The Money Acronyms in Your Mailbox, Translated

Somewhere around the time you hit sixty, your mailbox can start to conspire against you. There seem to be more envelopes arriving, and increasingly obscure language is being used, like “Medicare notices,” “Social Security letters” and “retirement statements.” Each letter is likely to appear as if you’ve been fed a dictionary of jargon (like RMD, FRA and IRMAA) that nobody has ever attempted to explain to you. So many of these letters may eventually end up shoved into a drawer and ignored until another letter arrives.

Don’t ignore these. Most of the acronyms listed above relate to straightforward concepts, and others relate to significant amounts of money that belong to you. I’m going to translate each of the ones I believe are important into plain English, so the next letter you open is easier to make sense of.

The withdrawal the IRS makes you take: RMD

Required minimum distributions (RMDs) dictate that you can’t leave your pre-tax funds alone. At a specific age (the new 73 per the SECURE 2.0 law for those aged 72+ as of 2022), the IRS requires that you withdraw a specified amount from your traditional IRA, 401(k), and the like every year. You can push your very first withdrawal to April 1 of the year after you turn 73, but after that you have to take it by December 31 each year.

Why would the government require this? It’s because the money was placed in your accounts decades ago tax deferred, and the government wants its share before you’re done. Not withdrawing sufficient funds results in severe penalties. So mark your calendar and ensure that you avoid missing a withdrawal. You’ll either need to calculate the total amount of your prior year-end account balance divided by the applicable IRS life expectancy factor, or allow your custodian to perform the calculation. Either way, no harm in having someone else handle the math.

When your full Social Security check kicks in: FRA

Full retirement age (FRA) is defined as the age at which you begin receiving your full Social Security benefit. That’s unless you choose to retire earlier than that, which reduces the monthly benefit amount for life. Or waiting beyond your FRA and continuing until age seventy increases your monthly benefit.

Understanding your FRA is important. This is due to the fact that it determines when you should elect to take Social Security. Consider a woman who turns 66 in 2026. Although she is getting close, she hasn’t yet reached her FRA. If she applies now, she will receive a reduced benefit for the remainder of her lifetime.

The raise that shows up on its own: COLA

Cost-of-living adjustments (COLAs) are annual increases added to your Social Security benefit due to inflation reducing purchasing power. For 2026, COLA increased about $56 per month (average increase) for the typical Social Security recipient. What I love about this concept is that it’s one of the few “raises” during retirement that occurs automatically, without you asking.

Annual COLA changes vary based on changes in pricing indexes, and the dollar impact of those increases on individual recipients’ benefits varies based on each recipient’s individual benefit level.

The Medicare surcharge for higher incomes: IRMAA

IRMAA refers to the additional Medicare premium charged to people who have a modified adjusted gross income (MAGI) exceeding certain levels ($109,000 if single filers; $218,000 if joint filers). Most people don’t even notice their regular Part B Medicare premium of $202.90 per month. But the surcharge begins at the first dollar amount exceeding that threshold. And here’s the kicker: Social Security bases this amount on your MAGI from two years ago. A one-time windfall (for example, sale of a home) could trigger this surcharge. The good news is: if you experience a change in circumstances (I.e. Lose your job or your husband) that reduces your MAGI below the threshold, you can submit form SSA-44 to have Social Security recalculate your premium rate. Don’t allow yourself to unnecessarily pay an IRMAA surcharge.

The advisor who has to put you first: fiduciary

A fiduciary is a financial professional who’s legally obligated to act solely in your best interest, not their own. That sounds like a pretty basic requirement for working with someone providing financial guidance. But unfortunately not everyone providing financial advice is held to that bar, which is exactly why it’s valuable to use this term and ask whether they’re acting in your best interests.

This matters greatly because many professionals providing financial services operate on commissions for placing clients into various types of investments or products. So ask them directly: “are you a fiduciary? Will you put that in writing?” their response indicates whose interests will be driving their decisions, yours or theirs.

Who gets what you leave behind: beneficiary

Your beneficiaries are the people or organizations whom you identify to receive an account or policy after you pass away. Many accounts and policies let you name a beneficiary on the form itself, including your retirement accounts, life insurance, and most bank accounts. And here’s the catch: what appears on this form takes precedence over your last will and testament. So a dated designation of an ex-spouse can direct your assets elsewhere than intended. Review your beneficiaries periodically.

The court process for settling an estate: probate

Probate is the court process by which estates are settled and distributed according to a decedent’s last will and testament. Probate proceedings usually take several months, and are public records available to anyone. An asset with a designated beneficiary or included within a living trust will likely bypass probate.

Turning savings into a paycheck: annuity

An annuity is a contract entered into with an insurance company where you provide them with a lump sum or series of payments today in exchange for periodic payments beginning immediately afterward, and continuing for your entire life (or for a fixed period of time). While some annuities guarantee that you’ll receive a predetermined amount of money every month, others come with many fees and complex provisions that can create anxiety.

But annuities can serve a useful purpose if you worry about exhausting your savings, as they convert large sums of money into predictable monthly checks. The catch is that the terms vary so much between different types of annuities, so review all fees and all surrender charges associated with an annuity before committing to purchase one, and consider hiring a fiduciary who has no incentive to sell it to you to examine it before you do.

Coverage for help with daily living: long-term care insurance

Long-term care insurance covers expenses related to assistance with the normal day-to-day activities when you are in a nursing home, assisted living facility, or have aides visiting your home. Unfortunately, neither your general health insurance nor Medicare cover extended custodial care, although most women discover this only too late.

That said, extended custodial care can cost tens of thousands of dollars a year; so many women rely on this type of care more frequently than men. Premiums paid for long-term care insurance increase the longer you delay buying it. Also, many applicants for long-term care insurance are denied coverage due to health-related issues. So this is a decision you’re better off making sooner rather than later, ideally in your early-to-mid sixties, not waiting until 68.

Filling the holes in Original Medicare: Medigap

Medigap is supplemental private insurance that fills gaps left by Original Medicare (like deductibles or the 20 percent co-insurance remaining on Part B). Medigap plans are identified by letter designations (Plan G, Plan N etc.), and have similar features regardless of who sells it.

You have six months from signing-up for Part B Medicare after reaching age 65 where insurers can’t deny coverage or charge you more based on your health status. Sign up for Medigap insurance outside of those six months and insurers may reject your application, or charge you more based on your health status. So the Medigap sign-up window is your best shot, not sometime next year.

The formula that taxes your benefit: provisional income

Provisional income is an IRS formula used to determine how much of your Social Security benefits will be subject to taxation. The formula calculates provisional income by adding:

Why does this matter? Once your provisional income exceeds specific thresholds (which vary based on filing status), up to 85 percent of your Social Security benefits become taxable. Understanding your provisional income lets you plan withdrawals from other accounts so that you avoid inadvertently sending excess portions of your Social Security benefits into the taxable category.

The check a widow can claim on a late spouse’s record: survivor benefit

A survivor benefit is the Social Security benefit available to a widow or widower from a deceased spouse’s Social Security record. You can apply for survivor benefits as soon as age 60 or 50 if disabled. Be aware that applying for survivor benefits before your full retirement age will reduce the amount payable.

For women, particularly given our greater likelihood of surviving our husbands, understanding when you can file for survivor benefits versus when you should file for your own benefits can lead to significantly more money received overall, particularly if filed correctly. Contact Social Security before making any decisions about when to apply for survivor benefits versus when to file for your own benefits, they can assist you in determining which approach gives the largest payout for you personally.

Photo by Douglas Fehr on Unsplash