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First Command Financial Services Glossary of Financial Advisor Terms

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This glossary from First Command Financial Services defines the terms military service members and veterans meet when they work with a financial advisor: pension, Thrift Savings Plan, Survivor Benefit Plan and the tax rules around them.

Each entry gives a short definition first, then why it matters or a small example with round numbers. Dollar limits are for tax year 2026. For anything not listed here, check the current IRS or SSA limit.

A

Asset allocation
Asset allocation is the split of a portfolio among stocks, bonds and cash. It drives most of the ups and downs you feel. A veteran with a pension often holds more stocks, since the pension already covers a steady base.

B

Beneficiary designation
A beneficiary designation is the form that names who receives an account when you die. It overrides your will. Check it on the TSP, each IRA and any life insurance after every marriage, divorce or birth.
Blended Retirement System (BRS)
The Blended Retirement System is the military retirement format that combines a smaller monthly pension with TSP government matching contributions. Service members who joined under it must manage their own TSP, so investment choices matter more than under the older pension-only format.
Bond
A bond is a loan you make to a government or company in exchange for interest and the return of principal at maturity. Bond prices can fall when interest rates rise, so bonds can lose value and are not risk-free.

C

Capital gain
A capital gain is the profit when you sell an investment for more than you paid. If you bought shares for $50,000 and sell for $70,000, the gain is $20,000. Gains inside a TSP or IRA are not taxed until withdrawal.
Catch-up contribution
A catch-up contribution is an extra amount people age 50 and older may add to a retirement account. In 2026 it is $8,000 on top of the $24,500 TSP or 401(k) limit, and $11,250 at ages 60-63.
Cost basis
Cost basis is what you paid for an investment, used to work out taxable gain when you sell. It matters most in taxable accounts. Sell shares bought at $40,000 for $55,000 and the taxable gain is $15,000.
Cost-of-living adjustment (COLA)
A cost-of-living adjustment is a yearly increase in a benefit meant to follow inflation. Military retired pay and Social Security both receive one. The Social Security COLA for 2026 benefits is 2.8%.

D

Deferred compensation
Deferred compensation is pay earned now but received later, often after you leave an employer. Second-career executives meet it often. The money may be only a promise from the company, so check how it is protected.
Diversification
Diversification means spreading money across many investments so one failure hurts less. It reduces risk but does not remove it. If more than a fifth of your net worth sits in one stock, fix that first.

E

Expense ratio
An expense ratio is the yearly fund cost shown as a percentage of the money invested. A fund charging 0.45% more on $600,000 costs $2,700 more each year. TSP funds are known for low costs.

F

Fee-only
Fee-only describes an advisor paid only by clients, not by commissions on products sold. A 1% fee on $500,000 is $5,000 each year. Ask for the exact cost in a written agreement before work starts.
Fiduciary
A fiduciary is a person legally required to put a client's interest ahead of their own. Ask any advisor, in writing, whether they act as one for the services you buy. Do not assume it.
Financial advisor
A financial advisor is a professional who gives guidance on investing, taxes, retirement income and insurance. Titles are not all regulated alike. Ask how the person is paid and what credentials they hold.
Full retirement age (FRA)
Full retirement age is when you can claim your full Social Security benefit. It is 67 for anyone born in 1960 or later. Claiming earlier permanently reduces the monthly check.

G

Governmental 457(b) plan
A governmental 457(b) is a deferred compensation plan for state and local government workers. The 2026 deferral limit is $24,500. Veterans in a second career with a city or county may have one.

H

Health savings account (HSA)
A health savings account is a tax-advantaged account for medical costs, available with a qualifying high-deductible health plan. The 2026 limits are $4,400 self-only and $8,750 family, plus $1,000 at age 55 and older.

