Tax Wise Distribution Strategy

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Tax Wise Distribution Strategy in TRAK

It's great to have a strategy! But, it is another thing entirely to effectively illustrate that strategy for a client. TRAK allows for quickly showing clients what their retirement looks like and how best to distribute income in retirement.

The Tax Wise Distribution Model is accessed through TRAK's Gap Analysis Calculator, a calculator whose features have been rapidly evolving over the last few years.

The calculator gives several options when selecting the model for the client's retirement income needs analysis. Choose either the tax neutral model (as a percent of income or current dollar value), which ignores taxation during retirement. Or select the Tax Wise Distribution Strategy. Once specified, the calculator configures the additional data fields needed to perform the desired calculations. The Taxation tab comes next, where the retirement tax tables are configured. Simply select a pre-defined tax table, or create a custom tax table for federal and/or state tax tables.

Subsequently, the taxation and distribution of each account must be configured. Cash accounts may be configured by the tax tiers from which the income will be distributed.

TRAK allows for an unlimited number of retirement accounts, encompassing:

1. Social Security
2. 401(k) and other pre-tax defined contribution plans (including employer match)
3. defined benefit plans, with federal and most state pension plans included
4. other cash accounts, including pre-tax, Roth, and capital gains accounts
5. accounts with known cash flows (such as a rental income or an annuity)
6. lump sum distribution accounts (such as the sale of an asset).
   

And finally, the client's retirement income is configured. Typically, as a client matures in retirement, their expenses decrease. This can easily be configured as well.

Once the data entry is completed, a number of calculation screens are quickly available for effectively educating a client about their retirement planning.

Summary

The Tax Wise Distribution Strategy helps a client more effectively plan for retirement by considering the effect of the projected progressive tax tables on their need for additional savings. It also allows a client to determine whether their additional savings should be pre-tax and/or after-tax.

Click here to instantly download a 30 day demo. Or call us (503-831-1111) to order TRAK-Deluxe, and be up and running in just a few minutes!

Additional Resources

There are several other resources available on the Tax Wise Distribution Strategy listed below. Please click on the link below to access the resource:

1. Overview video the Tax Wise Distribution Strategy
   
   
2. The distribution strategy in TRAK
   
   
3. White paper with multi-year analysis