The Baseline Present Retirement Report and the Proposed What-If Projection Retirement Report are created in essentially the same way. They extract the information needed to complete the retirement projections from either the Present or Proposed Financial Overview Reports.
IMPORTANT: The report always begins in the year the first spouse retires. It then runs through the life expectancy age entered in the EditClient | Projection Assumptions Tab.
The report aggregates all income listed (in Line 21 on the detailed Proposed What-If Overview report) and subtracts all expenses (Lines 22 through Line 27) to arrive at the Annual Free Cash or Shortage (Line 28) for each year. It then adds or subtracts this figure from your client's net worth (Line 34).
If you must "sell" some of the client's assets during the financial projection. you must explain to your client that you had to "sell" these assets to meet shortages. Only if you properly explain this to your clients can they understand the relationship between the projected available income and its source.
In other words, if the report indicates your client has sufficient cash income at retirement, it may be because you had to liquidate 50% of his assets during the projection. You must explain this; otherwise, your clients may look at the report and incorrectly assume their comfortable retirement is assured.
The Retirement Summary Report includes seven columns. Read these columns from left to right:
The report begins in the first year of retirement. The Summary and Detailed Overview reports display the information with the years marching horizontally across the page. If you print these reports using Times New Roman font (size 10), only about five years at a time will fit nicely on the page.
However, by summarizing the information from this Detailed Overview report into just a few columns, and by displaying the years vertically, MasterPlan gives you a summary report with a good "bird's eye view" of the entire retirement period.
Note: All figures in this report, are year-end annual figures.
MasterPlan divides the Total Cash Flow from Line 21 of the Detailed Report into two parts.
In the Earned Income Column, it displays any salary or self-employment income earned by either client. If neither client works, then this column will contain all zeroes. If there is any earned income, MasterPlan will calculate the FICA and Medicare taxes and include these in the Tax & Other Expenses Column.
Since MasterPlan allows you to create a Tax and Cash Flow Form for the Baseline Present situation and a different one for the Proposed What-If situation, the earned income on the proposed reports may not be the same as that on the present baseline reports.
Note: Remember to check the names of the Tax and Cash Flow Forms used for the current reports on the Status Line (the bottom line of the MasterPlan Window). MasterPlan displays the name of the form used for the Present projections after the "B:" and the one used for the Proposed projections after the "P:".
In this column, MasterPlan displays the annual total of all other cash flow available to the client, such as Social Security, payouts from retirement assets, interest or dividends that are not being reinvested in assets, rental income from rental properties, etc.
If you have repositioned the client portfolio with what-if buys, sells, and refinances, this column will include the cash flow from those actions, including the full amount borrowed from any new loans.
MasterPlan displays the Living Expenses from Line 22 on the Overview Reports. This detail comes from the Living Expenses line on the Cash Flow Tab of the Tax and Cash Flow Data Entry Form.
This column totals Extraordinary Living Expenses, Federal & State Taxes, Social Security Taxes, Loan, Property & Other Expenses, and Investments (Lines 23 through Lines 27) on the Overview Reports.
Again, if you have repositioned the client portfolio, this line will include the payoff of any old loans affected by the what-if actions, any increased or lowered taxes, etc.
In this column, MasterPlan displays the annual Surplus Cash, if any, or the annual shortage. If you told MasterPlan to Zero Surplus Cash on the EditClient | Projection Assumptions Tab, then this column will include shortages.
From Line 34 on the Overview Reports, MasterPlan displays the remaining net worth. This includes the net worth of all assets minus the remaining balance of any liabilities.
CAUTION: This column does not include the net worth adjusted for inflation, so be sure your client understands the effects of inflation and the difference between the future inflated dollar value and its equivalent current value.