YARCalc glossary

How to use this glossary

These definitions explain how YARCalc uses planning and report terms. A definition gives you the meaning needed to read the application; it does not replace the assumptions, limits, or current-law notes in the guide for that subject.

A term may describe a result without requiring a change

Finding an unfamiliar term does not mean the plan is wrong. Read its definition, identify the screen and time period involved, and then decide whether the underlying input or result is material to the decision you are making.

A–F

• Account balance — The value recorded for one account as of its balance date. A current balance is an input to the plan, not a forecast of what the account will be worth later.
• Age-banded spending — Spending that changes when a person reaches a specified age. It is useful for expenses that are expected to rise or fall during a known stage of retirement.
• Allocation — The percentage of an investment portfolio held in broad groups such as stocks, bonds, and cash. Allocation affects both expected growth and the range of possible outcomes.
• Annual Action Plan — A dated list of planning actions drawn from the saved Home plan. It turns longer-term guidance into work that can be accepted, deferred, completed, or dismissed.
• Arithmetic mean return — The simple average annual return used by the stochastic model for an asset class. It is not the same as a compounded long-term growth rate because volatility reduces compound growth.
• Asset class — A broad investment category whose members tend to share return and risk characteristics. YARCalc uses asset classes to translate holdings into portfolio-level stock, bond, and cash behavior.
• Basis — See Cost basis.
• Beneficiary — A person or organization designated to receive an account, insurance benefit, trust interest, or other property after an owner dies. A beneficiary designation may control an asset even when a will says something different.
• Bond — A debt security that generally promises interest and repayment of principal. An individual bond has contractual cash flows and a maturity date; a bond fund is a changing portfolio and does not behave like one bond held to maturity.
• Bond tent — A temporary increase in bonds or other safer assets around retirement, followed by a later reduction. Its purpose is to reduce exposure to a damaging early market decline while avoiding a permanently conservative allocation.
• Capital gain — The difference between an asset’s sale proceeds and its tax basis, after applicable adjustments. In a taxable account, realized gains may affect tax even when the total account balance falls.
• Cash reserve — Money intentionally kept in cash or cash-like assets to cover near-term spending. A reserve may reduce the need to sell investments after a decline, but holding more cash can reduce expected growth.
• Correlation — A measure of how two return series tend to move together. Positive correlation means they often move in the same direction; negative correlation means they more often offset one another. Correlation does not stay constant in every market.
• Cost basis — The modeled tax investment in a taxable holding. When part of the holding is sold, basis is used to estimate the portion of proceeds treated as capital gain.
• Current dollars — Amounts expressed in the purchasing power of a stated base year. Current-dollar or today-dollar figures remove assumed future inflation so values from different years are easier to compare.
• Defined-benefit pension — A retirement benefit that promises payments under a plan formula, often based on pay and service. It is modeled as income rather than as an investment account balance.
• Deterministic projection — One year-by-year calculation using the saved assumptions exactly as entered. It is useful for tracing cash flow and taxes, but it does not show the range of outcomes caused by uncertain returns.
• Discretionary spending — Spending the household is willing to reduce under stress. This distinction matters when a strategy or guardrail protects essential spending by cutting flexible expenses.
• Distribution — The full range and frequency of simulated outcomes. Looking only at the average hides how wide, uneven, or extreme that range may be.
• Diversification — Spreading assets among investments that do not all respond the same way to economic conditions. Diversification can reduce concentrated risk, but it cannot eliminate market loss.
• Drawdown — The decline from a prior portfolio peak to a later low point. A 20% drawdown means the balance fell one fifth from its earlier high before any subsequent recovery.
• Ending balance — The modeled value remaining at the planning horizon. It depends on the selected year, dollar basis, accounts included, and assumptions; it is not a guaranteed inheritance amount.
• Essential spending — Spending the household intends to preserve even in difficult markets, such as basic housing, food, insurance, and healthcare. The classification is a planning judgment rather than a universal category.
• Expected return — The average return assumption assigned to an asset class or holding. It describes the center of a model, not the return expected in any particular year.
• Fat-tail model — A stochastic return model that produces extreme positive and negative return shocks more often than the standard normal model. In YARCalc it is a stress comparison, not a prediction that a crisis will occur.
• Filing status — The federal income-tax filing category used for a projected year, such as married filing jointly or single. It changes tax brackets, deductions, and other calculations.
• Fixed-income glide path — A planned change in the portfolio’s bond and cash allocation over time. A glide path can move gradually toward a target or represent a temporary bond tent.

