The Gap Analysis Setup tab allows for the quick configuration of a few of the general setup features.
Configuration for Spouse
Including a spouse in the retirement gap illustration is optional and is configured by selecting the desired setting. Note that if a spouse is not considered, both the Spouse and the Spouse Retirement Plan tabs will be disabled (as shown below).
Model for Retirement Income
This selection determines if taxation, and distributions based on a client's taxation, should be taken into account for the client. Click here for a discussion of the Tax Wise Distribution Strategy.
Cash Balance Accounts
Default accumulation rates, distribution methods, and distribution rates of return can be assigned for the cash accounts. This includes 401(k) plans, TSP/Federal Savings Plan Tabs accounts (optional, configured in File/Config/Gap Analysis/Federal Plans) and Retirement Investments. This allows for easily changing the rates of return associated with the various cash balance accounts.
Use the same Accumulation Rate of Return for all Cash Balance Accounts
Check this box to use the same rate of return until retirement for all cash balance accounts.
Accumulation Rate of Return
Enter the rate of return earned by the cash balance account until retirement.
Use the same Distribution Method for all Cash Balance Accounts
Check this box to use the same account distribution method for all cash balance accounts.
Distribution Method
Select the account distribution method to be used by the cash balance accounts.
Use the same Distribution Values for all Cash Balance Accounts
This prompt is only visible if the Use the same Distribution Method for all Cash Balance Accounts is checked.
Check this box to use the same distribution values for all accounts.
Payout Rate of Return, Payout Percent, and/or Annuity Rate
The visible prompts will depend upon the distribution method. Enter the appropriate values for the various inputs.
Side Fund / Additional Savings
TRAK will calculate the additional savings needed for a client to meet their retirement goals. Any income distributed in retirement that is above the client's determined need is automatically deposited into the Side Fund account. This "extra" income may occur due to the sale of an asset, excess RMDs, etc.
Interest rate prior to retirement and Interest rate in retirement
The rates of return entered here relate to interest rates the additional savings would earn.
Annually increase additional monthly savings with client's raise
When additional monthly savings are needed to solve a retirement gap, check this box if the monthly savings increases the same month the client's raise occurs.
Tax Tier Inclusion
This prompt is used for the Tax Wise Distribution Strategy (not shown above). It clarifies the income tax tiers to which the account may be distributed during retirement. The options include:
1.All Tiers: The account may be distributed in all tax tiers.
2.Highest Tax Tier: The account may only be distributed in the highest tax tier.
3.Highest Tax Tiers: The account may only be distributed in the highest (x) tax tiers, where (x) is the value entered in the Tax Inclusion Value prompt (next input).
4.Tax Tiers At or Above Value: The account may be distributed in tax tiers at or above the tax rate entered in Tax Inclusion Value prompt (next input).
5.Lower Tax Tiers: The account is distributed in the lowest (x) tax tiers, where (x) is the value as entered in the Tax Inclusion Value prompt (next input).
6.Tax Tiers At or Below Value: The account may be distributed in tax tiers at or below the tax rate entered in the Tax Inclusion Value prompt (next input).
Tax Inclusion Value
This prompt is used for the Tax Wise Distribution Strategy (not shown above). This selection is enabled depending upon the chosen option in the prior prompt (Tax Tier Inclusion) and is the value corresponding to that option.
Restricted Distributions
These options determine if funds distributed from an account can be accessed when a shortfall would otherwise occur. For example:
With retirement savings accounts that have cash balances during retirement, a number of payout methods may be selected that restrict distribution to the account (e.g. "Amortize with Inflation"). If this box is checked, and there is an income shortfall, TRAK will override the restricted distribution and take money from the account.
