Retirement Plan

[Kathleen Reynolds]

#4111

Use the Retirement Plan category for any of the following types of plans:

• Corporate and self-employed pension, profit sharing and stock bonus plans qualified under IRC §401(a) (includes Keogh or H.R. 10 plans, 401(k) plans and employee stock ownership plans (ESOPs).
• Individual Retirement Accounts (IRAs) under IRC §408(a).
• Simplified Employee Plans (SEPs) under IRC §408(k).
• Tax-sheltered annuities (except for account balances existing on 12/31/86 if kept separate for accounting purposes) under IRC §403(B).

When entering the balance of the Retirement Plan, remember that you need to enter the balance from 12/31 of the year prior to the first year of the analysis. This is what is used for calculating the required minimum distributions.

Enter the Non-Deductible portion of the balance. The program will not tax distributions from (or conversions of) the Non-Deductible Balance.

To illustrate pre-59½ distributions, click the Pre-59½ Distributions button. Note that if you’re only interested in illustrating pre-59½ distributions, you don’t have to enter any data in the rest of the program. You can simply click that button and print the reports from the window that pops up.

Retirement Plan Contributions

One way to illustrate the advantage of contributing to an IRA or 401(k) is to add the tax savings created by that contribution into the Other Assets fund. This lets the customer see how those tax savings add up over time.

Lump Sum Distributions

The program illustrates the longest stretch-out possible of the funds in the Retirement Plan. If you’d like to illustrate a lump-sum distribution instead, answer “Yes” for the appropriate alternative, and then select what you’d like to have done with the distribution. It can either be re-invested in the Other Assets, or simply spent.

The 10-Year Averaging option for Lump Sum distributions is available for plan owners who were at least age 50 on January 1, 1986. The program calculates income tax using 1986 tax rates (see IRS Announcement 87-105, 1987-48 I.R.B. 32).

Click here for Input Assumptions.

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