Defined terms for the annuity market and lifetime income landscape.
Real versus nominal returns is the distinction between an investment return stated before and after inflation adjustment, where the nominal return is the raw percentage change in dollar value and the real return expresses the same change in purchasing-power terms.
Real yield is the yield on a bond after adjustment for inflation, expressing the return the investor earns in units of purchasing power rather than nominal dollars; it is directly observable on Treasury Inflation-Protected Securities.
Realized value is the share of the theoretical pooling benefit that a real lifetime income product actually delivers, expressed as a fraction of what a frictionless pool could produce for the same individual at the same planning age.
Reference dependence is the principle, foundational to prospect theory, that outcomes are evaluated as gains or losses relative to a reference point (typically the current position, an expectation, or an aspiration) rather than in absolute terms.
