Letter: R

When you transfer (or “roll over”) money from a 401(k) account to an IRA. This allows you to keep the tax-deferral benefits of a 401(k) when you change jobs or retire. You don’t pay any taxes on the money that is transferred, and your money continues to grow tax-free. To avoid a 20% tax withholding penalty, the rollover must take place directly from one custodian to another.

How comfortable you are with the possibility of your investments losing value. In general, your risk tolerance has to do with how much time you have before retirement. When you are younger, you may be more comfortable taking on aggressive, riskier investments. As you near retirement, you may want less risky investments.

The chance that an investment, such as a 401(k) account, will lose value. Some investments are riskier than others. Stocks carry more risk than bonds and cash investments. Risk is related to return: The more risk you are willing to take with your money, the more potential there is for a high return—and also for a loss.

The gain or loss of an investment in a given period, usually expressed as a percentage.

The amount you must withdraw from your 401(k) account each year once you reach age 70 ½. If you work beyond age 70 ½ and own less than 5% of your company, you can defer RMDs until you retire.

Your RMD amount is calculated using factors such as your life expectancy and account balance. Although your plan administrator may calculate your RMD, you (the participant) are ultimately responsible for calculating your RMD and for taking the correct amount on time every year from your account.