Retirement Definitions

This retirement definitions page provides detailed explanations of key retirement terms and concepts, including retirement accounts, living arrangements, income sources, and risk factors. Whether you're planning for retirement or just looking to better understand retirement-related topics, this page offers a comprehensive resource to help you make informed decisions about your retirement plans.

  1. Retirement: The period of a person's life when they stop working, typically after reaching a certain age or meeting certain criteria. Retirement can be voluntary or involuntary, and is often associated with a reduction in work responsibilities, a change in lifestyle, and the need to manage finances and health.

  2. Retirement age: The age at which a person is expected or able to retire from work. This age can vary depending on factors such as employment contract, pension plan, government policies, and personal preference. Retirement age is often associated with eligibility for retirement benefits and Social Security.

  3. Early retirement: Retirement that occurs before the normal retirement age. Early retirement is usually voluntary, although it can also be involuntary due to factors such as health, job loss, or company downsizing. Early retirement can offer benefits such as increased leisure time, but may also require careful planning to ensure financial security.

  4. Full retirement age: The age at which a person is entitled to receive full Social Security benefits. The full retirement age is determined by the year of birth, and can range from 66 to 67 for people born after 1954. Waiting until full retirement age to claim Social Security benefits can result in a higher monthly benefit amount.

  5. Partial retirement: Working reduced hours or a reduced workload as a transition to full retirement. Partial retirement can help people adjust to retirement by providing a gradual reduction in work responsibilities and income. It may also offer the opportunity to continue working in a field or job that is enjoyable or meaningful.

  6. Semi-retirement: Working part-time or working in a less demanding position as a transition to full retirement. Semi-retirement can also help people adjust to retirement by providing a gradual reduction in work responsibilities and income. It may also offer the opportunity to pursue other interests or engage in volunteer work.

  7. Phased retirement: A gradual transition to retirement, where an employee reduces their hours or workload over time. Phased retirement is often used as a way to retain valuable employees, and may be offered as part of a retirement plan or as a workplace benefit.

  8. Voluntary retirement: Retirement that is initiated by the employee, rather than the employer. Voluntary retirement may be a personal decision based on factors such as health, finances, or family obligations. It may also be influenced by changes in the workplace or job market.

  9. Involuntary retirement: Retirement that is initiated by the employer, rather than the employee. Involuntary retirement may occur due to factors such as downsizing, restructuring, or changes in business strategy. It can be a difficult transition for employees, and may require careful planning to ensure financial security.

  10. Forced retirement: Retirement that is required due to age or other factors, such as a company's policy. Forced retirement can be a contentious issue, as it may be perceived as discriminatory or unfair. Some countries have laws that prohibit mandatory retirement based on age.

  11. Bridge job: A job taken by an older worker to bridge the gap between full-time work and retirement. Bridge jobs may be part-time or temporary, and can provide income and social engagement while easing the transition to retirement.

  12. Second career: A career pursued after retirement from the first career. Second careers may be in a different field or industry, or may involve starting a business or pursuing a passion. Second careers can provide a sense of purpose and fulfillment, as well as additional income.

  13. Retirement community: A residential community specifically designed for retirees. Retirement communities may offer amenities such as social activities, healthcare services, and recreational facilities. They may also provide assistance with daily living activities and transportation.

  14. Active adult community: A residential community for older adults who are still active and independent. Active adult communities may offer amenities such as fitness centers, swimming pools, and golf courses, and may be located in warm climates or near desirable destinations.

  15. Independent living: A living arrangement designed for older adults who are able to live independently but want the convenience and amenities of a retirement community. Independent living facilities may offer housekeeping, meal service, and transportation, as well as social and recreational activities.
  16. Assisted living: A living arrangement designed for older adults who need assistance with daily living activities such as bathing, dressing, and medication management. Assisted living facilities may provide personal care services, 24-hour supervision, and medical monitoring.
  17. Nursing home: A residential facility for older adults who require 24-hour medical care and supervision. Nursing homes may provide skilled nursing care, rehabilitation services, and assistance with daily living activities.
  18. Continuing care retirement community (CCRC): A retirement community that offers a continuum of care, from independent living to assisted living to skilled nursing care, all on one campus. CCRCs may also provide a range of services and amenities, such as dining, housekeeping, and transportation.
  19. Retirement savings: Funds set aside specifically for retirement, typically in a retirement account such as a 401(k) or an individual retirement account (IRA). Retirement savings may be invested in stocks, bonds, mutual funds, or other financial instruments, and are intended to provide income and security in retirement.
  20. Pension: A retirement benefit paid to employees by their employer. Pensions are typically based on a formula that takes into account the employee's years of service and salary. Some employers may offer a defined contribution plan, such as a 401(k), instead of a traditional pension.
  21. Social Security: A government program that provides retirement, disability, and survivor benefits to eligible individuals. Social Security benefits are funded by payroll taxes and are intended to supplement retirement savings.
  22. Retirement income: The income received during retirement, including Social Security benefits, pension payments, and income from retirement savings. Retirement income may also come from part-time work, rental income, or other sources.
  23. Retirement planning: The process of setting financial goals and creating a plan to achieve them in retirement. Retirement planning may include saving for retirement, investing in retirement accounts, managing debt, and planning for healthcare expenses.
  24. Retirement readiness: The degree to which a person is financially prepared for retirement. Retirement readiness may be assessed by analyzing factors such as retirement savings, income sources, and retirement expenses.
  25. Longevity risk: The risk of outliving one's retirement savings. Longevity risk is a concern for retirees, as increasing life expectancy and rising healthcare costs can put a strain on retirement income.
  26. Sequence of returns risk: The risk of experiencing negative investment returns early in retirement, which can have a significant impact on the overall retirement portfolio. Sequence of returns risk is a concern for retirees who are heavily invested in the stock market.
  27. Required minimum distribution (RMD): The amount that must be withdrawn from certain retirement accounts, such as traditional IRAs and 401(k)s, each year after a certain age. Failure to take the required minimum distribution can result in penalties.
  28. Catch-up contributions: Additional contributions that can be made to retirement accounts by people who are 50 or older. Catch-up contributions allow older workers to boost their retirement savings in the years leading up to retirement.
  29. Annuity: A financial product that provides a stream of income over a set period of time, often for the remainder of a person's life. Annuities may be purchased from insurance companies and can be used as a retirement income source.
  30. Estate planning: The process of managing one's assets and affairs in preparation for death or incapacity. Estate planning may involve creating a will, establishing a trust, and designating beneficiaries for retirement accounts and life insurance policies.

  31. Power of attorney: A legal document that grants a designated individual the authority to act on behalf of another person in financial or legal matters. A power of attorney can be useful in retirement planning to ensure that someone can manage a person's finances and affairs if they become incapacitated.
  32. Living will: A legal document that outlines a person's wishes for end-of-life medical care. A living will can be useful in retirement planning to ensure that a person's healthcare preferences are respected if they are unable to make decisions for themselves.
  33. Medicare: A federal health insurance program that provides coverage for people over the age of 65 and certain younger people with disabilities or chronic conditions. Medicare may be an important source of healthcare coverage for retirees.
  34. Long-term care insurance: Insurance that provides coverage for the costs of long-term care, such as nursing home care or in-home care. Long-term care insurance can be an important component of retirement planning, as long-term care costs can be significant.
  35. Reverse mortgage: A financial product that allows homeowners to borrow against the equity in their home. The loan is repaid when the homeowner sells the home or passes away. Reverse mortgages can be used to supplement retirement income, but they can also be risky and may not be suitable for everyone.