Understanding Retirement Trends
Expert-defined terms from the Professional Certificate in Retirement Coaching and Mentoring course at London School of Business and Administration. Free to read, free to share, paired with a globally recognised certification pathway.
Understanding Retirement Trends Glossary #
Understanding Retirement Trends Glossary
Aging in Place #
Aging in place refers to the concept of older adults remaining in their own homes or communities as they age, rather than moving to assisted living facilities or nursing homes. This trend has become increasingly popular as individuals seek to maintain their independence and autonomy.
Defined Benefit Plan #
A defined benefit plan is a retirement plan in which an employer promises a specified monthly benefit to employees upon retirement. The benefit amount is typically based on a combination of factors such as salary history and years of service.
Defined Contribution Plan #
A defined contribution plan is a retirement plan in which both the employer and employee make contributions to an individual account. The ultimate retirement benefit is based on the contributions made and the investment performance of those contributions.
Early Retirement #
Early retirement refers to the practice of retiring before the traditional retirement age of 65. This trend has become more common as individuals seek to enjoy more leisure time or pursue other interests earlier in life.
Encore Career #
An encore career is a second career that individuals pursue after retiring from their primary career. These careers often involve giving back to the community, pursuing a passion, or exploring a new field.
Flexible Retirement #
Flexible retirement refers to the practice of transitioning gradually from full-time work to retirement. This trend allows individuals to reduce their hours, take on part-time work, or work remotely as they approach retirement age.
Gray Divorce #
Gray divorce refers to the phenomenon of older adults getting divorced later in life. This trend has implications for retirement planning, as it can lead to the division of assets and changes in financial security.
Longevity Risk #
Longevity risk is the risk of outliving one's retirement savings. With increasing life expectancies, individuals face the challenge of ensuring that their savings will last throughout their retirement years.
Phased Retirement #
Phased retirement refers to the practice of transitioning from full-time work to retirement through a gradual reduction in work hours or responsibilities. This approach allows individuals to ease into retirement while maintaining income.
Retirement Coaching #
Retirement coaching is a specialized form of coaching that helps individuals navigate the transition to retirement. Coaches assist clients in setting goals, creating a retirement plan, and adjusting to the changes that come with retirement.
Retirement Mentoring #
Retirement mentoring involves providing guidance and support to individuals as they navigate the retirement process. Mentors offer advice, share their own experiences, and help mentees make informed decisions about retirement.
Second Act Career #
A second act career is a career that individuals pursue after retiring from their primary career. These careers often involve a shift in focus, such as pursuing a passion, starting a business, or working in a new industry.
Sequence of Returns Risk #
Sequence of returns risk refers to the risk of experiencing poor investment returns early in retirement, which can have a significant impact on the sustainability of one's retirement savings. This risk is particularly relevant for individuals who rely on investment income during retirement.
Social Security #
Social Security is a federal benefits program that provides retirement, disability, and survivor benefits to eligible individuals. Workers pay into the Social Security system through payroll taxes, and benefits are based on earnings history.
Succession Planning #
Succession planning is the process of identifying and preparing individuals to fill key leadership roles within an organization. This practice ensures that there is a smooth transition of leadership when key employees retire.
Target Date Fund #
A target date fund is a type of investment fund that automatically adjusts its asset allocation over time based on the target retirement date of the investor. These funds typically become more conservative as the retirement date approaches.
Voluntary Retirement #
Voluntary retirement occurs when individuals choose to retire from their jobs rather than being forced to do so by their employer. This decision is often based on personal preferences, financial considerations, or lifestyle choices.
Workforce Aging #
Workforce aging refers to the increasing average age of the labor force as more individuals delay retirement and continue working into their later years. This trend has implications for employers, policymakers, and individuals planning for retirement.
401(k) Plan #
A 401(k) plan is a type of employer-sponsored retirement plan that allows employees to contribute a portion of their salary to a tax-advantaged investment account. Employers may also match a portion of employee contributions, providing additional retirement savings.
403(b) Plan #
A 403(b) plan is a retirement plan similar to a 401(k) plan but typically offered by nonprofit organizations, schools, and government entities. Employees can contribute a portion of their salary to the plan, and employers may offer matching contributions.
457 Plan #
A 457 plan is a type of deferred compensation plan available to employees of state and local governments, as well as certain nonprofit organizations. Contributions to the plan are made on a pre-tax basis, and withdrawals are typically taxed as ordinary income in retirement.
Age Discrimination #
Age discrimination refers to the unfair treatment of individuals based on their age, particularly in the workplace. This practice is illegal under the Age Discrimination in Employment Act, which protects workers age 40 and older from discrimination.
Catch #
Up Contributions: Catch-up contributions allow individuals aged 50 and older to make additional contributions to their retirement accounts above the standard limits. These contributions are designed to help older workers boost their retirement savings as they approach retirement age.
Early Withdrawal Penalty #
An early withdrawal penalty is a fee imposed on individuals who withdraw funds from a retirement account before reaching a certain age, typically 59 ½. This penalty is in addition to any income taxes owed on the withdrawal.
Required Minimum Distribution (RMD) #
A required minimum distribution is the minimum amount that individuals must withdraw from certain retirement accounts, such as traditional IRAs and 401(k) plans, once they reach a certain age, typically 72. Failure to take the RMD can result in a hefty penalty.
Reverse Mortgage #
A reverse mortgage is a type of loan that allows homeowners aged 62 and older to convert part of their home equity into cash. The loan is repaid when the homeowner moves out, sells the home, or passes away.
Roth IRA #
A Roth IRA is an individual retirement account that allows individuals to contribute after-tax dollars to a tax-advantaged investment account. Qualified withdrawals from a Roth IRA are tax-free, making it an attractive option for tax-free retirement income.
Safe Withdrawal Rate #
The safe withdrawal rate is the rate at which individuals can withdraw funds from their retirement savings without running out of money during retirement. This rate is typically expressed as a percentage of the total portfolio.
Self #
Directed IRA: A self-directed IRA is an individual retirement account that allows individuals to invest in a wider range of assets beyond traditional stocks and bonds. With a self-directed IRA, individuals have more control over their investment choices.
Spousal IRA #
A spousal IRA is an individual retirement account that allows a non-working spouse to contribute to an IRA based on the earned income of their working spouse. This type of IRA can help couples boost their retirement savings as a household.
Traditional IRA #
A traditional IRA is an individual retirement account that allows individuals to contribute pre-tax dollars to a tax-advantaged investment account. Withdrawals from a traditional IRA are taxed as ordinary income in retirement.
Withdrawing Money in Retirement #
Withdrawing money in retirement involves taking distributions from retirement accounts to cover living expenses. Individuals must carefully plan their withdrawals to ensure that they have enough income to last throughout retirement.
Working in Retirement #
Working in retirement refers to the practice of continuing to work part-time or full-time after officially retiring from a primary career. Many individuals choose to work in retirement for financial, social, or personal reasons.