Retirement Terms Beginning with ‘R’

Recharacterization: "The treatment of a contribution as being made to another type of IRA instead of the IRA to which the contribution was initially made."

Reconversion: "A method used by individuals to minimize the tax burden of converting an IRA by recharacterizing Roth IRA-converted amounts back to a Traditional IRA and then converting these assets back to a Roth IRA again. Be aware that the IRS released regulations in 1999 placing limits on reconversions."

Redeposit: "1. The requirement for a person to reinvest a certain amount of money into their retirement fund after he or she previously requested and obtained a return on the deposits made to the fund during a set time period, in order to receive a certain payout from the fund upon retirement. 
2. A cash management policy used by the Bank of Canada, where money is transferred from the central bank to the chartered banks."

Registered Education Savings Plan (RESP): "A savings plan sponsored by the Canadian government that encourages investing in a child's future post-secondary education. Subscribers to an RESP make contributions that build up tax-free earnings - tax-free because subscribers cannot deduct payments made to the plan from their income. The government contributes a certain amount to plans for children under 18 under the Canada Education Savings Grant (CESG)."

Registered Pension Plan (RPP): "A form of a trust that provides pension benefits for an employee of a company upon retirement. RPPs are registered with the Canada Revenue Agency. The employee and employer, or just the employer make contributions to this retirement plan until the employee leaves the company or retires."

Registered Retirement Income Fund (RRIF): "A retirement fund similar to an annuity contract that pays out income to a beneficiary or a number of beneficiaries. To fund their retirement, RRSP holders often roll over their RRSPs into an RRIF. RRIF payouts are considered a part of the beneficiary's normal income and are taxed as such by the Canadian Revenue Agency in the year that the beneficiary receives payouts. The organization or company that holds the RRIF is known as the carrier of the plan. Carriers can be insurance companies, banks or any kind of licensed financial intermediary. The Government of Canada is not the carrier for RRIFs; it merely registers them for tax purposes."

Registered Retirement Savings Plan (RRSP): "A legal trust registered with the Canada Revenue Agency and used to save for retirement. RRSP contributions are tax deductible and taxes are deferred until the money is withdrawn. An RRSP can contain stocks, bonds, mutual funds, GICs, contracts and even mortgage-backed equity. 
RRSPs have two main tax advantages: 
1. Contributors deduct contributions against their income. For example, if a contributor's tax rate is 40%, every $100 he or she invests in an RRSP will save that person $40 in taxes, up to his or her contribution limit. 
2. The growth of RRSP investments is tax sheltered. Unlike with non-RRSP investments, returns are exempt from any capital-gains tax, dividend tax or income tax. This means that investments under RRSPs compound at a pretax rate."

Registered Retirement Savings Plan Contribution (RRSP Contribution): "Assets invested in an RRSP. RRSP contributions can be made at any time and for any amount up to an individual's contribution limit for the year. If a contributor does not make the maximum allowable contribution, the balance of unused contribution room from 1991 onwards is carried forward indefinitely. This allows people to make up for the years that they did not maximize their allowed RRSP contributions."

Registered Retirement Savings Plan Deduction (RRSP Deductions): "The amount that a Canadian taxpayer contributes to his or her RRSP. This amount can be deducted from the taxpayer's annual income to arrive at his or her taxable income for the year."

Registered Retirement Savings Plan Deduction Limit (RRSP Deduction Limit): "The maximum amount that the Canada Revenue Agency (CRA) allows a taxpayer to deduct from his or her personal income when calculating tax liability. The sum of contributions made to a taxpayer's personal RRSP and his or her spouse's or common-law partner's RRSP must be lower than the RRSP deduction limit or withholding taxes will be imposed on the coverage."

Remainder Man: "The person who receives the principal remaining in a trust account after all other required payments have been made, such as those to the beneficiary and expenses."

Required Beginning Date (RBD): "The date by which a qualified plan participant or IRA owner must begin receiving required minimum distributions from his or her retirement account."

