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.
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, andRMD 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. TheAdvanced 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.
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 berolled 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.
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 Brentmarkwebsite.
Retirement Distributions Planner costs $249 (less $25 if downloaded.)
You may purchase the software by contacting the publisher at:
3505 Lake Lynda Drive, Suite 212
Orlando, FL 32817-8327
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 [email protected].