Plain English

Money words, explained

Short, plain definitions of the terms that show up in the Case Files, with the 2026 figures where they matter.

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AGI (adjusted gross income): Your total taxable income for the year, after a few adjustments such as contributions to a traditional IRA, and before the standard deduction. It is the starting point for many tax rules.
See also: MAGI, standard deduction
Amortization: How a loan is paid off over time in equal payments. Early payments are mostly interest, and later payments are mostly principal. Extra payments go straight to principal and shorten the loan.
See also: Principal and interest
Bracket (tax bracket): A slice of taxable income taxed at one rate. The 2026 federal brackets run from 10% to 37%. Only the dollars inside a bracket are taxed at that bracket's rate, not your whole income.
See also: Marginal rate, effective rate
Break-even age: The age at which a larger, later Social Security check has made up for the smaller checks you skipped by waiting. If you live past it, waiting paid off. The longer you live beyond it, the more it pays.
See also: Full retirement age
Cash cushion: Cash set aside for spending, measured in months of expenses. The Case Files flag a cushion under six months as a warning light. It is a rule of thumb, not a law.
COLA (cost-of-living adjustment): The yearly increase in Social Security checks to keep up with prices. The 2026 increase was 2.8%.
Delayed retirement credits: The increase Social Security adds to your check for each month you wait past full retirement age, up to age 70. After 70, waiting adds nothing.
See also: Full retirement age
Earnings test: A rule that can temporarily hold back Social Security benefits if you claim before full retirement age and keep working. In 2026 the limit is $24,480 a year, and $65,160 in the year you reach full retirement age. Withheld benefits are not lost: your monthly check is recalculated upward once you reach full retirement age.
See also: Full retirement age
Effective rate (average rate): Your total tax divided by your total income. It is always lower than your top marginal rate, because the lower slices of income are taxed at lower rates.
See also: Marginal rate
Fiduciary: A professional who is legally required to act in your best interest. Ask any adviser in writing whether they are a fiduciary at all times and how they are paid.
Full retirement age (FRA): The age at which you get your full Social Security benefit, with no early-claiming reduction and no delayed credit. It is 67 for anyone born in 1960 or later and a little lower for people born earlier. Your statement shows yours.
See also: Delayed retirement credits
Gross-up: Taking out more than you need, so that after tax you keep the amount you need. To pay off $120,000 from a 401(k), you must withdraw more than $120,000, because the withdrawal is taxed.
IRMAA (income-related monthly adjustment amount): The extra you pay on Medicare Part B and Part D premiums if your income is above certain lines. The first line is $109,000 for a single filer and $218,000 for a married couple filing jointly in 2026. It looks at your tax return from two years earlier, and one dollar over a line moves you to the next step.
See also: MAGI, look-back
Look-back (two-year look-back): Medicare uses the income on your tax return from two years ago to set this year's premiums. A big income year, such as a Roth conversion, can raise your Medicare premiums two years later.
See also: IRMAA
MAGI (modified adjusted gross income): AGI with certain items added back. Medicare surcharges, the Roth IRA contribution limit and the senior deduction all use a version of MAGI. For Medicare it includes tax-exempt interest.
See also: AGI, IRMAA
Marginal rate: The tax rate on your next dollar of income. It is the rate of the highest bracket your income reaches. It is the number that matters when you add income, for example from a Roth conversion.
See also: Effective rate, bracket
Medicare Part B: The part of Medicare that covers doctor visits and outpatient care. The standard monthly premium in 2026 is $202.90, and there is a yearly deductible ($283 in 2026). Higher-income households pay more.
See also: IRMAA
Medicare Part D: Medicare's prescription drug coverage. Higher-income households pay an income-related surcharge on Part D, too.
See also: IRMAA
Primary insurance amount (PIA): Your Social Security benefit at full retirement age. Claiming earlier reduces it and claiming later increases it. Your statement lists your benefit at 62, at full retirement age and at 70.
See also: Full retirement age
Principal and interest: The two parts of a loan payment. Interest is the cost of borrowing. Principal is the part that reduces what you owe. A mortgage payment may also include property tax and insurance (escrow), which this site leaves out.
See also: Amortization
Provisional income: The number Social Security uses to decide whether your benefits are taxable: your other income, plus tax-exempt interest, plus half of your Social Security. Above $25,000 (single) or $32,000 (joint), part of your benefit can be taxed, and above $34,000 or $44,000, up to 85%. These thresholds are not adjusted for inflation.
See also: AGI
RMD (required minimum distribution): The minimum you must withdraw each year from a traditional retirement account once you reach the required age: 75 if you were born in 1960 or later, 73 if born from 1951 to 1959. Missing it can trigger a penalty, currently 25% of the amount not taken, or 10% if corrected quickly.
See also: Uniform Lifetime Table
Roth 401(k) or Roth IRA: A retirement account funded with after-tax money. Qualified withdrawals are tax-free. A Roth IRA has no required withdrawals during the owner's life, and since 2024 Roth 401(k)s do not either.
See also: Roth conversion
Roth conversion: Moving money from a traditional account to a Roth. The amount moved is added to that year's taxable income and taxed. After that it can grow, and be withdrawn, tax-free under the Roth rules. A conversion cannot be undone.
See also: Bracket, IRMAA
Senior deduction (enhanced deduction for seniors): An extra $6,000 deduction per eligible person aged 65 or older, for tax years 2025 through 2028. It phases out for modified AGI above $75,000 (single) and $150,000 (joint).
See also: Standard deduction, MAGI
Standard deduction: A fixed amount you subtract from income before tax, so you pay no tax on it. For 2026 it is $32,200 for married couples filing jointly and $16,100 for single filers, before any extra amounts for age.
See also: Senior deduction
Survivor benefit: The Social Security check a surviving spouse can receive after the other spouse dies. The survivor keeps the larger of the two checks, not both. Survivors can start as early as 60 at a reduced amount.
See also: Full retirement age
Tax torpedo: A nickname for the range where extra income makes more of your Social Security taxable, so each added dollar is taxed at a higher effective rate than the bracket suggests.
See also: Provisional income
Traditional 401(k) or IRA: A retirement account where contributions usually went in before tax. Withdrawals are taxed as ordinary income, and required withdrawals start later in life.
See also: Roth, RMD
Uniform Lifetime Table: The IRS table that sets the divisor for your required withdrawal. At 75 the divisor is 24.6, so the first required withdrawal is your balance divided by 24.6, roughly 4.1%.
See also: RMD