Required Minimum Distribution (RMD): "The amount that Traditional, SEP and SIMPLE IRA owners and qualified plan participants must begin distributing from their retirement accounts by April 1 following the year they reach age 70.5. RMD amounts must then be distributed each subsequent year. "

Required Minimum Distribution Method: "One of three methods by which early retirees of any age can access their retirement funds without penalty before turning 59 ½. Normally, funds withdrawn before age 59 ½ are assessed a 10% early withdrawal penalty. Funds must be withdrawn as substantially equal periodic payments as outlined by Internal Revenue Code Section 72(t) and must continue for five years or until the retiree reaches 59 ½, whichever is longer. If withdrawals are stopped, all funds that have already been withdrawn become subject to early withdrawal penalties. 
The annual distribution amount is calculated by dividing the retirement account balance on December 31 of the prior year by the retiree's remaining life expectancy as determined by the IRS's life expectancy table. This means that an increase in the retiree's account balance will lead to larger distributions and a decrease in the retiree's account balance will lead to smaller distributions. "

Resolution Trust Corporation (RTC): "A temporary federal agency established under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), enacted on Aug. 9, 1989, to resolve the savings and loan (S&L) crisis of the 1980s. 
The Resolution Trust Corporation (RTC) had a mission to resolve all thrifts placed under conservatorship or receivership between Jan. 1, 1989, and Aug. 8, 1992. The S&L or thrift industry crisis had resulted in the biggest collapse of U.S. financial institutions since the 1930s. The RTC accomplished its mission by closing, selling or merging troubled thrifts and disposing of assets in an expeditious manner. "

Retirement: "When a person chooses to leave the workforce. The concept of full retirement – being able to permanently leave the workforce in old age – is relatively new, and for the most part only culturally-widespread in first-world countries. Many developed countries have some type of national pension or benefits system (i.e. the United States' Social Security system) to help supplement retirees' incomes."

Retirement Contribution: "A monetary contribution to a retirement plan. Retirement contributions can be pretax or after tax, depending on whether the retirement plan is qualified, how much the contribution is in relation to the contributor's income, and whether the contributor has made previous contributions that would limit tax deductibility."

Retirement Income Fund (RIF): "A group of investment products available to anyone as a conservative means of saving for retirement. A RIF is generally a mutual fund that is well diversified in large and mid-cap stocks and bonds. A RIF balances its portfolio to allow for moderate gains using a conservative approach to attempt to retain value while providing income to investors."

Retirement Method of Depreciation: "An accounting procedure in which an asset is expensed for depreciation purposes only when it is removed from service instead of allocating its costs across the useful life of the asset. The depreciation expense must be reduced by the asset's salvage value, if any. Public utilities and railroads are the main types of businesses that might use this type of depreciation."

Retirement Money Market Account: "A money market account that an individual holds within a retirement account such as an IRA. In a retirement money market account, deposits are placed in low-risk investments like certificates of deposit, Treasury bills and short-term commercial paper. The account pays a relatively low rate of interest, slightly higher than a savings account, but provides liquidity and stability. For the account holder, it operates much like a checking or savings account."

Retirement of Securities: "1. The cancellation of stocks or bonds because the issuer has bought them back. 
2. The removal of an asset from securities markets because its maturity date has been reached."

Retirement Planner: "A practicing professional who helps individuals prepare a retirement plan. A retirement planner identifies sources of income, estimates expenses, implements a savings program and helps manage assets. Estimating future cash flows and assets is also a central part of a retirement planner's work. He or she may use a web-based calculator or software program that will predict future cash flows and assets based on the data entered."

Retirement Planning: "The process of determining retirement income goals and the actions and decisions necessary to achieve those goals. Retirement planning includes identifying sources of income, estimating expenses, implementing a savings program and managing assets. Future cash flows are estimated to determine if the retirement income goal will be achieved."

Retirement Readiness: "The state and/or degree of being ready for retirement. Retirement readiness typically refers to being financially prepared for retirement, or the degree to which an individual is on target to meet his or her retirement-income goals so that the standard of living enjoyed while working will be maintained after retirement. "

Returnment: "The act of returning to work after one has retired from one's job. Returnment happens for many reasons: some people do it out of financial necessity, others because they find full-time retirement less fulfilling than they thought and return to work for the satisfaction that work provides."