G–M

• Guardrail — A rule that responds when a result crosses a stated threshold. A spending guardrail may reduce flexible spending after a drawdown; a planning threshold may flag the plan for review.
• Historical bootstrap — A stochastic method that builds possible futures by resampling periods from historical data. It preserves some features of observed markets but cannot include regimes that are absent from the selected history.
• Home plan — The household’s operational plan. Current balances, monitoring, check-ins, reminders, and accepted actions belong to Home; alternative assumptions belong in What-if scenarios.
• Inflation — The rate at which general prices rise. Inflation affects future spending and the purchasing power of money, so a larger nominal amount may not represent a larger real standard of living.
• Inherited IRA — An IRA received after the original owner’s death. Distribution rules depend on the beneficiary and circumstances, so it is modeled separately from the beneficiary’s own IRA.
• IRMAA — Income-Related Monthly Adjustment Amount: an additional Medicare Part B or Part D premium for people whose applicable income exceeds specified thresholds. It generally uses income from an earlier tax year.
• Legacy goal — The amount or priority a household hopes to leave to people or organizations after funding retirement. A legacy goal is a planning preference, not a promise that assets will remain.
• Liability — An amount owed, such as a mortgage, loan, or credit balance. A liability reduces net worth and its required payments affect annual cash flow.
• Longevity risk — The risk that one or more household members live long enough for spending, healthcare, inflation, and withdrawals to continue beyond the period the plan can support.
• MAGI — Modified adjusted gross income. Different laws use different modifications, so the MAGI relevant to Medicare premiums may not be identical to the MAGI used for another tax rule.
• Markov regime model — A stochastic model that moves among statistical market states, with the next state influenced by the current one. The states are simplified representations, not named forecasts of future economic cycles.
• Median — The middle ranked result, also called P50. Half of simulated outcomes are at or below it and half are at or above it. The median is not necessarily the same as the average.
• Medicare — The federal health-insurance program primarily serving people age 65 and older and certain younger people with qualifying conditions. Premiums, enrollment timing, supplemental coverage, and out-of-pocket costs remain separate planning inputs.
• Monte Carlo analysis — A calculation that runs many possible market paths through the same retirement plan. It shows how the plan responds to modeled uncertainty; it does not assign certainty to the future.

