Permalink Submitted by john sims on Sun, 2009-11-22 02:15
[quote=”[email protected]“]Who offers the best software for analyzing Roth IRA Conversions?[/quote]
Money Tree Software out of Oregon at 877-421-9815 offers a pretty good one.
Permalink Submitted by Genevieve Comfort on Thu, 2010-06-03 17:13
Hi,
I have been a daily reader of this forum for over a year. I greatly appreciate the wealth of knowledge provided by the regular contributors. I viewed this thread last December with great interest, since I faced Roth conversion decisions in 2010. Since I had grown to have great respect for the contributions of Bruce Steiner, following his advice, I purchased Brentmark’s Retirement Plan Analyzer, previously known as Pension and Roth Analyzer. Subsequently, I have run many cases with this software, examining numerous variations of the facts pertinent to my own situation. While the software provides great flexibility and ease of use with the ability to provide customized reports that would easily impress clients, I have found what appears to be a significant underestimation of income taxes. In particular, in the case wherein a second-level non-spousal beneficiary inherits a Traditional IRA, the software appears to calculate the income tax on each income stream, e.g., RMD, and designated other income, as if each were the only income. Consequently, it applies a lower income tax rate to each income stream than does IRS. Although I have repeatedly brought this apparent substantive calculation error to the attention of Brentmark by e-mail and letter, Brentmark has chosen to ignore my communications. Based upon my experiences, I second Mr. Steiner’s alternative suggestion, an Excel spreadsheet . If calculation correctness is important to you, create your own Excel sheet that matches your case.
Permalink Submitted by Alan Spross on Thu, 2010-06-03 22:58
Question – does it treat the RMD as the only income in determining beneficiary taxation? No place to enter other annual income estimates from all sources and/or additional distributions from the IRA itself in excess of the RMD?
And it sounds like this deficiency does not apply to the IRA/Roth owner?
Permalink Submitted by Genevieve Comfort on Fri, 2010-06-04 00:12
Alan,
The software initially has the IRAs owned by the owner. The default case is that upon the death of the owner, the IRAs pass to a spouse. After the death of the spouse, the IRAs then pass as beneficiary IRAs to a non-spouse owner. At each stage, the software user is able to specify additional income, and annual expenses. The problem I have described is that during the period of the non-spousal beneficiary, the software appears to calculate the income tax on the RMD and the income tax on the specified “Other Income” as though each were the only income, rather than first adding them together to establish an AGI. As a result, during this period, the calculated income tax is substantially too small. This problem does not appear to exist during the period when the IRA owner or the spousal beneficiary is alive.
Another substantive challenge is that the program places the excess of income and calculated RMDs – minus expenses – into an “Other Assets” account. The user must specify both an assumed earnings rate on this Other Assets account as well as an assumed tax rate on the earnings from this account. The software authors apparently considered this Other Assets account as an investment account, allowing the user to input an assumed 15% capital gains tax rate. However, if instead one envisions earnings on Other Assets to be subject to tax as ordinary income, e.g., earnings on CDs, then this software structure is awkward, at best. The program does not have an option to add the income from earnings on Other Assets to the RMD and other specified income to determine an overall AGI upon which income taxes are calculated. So, the user must take the annual income tax outputs from the Retirement Plan Analyzer and compare them to the income taxes output from tax software, e.g., Turbotax. One must then adjust the assumed income tax rates input for earnings on Other Assets in Retirement Plan Analyzer until the annual overall income tax outputs between RPA and Turbotax converge.
If these two areas of difficulty were corrected, I believe Retirement Plan Analyzer could be a very useful program, allowing the user to investigate a number of alternative cases and display a wide assortment of useful outputs with ease. However, until that time, ease of use and flexibility of output cannot make up for lack of calculation credibility. My results, my opinions.
Permalink Submitted by john sims on Sun, 2009-11-22 02:15
[quote=”[email protected]“]Who offers the best software for analyzing Roth IRA Conversions?[/quote]
Money Tree Software out of Oregon at 877-421-9815 offers a pretty good one.