I

Income-related monthly adjustment amount (IRMAA)
IRMAA is a surcharge on Medicare Part B and D premiums for higher earners, based on income from 2 years earlier. A big Roth conversion can raise it, so check the thresholds before converting.
Individual retirement account (IRA)
An IRA is a personal retirement account that you open yourself, either traditional or Roth. The 2026 combined contribution limit is $7,500, plus $1,100 at age 50 and older.
Investment management
Investment management is the ongoing work of choosing, monitoring and rebalancing a portfolio. At First Command Financial Services, the focus is keeping you on the written plan, since selling at the wrong moment usually hurts more than any forecast miss.

M

Military retired pay
Military retired pay is the monthly income paid to eligible service members after qualifying service. It is taxable federal income and rises with COLAs. It works like a bond-like base that shapes how much risk the rest of your portfolio can carry.
Modified adjusted gross income (MAGI)
MAGI is adjusted gross income with certain deductions added back. It decides Roth IRA eligibility and Medicare IRMAA. The 2026 Roth phase-out is $153,000-$168,000 single and $242,000-$252,000 married filing jointly.

P

Portfolio rebalancing
Rebalancing means selling some of what grew and buying what lagged to return to your target mix. Done by rule, it removes the urge to guess. In a TSP or IRA, it creates no tax.

R

Required minimum distribution (RMD)
A required minimum distribution is the amount you must withdraw yearly from most pre-tax retirement accounts. It starts at age 73, or age 75 if you were born in 1960 or later. Missing one triggers a penalty.
Rollover
A rollover moves money from one retirement account to another without taxes when done correctly. A direct rollover goes custodian to custodian. Moving a TSP balance to an IRA after separation is common.
Roth conversion
A Roth conversion moves money from a pre-tax account to a Roth IRA and counts the amount as taxable income that year. Converting $30,000 adds $30,000 to income. Estimate the tax bill and IRMAA effect first.
Roth TSP
Roth TSP is the after-tax option within the Thrift Savings Plan, where qualified withdrawals are tax-free. It suits service members in low tax years, such as tax-free combat zone pay, when the deduction is worth less.

S

Safe withdrawal rate
A safe withdrawal rate is the share of a portfolio you can spend each year with a reasonable chance it lasts. It is an estimate, not a promise. A pension lowers how much you need to draw.
Sequence of returns risk
Sequence of returns risk is the danger that poor market years come early in retirement, when you are withdrawing. Selling in a drop locks in losses. Holding 2 years of spending in cash can help you stay put.
Social Security earnings test
The earnings test temporarily withholds benefits if you claim before full retirement age and keep working. In 2026 the limit is $24,480, or $65,160 in the year you reach full retirement age. It matters for second-career earners.
Standard deduction
The standard deduction is a flat amount that lowers taxable income without itemizing. For 2026 it is $16,100 single, $32,200 married filing jointly and $24,150 head of household. Most veterans take it.
Survivor Benefit Plan (SBP)
The Survivor Benefit Plan is a military program that pays a spouse or other eligible beneficiary a portion of your retired pay after you die. The cost reduces your pension, so compare it with other life insurance before you elect.

T

Tax-deferred
Tax-deferred means you pay no tax on contributions or growth until you withdraw. A traditional TSP works this way. Withdrawals are taxed as ordinary income, which is why large balances need an exit plan.
Thrift Savings Plan (TSP)
The Thrift Savings Plan is the federal government's retirement savings plan for service members and federal employees. The 2026 employee deferral limit is $24,500. After separation you can leave it, roll it over or withdraw.
Traditional IRA
A traditional IRA holds pre-tax or deductible contributions that grow tax-deferred and are taxed when withdrawn. A TSP rollover often lands here. RMDs apply, so plan for those withdrawals.

V

VA disability compensation
VA disability compensation is a monthly tax-free payment to veterans for service-connected conditions. It does not count as taxable income, but it interacts with military retired pay in some cases. Confirm how before relying on it.

W

Written plan
A written plan is the document an advisor gives you that lays out your accounts, income sources, taxes and next actions. At First Command Financial Services, it is the reference you return to before changing course.
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