Glossary: Investor Persona Terms
This glossary covers terms you'll encounter when planning investments around your life stage, career profile, or specific circumstances. Bookmark it for quick reference as you explore other articles in the Investor Personas series.
Accumulation Phase — The period (typically ages 25-55) when you're building wealth through regular contributions and compound growth, before shifting to preservation and withdrawal.
Asset Location — The strategy of placing investments in the most tax-efficient account type (e.g., bonds in tax-deferred accounts, stocks in taxable accounts).
Beneficiary Designation — The person or entity you name to receive an account's assets upon your death, which overrides your will for retirement accounts and insurance policies.
Catch-Up Contribution — Additional retirement contribution amounts allowed for investors age 50+ (currently $7,500 extra for 401(k)s, $1,000 extra for IRAs).
Caregiver Agreement — A written contract under which a family member provides care services in exchange for payment, used for tax and Medicaid planning purposes.
Concentration Risk — The danger of holding too much of your net worth in a single asset (often employer stock), which creates correlated exposure to both income and wealth loss.
Custodial Account (UGMA/UTMA) — Investment accounts held for a minor's benefit under the Uniform Gifts/Transfers to Minors Act, which transfer ownership at the age of majority.
Decumulation — The phase of drawing down retirement savings to fund living expenses, requiring different strategies than the accumulation phase.
Direct Indexing — An investment approach that replicates an index using individual stocks rather than a fund, enabling personalized exclusions and enhanced tax-loss harvesting.
Employer Match — Free money from your employer deposited into your 401(k) when you contribute, typically 50-100% of your contribution up to a certain percentage of salary.
ESG (Environmental, Social, Governance) — Investment criteria that consider environmental impact, social responsibility, and corporate governance alongside financial returns.
Family Office — A private organization providing comprehensive wealth management, tax planning, and lifestyle services for one affluent family (single-family office) or multiple families (multi-family office).
Fiduciary — An advisor legally obligated to act in your best interest, as opposed to a suitability standard that only requires recommendations be appropriate.
FMLA (Family and Medical Leave Act) — Federal law providing 12 weeks of unpaid, job-protected leave annually for family caregiving or medical reasons.
Human Capital — The present value of your future earnings, which declines as you age and should be considered alongside financial capital when assessing total wealth.
Impact Investing — Investments targeting measurable social or environmental outcomes alongside financial returns, often in private markets.
Life-Stage Investing — An investment approach that adjusts asset allocation, risk tolerance, and financial priorities based on your age and life circumstances.
Lookback Period — The time window (typically 5 years for Medicaid) during which asset transfers are reviewed and may trigger eligibility penalties.
Negative Screening — The exclusion of specific industries or companies from a portfolio based on values criteria (e.g., no tobacco, weapons, or fossil fuels).
Net Unrealized Appreciation (NUA) — A tax strategy for employer stock in a 401(k) that allows paying capital gains rates on appreciation rather than ordinary income rates.
Qualified Charitable Distribution (QCD) — A direct transfer from an IRA to a charity that satisfies Required Minimum Distributions without counting as taxable income (age 70½+).
Required Minimum Distribution (RMD) — Mandatory annual withdrawals from Traditional retirement accounts starting at age 73 (for most), calculated by dividing the account balance by an IRS life expectancy factor.
Roth Conversion — Moving funds from a Traditional IRA or 401(k) to a Roth account, paying income tax now in exchange for tax-free withdrawals later.
Rule of 55 — A provision allowing penalty-free 401(k) withdrawals starting at age 55 if you've separated from the employer sponsoring that plan.
Sequence of Returns Risk — The danger that poor investment returns early in retirement (when you're withdrawing) will permanently impair portfolio longevity, even if average returns are acceptable.
Solo 401(k) — A retirement plan for self-employed individuals with no employees, allowing both employee and employer contributions up to $70,000 annually (2025).
Spousal IRA — An IRA contribution made on behalf of a non-working or low-earning spouse, using the working spouse's earned income to qualify.
Succession Planning — The process of preparing for the transfer of business ownership, wealth, and decision-making authority to the next generation.
Tax-Loss Harvesting — Selling investments at a loss to offset capital gains, reducing current-year taxes while maintaining portfolio exposure through substitute holdings.
Withdrawal Sequencing — The order in which you tap different account types in retirement (typically taxable → tax-deferred → Roth) to optimize lifetime tax efficiency.
This glossary will expand as new investor persona content is published. Terms link to deeper explanations in related articles throughout the series.