Permalink Submitted by [email protected] on Wed, 2009-12-02 04:11
Try this … it will be available in about a week. http://www.legacycg.com there is a free trial offer.
Permalink Submitted by Bruce Steiner on Wed, 2009-12-02 20:58
Either Brentmark’s Pension and Roth Analyzer http://www.brentmark.com or Excel.
Permalink Submitted by Genevieve Comfort on Thu, 2010-06-03 17:13
Hi,
I have been a daily reader of this forum for over a year. I greatly appreciate the wealth of knowledge provided by the regular contributors. I viewed this thread last December with great interest, since I faced Roth conversion decisions in 2010. Since I had grown to have great respect for the contributions of Bruce Steiner, following his advice, I purchased Brentmark’s Retirement Plan Analyzer, previously known as Pension and Roth Analyzer. Subsequently, I have run many cases with this software, examining numerous variations of the facts pertinent to my own situation. While the software provides great flexibility and ease of use with the ability to provide customized reports that would easily impress clients, I have found what appears to be a significant underestimation of income taxes. In particular, in the case wherein a second-level non-spousal beneficiary inherits a Traditional IRA, the software appears to calculate the income tax on each income stream, e.g., RMD, and designated other income, as if each were the only income. Consequently, it applies a lower income tax rate to each income stream than does IRS. Although I have repeatedly brought this apparent substantive calculation error to the attention of Brentmark by e-mail and letter, Brentmark has chosen to ignore my communications. Based upon my experiences, I second Mr. Steiner’s alternative suggestion, an Excel spreadsheet . If calculation correctness is important to you, create your own Excel sheet that matches your case.
Permalink Submitted by Alan Spross on Thu, 2010-06-03 22:58
Question – does it treat the RMD as the only income in determining beneficiary taxation? No place to enter other annual income estimates from all sources and/or additional distributions from the IRA itself in excess of the RMD?
And it sounds like this deficiency does not apply to the IRA/Roth owner?
Permalink Submitted by Genevieve Comfort on Fri, 2010-06-04 00:12
Alan,
The software initially has the IRAs owned by the owner. The default case is that upon the death of the owner, the IRAs pass to a spouse. After the death of the spouse, the IRAs then pass as beneficiary IRAs to a non-spouse owner. At each stage, the software user is able to specify additional income, and annual expenses. The problem I have described is that during the period of the non-spousal beneficiary, the software appears to calculate the income tax on the RMD and the income tax on the specified “Other Income” as though each were the only income, rather than first adding them together to establish an AGI. As a result, during this period, the calculated income tax is substantially too small. This problem does not appear to exist during the period when the IRA owner or the spousal beneficiary is alive.
Another substantive challenge is that the program places the excess of income and calculated RMDs – minus expenses – into an “Other Assets” account. The user must specify both an assumed earnings rate on this Other Assets account as well as an assumed tax rate on the earnings from this account. The software authors apparently considered this Other Assets account as an investment account, allowing the user to input an assumed 15% capital gains tax rate. However, if instead one envisions earnings on Other Assets to be subject to tax as ordinary income, e.g., earnings on CDs, then this software structure is awkward, at best. The program does not have an option to add the income from earnings on Other Assets to the RMD and other specified income to determine an overall AGI upon which income taxes are calculated. So, the user must take the annual income tax outputs from the Retirement Plan Analyzer and compare them to the income taxes output from tax software, e.g., Turbotax. One must then adjust the assumed income tax rates input for earnings on Other Assets in Retirement Plan Analyzer until the annual overall income tax outputs between RPA and Turbotax converge.
If these two areas of difficulty were corrected, I believe Retirement Plan Analyzer could be a very useful program, allowing the user to investigate a number of alternative cases and display a wide assortment of useful outputs with ease. However, until that time, ease of use and flexibility of output cannot make up for lack of calculation credibility. My results, my opinions.