Assets - Retirement Plan Strategies
The Ret. Plan Strategies tab includes various strategies related to your clients' retirement plans, such as their 401(k) and Roth IRAs. You can use this section to model:
Maximized additions to retirement plans
Roth Conversions
Qualified Charitable Distributions (QCDs)
Maximize Retirement Plan Additions
Use this section to have the program automatically maximize additions for a selected retirement plan. The table summarizes total current additions going towards the maximum. For the most part the table only shows personal additions, with two exceptions:
Health Savings Accounts show combined personal and company additions. This is because they both count towards the legal limit. When checking the box to maximize additions to an HSA it is assumed that increased additions are made personally.
Profit Sharing shows company additions. When you check the box the program will automatically increase company additions based on the legal limit the company is allowed to make.
You can elect to maximize additions to as many retirement plans as you like. For example, if a client is maximizing contributions to their Roth IRA, 401(k), and HSA, you can check the boxes for each option to have additions maximized for all those account types.
When an option is selected the current limits are also provided for quick reference and comparison to the table.
NOTE: Moneytree Plan does not recognize legal limits for additions manually modeled in the Assets tab. If you mark a retirement plan type to maximize additions that already exceeds the legal maximum, additions will not change in reports.
Roth Conversions
Here you can quickly model conversions from a tax-deferred retirement plan into a Roth IRA. The table will list each tax-deferred retirement plan pool. By default Moneytree Plan pools together all retirement plans based on owner and taxability. If the option to project a retirement plan separately is checked in the Assets tab then it will have its own listing in the table.
For example, all of one client's IRAs, 401(k)s, and other tax-deferred retirement plans would be combined into a consolidated bucket of money. There is a box in the Assets tab to project retirement plans separately. If that is checked, then that retirement plan will be separated from the consolidated bucket and will have a dedicated listing in the table.
To model a Roth conversion, select the desired option then use the table to enter the owner's age when they will convert and desired amount, either as a dollar amount or a percent of balance for the asset(s). Next, add a second entry to set the age when they will stop the conversion with all other fields 0.
The funds will be automatically transferred from the selected tax-deferred account into a Roth IRA fund of the same owner.
Qualified Charitable Distributions
Use this section to model Qualified Charitable Distributions (QCDs) from desired retirement plans. Simply select the desired option, then use the table to model the QCDs based on the owner's age. They can be modeled as a dollar amount or a percentage of the RMD. QCDs before the legal start age or exceeding the legal limit will be reported for itemized deductions as charitable contributions coming from the selected retirement plan.
If the QCDs are being made for a limited time create one entry to start the QCDs and a second entry at the desired stop age with all other fields at 0.
When modeled the program will automatically withdraw funds from the selected retirement plan and create a tax deductible expense up to the legal limit.