Glossary & Abbreviations

Accumulated Savings is money in cash, bank accounts and investment accounts, including IRAs, 401(k) and similar accounts

Actuarial Approach is the use of basic actuarial principles (such as the Basic Actuarial Equation) to accomplish one’s personal financial goals

Actuarial Budget Benchmark (ABB) is a conservatively calculated Actuarial Spending Budget, based on a specific set of assumptions about the future, designed to equate the approximate market value of your future spending liabilities with the market value of your assets.  The ABB provides a benchmark for determining how aggressive or conservative your spending is.

Actuarial Budget Calculators (ABC) are two Excel workbooks, one for Retirees and one for Pre-Retirees, which are tools used to calculate an ASB

Actuarial Spending Budget (ASB) is a spending budget developed using the Actuarial Approach, based on your spending goals, data and reasonable assumptions

Actuaries Longevity Illustrator (ALI) is an internet tool, designed by the American Academy of Actuaries and the Society of Actuaries, to provide you with perspectives on your longevity. It helps you estimate how long you might actually live, with different probabilities of survival.

Annuity is, in its most general sense, a series of periodic payments made at regular, fixed intervals

Basic Actuarial Equation is the equation that balances the PV of one’s total assets with the PV of one’s total liabilities and is expressed in this website as:

Accumulated Savings
PV Income from Other Sources
PV Future Non-Recurring Expenses
PV Future Recurring Annual Spending Budgets

Discount Rate is the rate of return used to discount back a stream of payments, due to the time value of money, in the calculation of a present value.  For the ASB, this rate is also the assumed rate of investment return.

Fair value is a rational and unbiased estimate of the potential market price of a good, service, asset or liability

Future Non-Recurring Expenses are unusual expenses and expenses not expected to be recurring, such as car repairs, new cars, home repairs, replacement of broken appliances or remodeling. Long-term care expenses and desired estate at end of LPP may or may not be considered here, depending on context

Future Recurring Annual Spending Budgets are budgets for expected recurring expenses, including living expenses and taxes

Income from Other Sources (IFOS) is expected income from sources other than Accumulated Savings, and includes wages, Social Security benefits, pension benefits, annuities, expected income from future sales of assets, etc.

Indexed Annuity is an annuity that is bench-marked (indexed) to a specified index, such as the stock market or inflation. When we use the term, we mean bench-marked to inflation.

Inflation is the general increase in prices and fall in the purchasing power of money

Lifetime Income Sources are sources of income that are payable during the LPP

Lifetime Planning Period (LPP) is the retirement payout period (difference between current age and assumed age at death)

Market Value is the fair value of an asset or liability, based on the current market price or liability settlement

Mark-to-market or fair value accounting refers to accounting for the fair value of an asset or liability based on the current market price

Nominal (or Future) Dollars are dollars that are unadjusted for inflation

Other Sources of Income include all sources of income not addressed elsewhere in the ABC; the most common is PV of expected future sale of an asset, such as a home

Present Value (PV) is the discounted value (using an assumed Discount Rate, or rates) of a future payment or stream of payments determined as of a specified date (the valuation date).

Present Value Calculator (PVC) is an Excel spreadsheet used to calculate present values

Qualified Longevity Annuity Contract (QLAC) is a deferred annuity funded with an investment from a qualified retirement plan or IRA that satisfies certain legal requirements

Rainy Day Fund is money set aside to mitigate future adverse contingencies, such as poor investment performance

Real (or Today’s) Dollars are dollars that are adjusted for inflation

Reverse Mortgage is a type of home loan for older homeowners that requires no monthly mortgage payments

Sequence of Returns Risk (SORR) is the risk of receiving lower or negative returns early in a period when withdrawals are made from an individual's underlying investments

Society of Actuaries (SOA) is a professional organization for actuaries based in North America

Systematic (or Structured) Withdrawal Plan (SWP) is an algorithm for withdrawing funds from an investment portfolio