## Adjusted Gross Income (AGI)
**Adjusted Gross Income (AGI)** is gross income minus certain above-the-line deductions. Many tax credits, Roth IRA eligibility rules, and Medicare IRMAA thresholds reference AGI or Modified AGI (MAGI).
## Modified Adjusted Gross Income (MAGI)
**MAGI** is AGI with certain items added back (the add-backs differ by program). IRMAA tiers and ACA premium subsidies key off MAGI, which is why Roth conversions—which raise MAGI—can trigger Medicare surcharges or reduce health-insurance subsidies.
## IRMAA
**IRMAA (Income-Related Monthly Adjustment Amount)** is a surcharge on Medicare Part B and D premiums for higher-income households, based on MAGI from two years prior. Crossing a tier threshold by any amount triggers that tier's full surcharge.
## Marginal vs. effective tax rate
Your **marginal tax bracket** is the rate applied to your next dollar of taxable income; your **effective rate** is total tax divided by total income, and is always lower. Roth conversion planning targets filling lower marginal brackets without jumping into the next one.
## Standard deduction
The **standard deduction** is a fixed amount that reduces taxable income, varying by filing status and age. Bracket-filling math starts after the standard deduction, which is why some income each year is effectively taxed at zero.
## Capital gains and qualified dividends
**Long-term capital gains** and **qualified dividends** are taxed at preferential rates (0%, 15%, or 20%) instead of ordinary brackets. Withdrawals from taxable brokerage accounts often realize long-term gains, which is why withdrawal sequencing across account types changes lifetime taxes.
## Net Investment Income Tax (NIIT)
The **Net Investment Income Tax (NIIT)** is a 3.8% federal surtax on investment income (interest, dividends, capital gains, rental income) once MAGI exceeds $200,000 (single) or $250,000 (married filing jointly). It applies on top of, not instead of, ordinary or capital-gains tax.
## Additional Medicare Tax
The **Additional Medicare Tax** is a 0.9% federal payroll surtax on wages and self-employment income above $200,000 (single) or $250,000 (married filing jointly). Unlike NIIT, it applies to earned income, not investment income, and is collected the same way regular Medicare tax is.
## Alternative Minimum Tax (AMT)
The **Alternative Minimum Tax (AMT)** is a parallel tax system that recalculates liability on a broader income base with fewer deductions, at flat rates after a large exemption. You pay whichever is higher: regular tax or AMT. It mainly affects households with large itemized deductions, incentive stock options, or capital-gains-heavy income sitting in mid-range ordinary brackets.
## Account tax types
**Taxable** accounts (brokerage) realize gains when you sell; **tax-deferred** accounts (traditional IRA, 401(k)) tax withdrawals as ordinary income; **tax-free** accounts (Roth) allow qualified withdrawals tax-free. Diversifying across all three creates flexibility in retirement.
## Required Minimum Distribution (RMD)
A **Required Minimum Distribution (RMD)** is the IRS-mandated minimum withdrawal from tax-deferred retirement accounts after the applicable starting age. RMD amounts depend on account balance and IRS life expectancy factors. Large tax-deferred balances can force high-tax RMD years—one motivation for earlier Roth conversions.
## Roth five-year rule
The **five-year rule** governs when Roth money becomes fully accessible: each conversion has its own five-year clock before penalty-free withdrawal under age 59½, and the account itself needs five years for earnings to be qualified. This timing underpins Roth conversion ladders.
## Break-even tax rate (BETR)
**BETR** is the future ordinary marginal tax rate at which after-tax ending wealth is the same whether you convert to Roth or leave money tax-deferred. Above that rate, conversion tends to win in Analyzer’s model; below it, leaving funds deferred tends to win. Autopilot’s Minimize BETR goal and the Workbench BETR % column use this framing.
## Safe withdrawal rate
A **safe withdrawal rate** is the starting percentage of a portfolio you withdraw in year one (adjusting for inflation after) with a high probability of lasting the full horizon. Research-based tables vary the rate by horizon length and equity allocation.
## Sequence of returns risk
**Sequence of returns risk** is the danger that poor investment returns early in retirement—especially when you are also withdrawing—permanently reduce how long your portfolio can support spending. Monte Carlo simulations in Analyzer model this by randomizing return paths across many trials.
## Guardrails withdrawal strategy
A **guardrails** strategy adjusts retirement spending dynamically: cut withdrawals after the portfolio falls below a lower band, raise them above an upper band. It typically sustains higher average spending than a fixed rule at the cost of income variability.
## Emergency fund
An **emergency fund** is accessible cash covering several months of expenses, held outside investments. Analyzer's liquidity pillar scores roughly six or more months as excellent and under one month as critical.
## Asset allocation and equity weighting
**Asset allocation** is your portfolio's split across stocks, bonds, and cash. **Equity weighting**—the stock percentage—drives both expected return and volatility, and is an input to withdrawal-rate tables and Monte Carlo volatility presets.
Educational content only—not personalized investment, tax, or legal advice.