Gnomenclature

Recession is a period when the economy is shrinking. This is generally measured by a negative change in the inflation-adjusted Gross Domestic Product (GDP).

Refinancing means taking out a new loan to replace an existing one. Changing your loan terms can accomplish a variety of financial goals. Depending on the terms, refinancing may ultimately either increase or decrease your total borrowing costs.

Required Minimum Distributions (RMDs) apply to money that has been saved in traditional retirement plans. These plans require that you start taking annual distributions from the plan upon reaching age 73. The size of the distribution is determined by your age and marital situation. Those distributions are subject to ordinary tax consequences. Roth accounts are not typically subject to RMDs by the original owner but may require RMDs once passed on to a subsequent beneficiary.

A retirement calculator is a tool you can use to model the future value of retirement savings. It can be used to find out how much you will need to save annually to reach a certain goal or how much a given savings rate will amount to by the time you retire.

A good retirement calculator should include variables such as annual savings, inflation rate, investment earnings and time till retirement. Retirement calculators are useful, but they are based on assumptions that may differ from reality. So, retirement calculations should be updated regularly to keep your savings on track.

Rollover plans enable employees to delay tax consequences on retirement savings when they leave an employer’s retirement plan. Upon taking money out of an employer’s plan, an individual has a limited amount of time to roll that money over into a new qualified plan without its being subject to taxation and early withdrawal penalties.

A Roth IRA is a type of tax-advantaged retirement plan which individuals set up on their own behalf. Contributions to Roth IRAs are not tax-deductible. However, eligible withdrawals from a Roth IRA are not subject to income tax. Contributions to a Roth IRA can be withdrawn at any time. However, earnings on those contributions may be subject to a 10% penalty if withdrawn before the owner reaches age 59½ or if the IRA has been in place for less than five years.