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FEATURE STORY
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Retirement Distributions
Planner
Quick retirement-planning computations
for the trusts-and-estates practice
By Donald H. Kelley
The new year is a good time to help your clients reassess where they
are and where they are going as they head towards retirement. And what
better way to do this than with retirement planning software! This
family of software addresses a broad range of retirement benefit topics,
including required minimum distribution (RMD) computations, 401(k)
eligibility, stretch individual retirement accounts (IRAs), pre-59 1/2
distributions and IRA schedules. As we ring in the new year, let's
explore one such program, Brentmark's Retirement Distributions
Planner, a tool that addresses pension plans for advisors and the
clients they serve.
Kelley Rating (one asterisk = lowest, to five asterisks =
highest):
Ease of navigation, design of interface and learning curve
****
Instructional documentation and help system ***
Carries out the goal of the product as advertised *****
Overall usefulness ****
There are times in the trusts-and-estates practice when you want to get
a quick fix on either the projected estate value of a retirement plan or
the ultimate benefits it will produce. Estate planning is not just about
the "estate." Retirement planning also enters into the equation.
Sometimes, you need to know the costs and benefits of a client removing
money from an IRA before 59 1/2 years old and after 70 1/2. Brentmark's
Retirement Distributions
Planner and related products will assist you in computing the
retirement benefits from qualified plans, IRAs, Roth IRAs and 401(k)
plans. You should expect this type of program to handle pre-59 1/2
distributions, compute RMDs and illustrate stretch IRAs in graphic and
textual format. Ideally, such programs should produce a yearly schedule
of retirement payments and graph the yearly status of the retirement
fund.
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Competitive
Products
Programs in this genre have different emphases, with some dedicated to
only particular calculations and some going into greater technical
detail:
Denver Tax Software's IRA/Pension
Distribution Planner is aimed at designing distributions that avoid
penalties. This program, which includes help screens with informative
legal explanations, calculates the maximum distribution for clients
under 59 1/2 -- to allow for the withdrawal of funds while avoiding the
10 percent early distribution penalty. It also supplies the RMD amounts
for clients over 70 1/2 to avoid the 50 percent penalty. The program
costs $199, and a demo is available.
The Leimberg Retirement
Plan Analyzer (also sold by Brentmark) is a more
sophisticated program. It handles up to 10 beneficiaries and calculates
up to four alternatives simultaneously for various types of
distributions. It addresses insurance premiums and proceeds and federal
and state estate taxes. The program allows you to enter income tax rates
that vary yearly and by type of distribution. It costs $595.
The National Underwriters' Ultimate
IRA Calculator on CD calculates and projects RMDs, substantially
equal periodic payments and the taxable portion of distributions,
conversions and losses. The program includes brief explanations of each
calculation. Priced at $81.70, it is sold along with the book
Ultimate IRA Resource, by William J. Wagner, which covers all
aspects of IRAs in detail.
PenD'Calc's Retirement and Estate
Planning Software by Clarity Software offers comprehensive programs
and separate modules that include the 72(t) Software
Distribution Calculator and 72t Early
Distribution Software, priced at $199, and RMD Software for $99,
both with features for single- and multi-year presentation. IQA
Software (also called Stretch Plus) for IRAs,
annuities and non-qualified annuities illustrates stretch IRAs and both
qualified and non-qualified stretch annuities. It includes the 72(t) Software
Distribution Calculator, which calculates early distributions, and
the RMD Software. It
costs $399. ILIT
Software, priced at $199, integrates IRA distribution planning with
insurance trust planning. The Advanced PenD'Calc
Software is a retirement, distribution and estate-planning software
bundle that includes all of the PenD'Calc pension products. This
comprehensive package costs $899.
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What's It All
About?
Retirement Distributions
Planner helps you plan for the achievement of retirement targets and
the effect of proposed plan distributions. It calculates RMDs under the
2002 final regulations (as well as the 2001 proposed regulations and the
pre-2001 rules) from qualified plans, IRAs and Roth IRAs. It calculates
stretch IRAs and pre-59 1/2 distributions. It may be used for IRAs,
401(k)s and Roth 401(k)s that are not rolled into Roth IRAs and
Roth 401(k)s that will be rolled into a Roth IRA at the owner's
death. The program calculates Roth IRA minimum distributions. Reports
show annual distributions, the life expectancy for each beneficiary,
total distributions to each beneficiary and yearly distributions to all
beneficiaries.
