by Carolyn Rothwell on July 26, 2012

Silver 101 - Understanding the Retirement Capital Analysis


This post provides everything you need to know about the Retirement Capital Analysis in Silver by breaking down each of the columns on this year by year retirement projection.

RetirementCapitalAnalysis

[1] Retirement Spending Needs:

  • Retirement spending starts when either individual reaches retirement age. 
  • This is the value of the “Annual expenses during retirement” entered in Income/Expense input, increased for inflation. 
  • If one individual is retired, and the second is still working, the program will apply the working individuals after-tax and after-contribution income to reduce the sending need.
  • After the life expectancy of one individual, the spending need will change to “Annual expenses for a survivor in retirement” entered in the Income/Expenses input, increased for inflation. 

[2] Social Security:

  • The program will estimate a benefit based on the clients earned income, or if the actual benefit is entered on the Pension/SS input, the actual benefit will be used. 
  • The program will inflate the SS benefit prior to the start age (as well as after the start age), by the increase rate entered. 
  • Silver assumes 85% of the SS benefit is taxable, and applies the tax rate to that taxable amount, and the after tax SS benefit is displayed.
  • The program will account for spouse and survivor disability benefits in retirement.  

[3] Pension Income:

  • Pension amount is from the Pension/SS input. 
  • The pension benefit could be inflated prior to the start age if you have set “annual increase rate before starting age” and after start age if you have “annual increase rate after starting age” entered. 
  • Silver assumes the pension is taxable.  The after tax pension benefit is displayed.
  • The program will account for survivor benefits after the death of the pension recipient, when entered under “Percent of this benefit available to surviving spouse” on the Pension/S.S. input.

[4] Education & Other Inc/Exp:

  • This is the sum of everything entered in the Special Income Planner, Special Expense Planner or Education Costs. 
  • If you had a Special Income of 10,000, and a Special Expense for the same year of (15,000), the net result of (5,000) would display in this column. 
  • Note: Special Income items are not reduced for taxes.  If the income entered in the Special Income Planner is taxable, enter the after tax value.

 [5] Net Surplus or (Shortage):

  • This is the sum of everything to the left of this column.  Spending Needs offset by SS & Pension amounts & Other Inc/Exp = Surplus/(Shortage).

[6] Annual Additions to Assets:

  • The total of additions to assets entered in the Asset input. 
  • This includes both personal and company additions.

[7] Retirement Capital:

  • This column show the combine asset account totals: Savings & Investments, Tax Free, Annuity, 401K/TSA/SEP/Simple, IRA, and Roth IRA investments and retirement accounts.
  • The value at the top of the column (above the line) is the starting capital balance of all assets entered in the Asset input screen. Each year the program adjusts the balance based on the following illustration:

    Starting balance
    +- plus or minus surplus or shortage (during retirement years)
    + plus annual additions
    -  taxes on growth and/or withdrawal
    + plus annual interest (from the Taxable Savings and Tax Free Accounts reports)
    = next years balance.

Below are the instructions to replicate the monthly compounding method used to calculate growth on investments in Silver, with less work! 

Growth:

Shortage Occurs:

  • Take the “End of Year Balance of the previous year” + “1/2 year account addition” x “the interest rate” [A]
  • Take “1/2 of the Cash Flow shortage” x “the interest rate” [B]
  • Take [A] - [B]  = “Annual Growth”
Surplus Occurs:
  • Take the “End of Year Balance of the previous year” + “1/2 year account addition” x “the interest rate” [A]
  • Take “1/2 of the Cash Flow surplus” x “the interest rate” [B]
    1. Take [A] - [B] = “Annual Growth”
 
Silver Financial Planner

Subscribe to Email Updates

Recent Posts

Planner Guides

Check out our free informational guides for advisors including:
  • Fundamental Financial Planning Interview Guide 
  • Making the Most out of Planning Engagements
  • Social Security: Choices Opportunities, and Decisions
  • Understanding Medicare Fundamentals

Popular Posts

Carolyn Rothwell

Carolyn enjoys spending her time building Money Tree Software's brand and products. Her experience creating and delivering financial plans for a full-service financial planning firm and supporting advisors working to provide the best planning to their clients as a Money Tree support member has provided an excellent understanding of the importance of financial planning.