Updated Sep 15, 2011
This Glossary is designed to assist users of The Razor with unfamiliar terminology located within the software. If you would like a term or word added to this list please email support@fpadvantage.com.
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
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Active Age
	"Active Age" is simply the age your client plans to retire. It refers to a period in retirement when they will be most active with travel and other interests, requiring more income to fund their lifestyle.  See "Passive Age".
Alternative Investment Strategy
	Alternative investments are investment products other than traditional investments; stocks, bonds, cash or property. The Razor positions the various life insurance planning concepts provided by insurance companies as an "Alternative Investment Strategy". You can choose to remove this document from the print routine by un-checking it from the navigation menu. You can also choose to select a new strategy through the drop down menu in the bottom left hand corner (only available while the Alternative Investment Strategy document is visible).
Average Tax Rate
	"Average Tax Rate" represents the combined overall average rate of tax paid by both clients. It is calculated as (Total Tax) ÷ (Total Taxable Income).
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Base Income
	"Base Income" represents all sources of income that is received by both clients such as earned income, government benefits, pensions, and RRIF minimum withdrawals.
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Clawback Rate
	The "Clawback Rate" is an equivalent rate of income tax that would result in an amount of tax equal to the amount of the benefit clawed back. There are two benefits that can be clawed back, Old Age Security and the Age Credit.
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Highest Tax Rate
	The "Highest Tax Rate" is the combined total of the Clawback Rate and the Marginal Tax Rate.  This will result in the highest percentage of tax payable. For 2011 OAS is clawed back at the rate of 15% of the benefit on taxable income between $66,733 and $108,090. Therefore the highest tax rate would be equal to the marginal tax rate applicable to income of $108,090 plus 15%.
Human Capital
	"Human Capital" is used by The Razor as a heuristic method to calculate a client’s life insurance needs.  This process involves estimating their future earnings potential, then discounting this future cash flow using an appropriate investment rate of return. The lifestyle that your client enjoys today, and hopes to enjoy in the future, is only made possible because each year they convert part of their Human Capital into cash, investments, real estate and other assets that they will use in the future.
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Life Expectancy at Retirement
	"Life Expectancy at Retirement" is the client’s estimated life expectancy based on their retirement age and not the age they are now. By using the client’s life expectancy at retirement instead of their current life expectancy, you get a more accurate estimate of the number of years the client is expected to live in retirement.
Lifestyle Deficiencies
	"Lifestyle Deficiencies" represent the difference between the client’s income goal in retirement and the amount of income the client’s resources are able to generate.
Lifestyle Line Of Credit
	The "Lifestyle Line of Credit" is a theoretical debt created when there are inadequate liquid assets needed to meet the client’s annual after-tax income goal in retirement. By offsetting fixed assets with the Lifestyle Line of Credit we can determine if there will be adequate fixed assets (such as real estate) to compensate for income deficiencies in retirement.
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Paid at Source
	"Paid at Source" represents the income taxes that are withheld at source from RRIF withdrawals that exceed the minimum amount payable and the portion of OAS that is clawed back based on the previous year’s taxable income.
Paid by Installment
	"Paid by Installment" represents the net amount of income taxes due at the end of each year and is calculated as (Total Tax) – (Paid at Source).
Passive Age
	"Passive Age" refers to a period in retirement when your client is likely to be less active, requiring a reduced amount of income to fund their lifestyle needs.  See "Active Age".
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Tax Efficiency
	"Tax Efficiency" is a concept that is applied to non-registered investments and represents the portion of investment income that is taxable. For example, an investment that earns capital gains that are fully realized each year would be 50% tax efficient.  Whereas an investment that earns only interest would be 0% tax efficient, as 100% of the growth is subject to taxation. Allocation and taxation have an immense impact on a client’s ability to fund their needs throughout their lifetime. By incorporating Tax Efficiency into The Razor, we are able to accurately calculate taxation while minimizing the complexity of the analysis and the effort required to complete it.