The minimum distribution calculations address both single and joint life
expectancies as well as spousal and up to five nonspousal beneficiaries.
The minimum distribution incidental benefit rules are included for
nonspousal beneficiaries. You may enter additional plan contributions
and an expected plan growth percentage.
The program also addresses avoidance of the 10 percent penalty for
pre-59 1/2 distributions. The three methods from Revenue Ruling 2002-62
to avoid the 10 percent penalty are included as well as the calculation
variations from the Internal Revenue Service's FAQs regarding Rev. Rul.
2002-62.
How It Works?
Retirement
Distributions Planner has a clear and simple interface that presents
both the required inputs and resulting calculations on a single screen.
First, you enter the year for calculation and then select either
"Normal" (IRA, 401(k), Roth 401(k) or Roth IRA) or 5 percent owner. You
then enter the plan balance at the end of the prior year. For
projections, you may enter anticipated plan growth. Then you indicate if
there is a designated beneficiary and whether the beneficiary is a
spouse. Owner's and beneficiary's birth dates are then entered. A
beneficiary information screen allows you to enter more detailed
beneficiary information, including projected years of death (which may
be based on life expectancies computed by the program.) You also may
designate beneficiaries at the surviving spouse's death and select the
separate accounts rule, if desired. Another pop-up screen lets you
specify annual contributions to the plan and designate annual percentage
increases in the contributions.
A schedule appears on the right-hand side of the screen, reflecting the
plan balance, life expectancy, yearly distributions and total
distributions for distributions beginning at age 70 1/2. This schedule
extends through the life expectancy of the owner and the life expectancy
of the spouse after rollover. It then shows the annual distributions
when the plan is stretched beyond the life of the surviving spouse. The
program computes the RMDs for each year. You may also display a bar
chart showing the annual balance and total distributions or a line chart
of annual distributions.
You need only click on "Calculate Pre-59 1/2 Distributions" to bring up
a screen with required data inputs and a schedule of distributions
designed to satisfy the substantially equal distributions exception to
the 10 percent penalty rule and a comparison of the three allowable
distribution methods. You also may specify a goal of distributions that
are a specific dollar amount annually or distributions that are as much
as possible.
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Where Do
You Get It?
The product, along with a downloadable demo and links to a series of
case studies illustrating the capabilties of the tool, is available on
the Brentmark website.
Retirement Distributions
Planner costs $249 (less $25 if downloaded.)
You may purchase the software by contacting the publisher at:
Brentmark Software
3505 Lake Lynda Drive, Suite 212
Orlando, FL 32817-8327
Phone: 800-897-6665
www.brentmark.com/orders.htm
Bottom Line
This program is primarily a planning tool. It will help you analyze both
the projected estate tax value and retirement distributions of your
clients' retirement plans. It is quick and easy to use and is an
excellent value for the calculations it performs. And it's also a great
way to help your clients tackle those retirement preparation resolutions
and reevaluate their retirement plans as they embark upon the new year.
Trusts & Estates magazine is pleased to present the monthly
Technology Review by Donald H. Kelley -- a respected connoisseur of
the software and Internet resources wealth management advisors use to
further their practices.
Kelley is a lawyer living in Highlands Ranch, Colo. and is of counsel to
the law firm of Kelley, Scritsmier & Byrne, P.C. of North Platte, Neb.
He is the co-author of the Intuitive Estate Planner Software,
(Thomson-West 2004). He has served on the governing boards of the
American Bar Association Real Property Probate and Trust Section and the
American College of Tax Counsel. He is a past regent and past chair of
the Committee on Technology in the Practice of the American College of
Trust and Estate Counsel.
Trusts & Estates has asked Kelley to provide his unvarnished opinions
on the tech resources available in the practice today. His columns are
edited for readability only. Send feedback and suggestions for articles
directly to him at dhkelley@qwest.net.
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