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ORP News and other news related to retirement

2017 News

11/05/2017: Optional Use of Proposed GOP Tax Reform Tax Schedule

A checkbox has been added at the bottom of the extended form, in the tax parameters section. Checking this check box will cause ORP to substitute the standard personal income tax computation schedule with that contained in the Republican tax reform bill.

10/31/2017: Health Savings Accounts Implemented

Early retirees who choose a high deductible health plan (HDHP) during their ACA enrollment can deduct their HSA contributions from their Modified Adjusted Gross Income (MAGI) for that tax year. ORP now models contributions to health savings accounts in conjunction with constraining taxable income.

10/13/2017: Improved Early Retirement Modeling

Early retirement is the retirement phase before age 59 1/2. During that period withdrawals from your IRA and Roth IRA are subject to a 10% early withdrawal penalty. Up until now ORP has modeled early retirement distributions in the same way it handled regular retirement withdrawals.

The IRS Substantially Equal Periodic Payments (SEPP) program allows receiving IRA payments without the 10% early distribution penalty before age 59 1/2. IRA to Roth IRA conversions are also exempt from the penalty. ORP has been enhanced to provide detail modeling of these two IRS exceptions during early retirement.

09/28/2017: Enhanced Default Inflation Rates

The Federal Reserve continually states that its target inflation rate is 2%, not the 2.5% currently used as the default by ORP. A study by the Senior Citizens League found that seniors' spending inflation, particularly medical costs, is 4%, not ORP's 2.5% default.

ORP's default inflation rates have been adjusted accordingly, 2% for income inflation and 4% for spending inflation. Of course these are default rates. You can set them to whatever your are comfortable with.

08/07/2017: Revised Growth of Account Contributions

Formerly ORP was increasing annual contributions to savings by the income inflation rate. The revised method assumes that contributions track the Bureau of Labor Statistic observed wage and salary growth for U.S. workers. This means that contributions will increase rapidly early in a workers history and flatten out as retirement approaches.

06/07/2017: Revised After-tax Account Model

ORP's method of modeling the After-tax Account has been revised. The After-tax Account is divided into two asset types: stocks and bonds. Stocks grow in value over the years and when they are sold the proceeds are taxed at the capital gains rate. Bonds yield interest each year which is taxed as personal income. Bonds do not grow in value and are redeemed at face value. Stocks do not issue dividends.

05/01/2017: Social Security OASI Depletion in 2035

The Social Security and Medicare Boards of Trustees estimates that Social Security's Old Age and Survivors Insurance (OASI) Trust Fund has a projected reserve depletion date of 2035. At that time, OASI income would be sufficient to pay 77 percent of scheduled OASI benefits. Since this is fact, until Congress changes the law, ORP reduces Social Security income by 23% beginning in the year 2035.

03/19/2017: Tax Table Update

ORP is now running with the 2017 Federal tax table.

03/13/2017: New Infrastructure

Beginning the process of switching ORP from 1990 WATCOM compilers, c and FORTRAN, to 2016 Netbeans and gnu.

03/06/2017: Enhance the 3-PEAT Simulator

Add the facility to download an Excel spreadsheet containing a summary of the simulator's output.

02/26/2017: Add the 3-PEAT Simulator

he simulator simulates the actions of a retiree that runs ORP annually with changed initial conditions (savings balance, Social Security income, etc.) to determine the current year's savings withdrawals and spending budget. Historical data are used to assess plan performance under historical financial conditions. In particular, the plan is reviewed for premature savings depletion and excessive disposable income volatility.

2016 News

08/03/2016: Capping IRA to Roth IRA Conversions

ORP's IRA to Roth conversion option has been enhanced for users who choke up on conversion's large IRA distributions early in retirement. The enhancement allows you to cap taxable income within your choice of tax brackets. Setting this parameter to 15% or 25% will cap conversions and usually string them out over more years.

The enhancement is targeted to planners who advocate this strategy to let them assess the economic consequences of their choices. It's all a matter of balancing the maximizing of retirement disposable income with being comfortable with IRA distributions (not quantifiable).

6/13/2016: Affordable Care Act Income Test Tightened

Models which contain non-savings income (Social Security benefits, pension income, post retirement earnings, etc.) after retirement and before Medicare are infeasible when this income exceeds ACA income limits. ORP now checks for this condition and disables ACA income limits when they are exceeded by this non-savings income.

4/4/2016: Affordable Care Act Constraint Relaxed

ORP now allows for modeling ACA income restrictions while specifying minimum bounds on the Roth IRA and After-tax accounts. Formerly this was disallowed because it was creating infeasible models in most cases. This was accomplished by not applying the minimum bound requirement until age 65, when the ACA income restrictions no longer apply.

3/23/2016: Income Tax Table

ORP's Income tax brackets have been updated to reflect changes for 2016.

2/25/2016: ORP's Third Article

A third article featuring ORP has been published in The Journal of Personal Finance:

Measuring the Financial Consequences of IRA to Roth IRA Conversions. See page 47

Past News 2000-2015

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