. It is a unique and powerful tool that provides employees with a stake in the company’s success and … …
What is an Elective-Deferral Contribution? An elective-deferral contribution is a type of retirement savings contribution that allows individuals to set aside a portion of their income on a pre-tax basis. This means that the contribution is deducted from the individual’s salary before taxes are calculated, reducing their taxable income for … …
Distribution in Kind: Definition, Benefits, and About Payments Distribution in kind is a method of distributing assets or investments directly to the shareholders or investors, rather than converting them into cash. This type of distribution allows the shareholders to receive their share of the assets in the form of physical … …
AARP Overview: Advocating for Retirement Planning Why Retirement Planning Matters AARP recognizes the importance of retirement planning and the impact it can have on individuals’ quality of life. Through various initiatives and programs, AARP aims to educate and empower individuals to take control of their financial future and make informed … …