Reverse Morris Trust: "A tax-avoidance strategy, in which a corporation wanting to dispose of unwanted assets can do so while avoiding taxes on any gains from those assets. The Reverse Morris Trust starts with a parent company looking to sell assets to a smaller external company. The parent company then creates a subsidiary, and that subsidiary and a smaller external company merge and create an unrelated company. The unrelated company then issues shares to the shareholders of the original parent company. If those shareholders control over 50% of the voting right and economic value in the unrelated company, the Reverse Morris Trust is complete. The parent company has effectively transferred the assets, tax-free, to the smaller external company."

Reversionary Annuities: "A retirement income strategy that combines an insurance policy with an immediate annuity to provide for a surviving spouse. Similar to a permanent life insurance policy, the policy owner of a reversionary annuity pays a premium to guarantee a benefit to the survivor. With a reversionary annuity, upon the insured's death, the beneficiary receives a guaranteed lifetime income instead of a lump sum payment."

Revocable Beneficiary: "The ability of a policy owner either to change who will receive the compensation from his or her policy or to terminate the policy without having to get consent from the current beneficiary. Most life insurance policies have this feature."

Revocable Trust: "A trust whereby provisions can be altered or canceled dependent on the grantor. During the life of the trust, income earned is distributed to the grantor, and only after death does property transfer to the beneficiaries."

Revoked IRA: "An IRA holder may revoke an IRA within the 7 days after the IRA is established. When an IRA holder elects to revoke the IRA, the full amount contributed to the IRA must be returned to the IRA holder."

Rollover: "A rollover is when you do the following:

1. Reinvest funds from a mature security into a new issue of the same or a similar security. 
2. Transfer the holdings of one retirement plan to another without suffering tax consequences. 
3. Move a forex position to the following delivery date, in which case the rollover incurs a charge."

Rollover IRA: "A special type of traditional individual retirement account into which employees can transfer assets from their former employer's retirement plan when they change jobs or retire. The purpose of a rollover IRA is to maintain the tax-deferred status of those assets. Rollover IRAs are commonly used to hold 401(k), 403(b) or profit-sharing plan assets. Rollover IRA funds can later be moved to a new employer's retirement plan. Rollover IRAs do not cap the amount of money an employee can roll over, and they permit account holders to invest in a wide array of assets such as stocks, bonds, ETFs and mutual funds."

Roth 401(k): "An employer-sponsored investment savings account that is funded with after-tax money. After the investor reaches age 59.5, withdrawals of any money from the account (including investment gains) are tax-free. Unlike the Roth IRA, the Roth 401(k) has no income limitations for those investors who want to participate - anyone, no matter what his or her income, is allowed to invest up to the contribution limit into the plan."

Roth IRA: "An individual retirement plan that bears many similarities to the traditional IRA, but contributions are not tax deductible and qualified distributions are tax free. Similar to other retirement plan accounts, non-qualified distributions from a Roth IRA may be subject to a penalty upon withdrawal."

Roth IRA Conversion: "A reportable movement of assets from a Traditional, SEP or SIMPLE IRA to a Roth IRA, which can be subject to taxes. A Roth IRA conversion can be advantageous for individuals with large traditional IRA accounts who expect their future tax bills to stay at the same level or grow at the time they plan to start withdrawing from their tax-advantaged account, as a Roth IRA allows for tax-free withdrawals of qualified distributions."

Roth Option: "An option available within some employer-sponsored qualified plans that allows for Roth tax treatment of employee contributions. The Roth option allows employees to deposit money into their retirement plans on an after-tax basis. This feature is available for both 401(k) and 403(b) plans."

Rule 72(t): "An Internal Revenue Service (IRS) rule that allows for penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA owner to take penalty-free early withdrawals, he or she must take at least five "substantially equal periodic payments" (SEPPs). The amount depends on the IRA owner's life expectancy calculated with various IRS-approved methods."