N–R

• Net worth — Assets minus liabilities at a point in time. Net worth includes property and other assets that may not be available to fund retirement spending unless the plan includes a sale or borrowing strategy.
• Nominal dollars — Dollar amounts in the year they occur, including assumed inflation. A nominal future balance may look larger while buying no more than a smaller amount today.
• P10 — The tenth percentile. Ten percent of simulated results are at or below this value and ninety percent are above it. It is commonly used as a downside planning view.
• P25 — The twenty-fifth percentile. One quarter of simulated results are at or below this value and three quarters are above it.
• P5 — The fifth percentile. Five percent of simulated results are at or below this value and ninety-five percent are above it. It represents a severe downside result within the selected model, not a worst possible outcome.
• P50 — The fiftieth percentile, or median. Half of simulated results are at or below it and half are above it.
• P75 — The seventy-fifth percentile. Three quarters of simulated results are at or below this value and one quarter are above it.
• P90 — The ninetieth percentile. Ninety percent of simulated results are at or below this value and ten percent are above it. It is an optimistic modeled result.
• P95 — The ninety-fifth percentile. Ninety-five percent of simulated results are at or below this value and five percent are above it. It is a strong upside result within the model, not a 95% guarantee.
• Percentile — A rank within a group of results. Px means x percent of results are at or below that value; it does not mean there is an x percent chance that one displayed path will occur exactly.
• Percentile path — A year-by-year line made from the selected percentile at each modeled year. Because the simulations are ranked again every year, the points on the line may come from different underlying paths.
• Planning horizon — The period from the plan’s starting date through its final planning year. Extending it tests more years of spending, inflation, taxes, and market uncertainty.
• Probability of success — The share of simulated paths that satisfy the analysis success rule through the planning horizon. It is conditional on the saved plan, model, run settings, and assumptions—not a forecast confidence rating.
• Qualified dividend — A dividend that may receive long-term capital-gain tax rates when applicable requirements are met. Other dividends are generally taxed as ordinary income.
• Real return — Investment return after inflation. A portfolio can have a positive nominal return but a negative real return when prices rise faster than the portfolio.
• Required minimum distribution (RMD) — A minimum amount that applicable tax-deferred account owners or beneficiaries generally must withdraw under current rules. The withdrawal may be taxable and can affect other income-based thresholds.
• Retirement-income bridge — Temporary income used between the end of work and a later benefit or other income source. A bridge can come from an employer supplement, other income, or planned withdrawals from savings.
• Roth account — A retirement account funded under Roth tax treatment. Qualified withdrawals are generally tax-free, but contribution, conversion, holding-period, and distribution rules still matter.
• Roth conversion — A transfer from a tax-deferred retirement account to a Roth account. The converted taxable amount generally increases income in the conversion year in exchange for future Roth treatment.

S–Z

• Scenario — A complete set of household assumptions used for calculations. Home is the operational scenario; a What-if changes selected assumptions for comparison.
• Sequence-of-returns risk — The risk that poor investment returns occur early while the household is withdrawing money. Early losses can do more damage than the same returns in a different order because withdrawals leave less capital available for recovery.
• Social Security claiming age — The age at which a person starts a Social Security retirement benefit in the scenario. Claiming earlier or later changes the modeled monthly benefit and the years it is received.
• Stochastic analysis — Analysis based on many simulated paths rather than one fixed return sequence. Its results include probabilities, percentiles, drawdowns, and ranges that must be read together.
• Stress test — A deliberately difficult assumption or model used to see how the plan responds. A stress test reveals sensitivity; it does not estimate how likely that exact event is.
• Success threshold — The minimum probability or other target the household chooses for judging a stochastic result. It expresses a planning preference and does not turn the model into a guarantee.
• Tax-deferred account — An account in which investment growth is generally not taxed annually and withdrawals are generally ordinary income. Traditional IRAs and traditional workplace retirement plans are common examples.
• Tax-free withdrawal — A withdrawal the model treats as excluded from ordinary taxable income, such as a qualified Roth distribution. Tax-free does not mean the transaction is exempt from every rule or reporting requirement.
• Taxable brokerage account — An investment account without retirement-account tax deferral. Dividends, interest, and realized gains can create current tax even when money remains in the account.
• Time horizon — See Planning horizon.
• TIPS — Treasury Inflation-Protected Securities. Their principal and coupon dollars change with the official CPI-based index ratio, while maturity pays at least the remaining original principal. Taxable accounts can owe federal tax on positive inflation adjustment before receiving that principal in cash.
• Today dollars — See Current dollars.
• Variable sweep — An analysis that reruns the plan across a range of values for one selected input while holding the other selected inputs constant. It helps locate sensitivity and break-even regions.
• Volatility — The amount of year-to-year variation assumed for returns or inflation. Greater volatility widens the range of simulated outcomes and can reduce compound growth even when the arithmetic mean is unchanged.
• What-if — An alternative scenario used to test a decision without changing Home. A Linked What-if can receive later Home updates, while an Independent What-if remains a separate copy.
• Withdrawal order — The rule used to choose which accounts fund a retirement cash need. The order can change current taxes, future account balances, RMDs, and the amount left in each tax category.