BASIC ASSUMPTIONS

         The first module sets the stage for retirement, establishing timing, 
marital status and ages of participants. The predicted age at death is 
critical in evaluating pension options since some plans stop paying the 
surviving spouse. At this input you are prompted with your life expectancy 
according to the IRS. One scenario for analysis should include an untimely 
early death. 

         An important decision is how to handle distributions from your 
company (401k) savings plan, you can pay taxes immediately or defer with an 
IRA rollover. If you choose a lump sum distribution the program will choose 
the lowest tax from conventional or ten year averaging, but will not 
investigate eligibility for capital gains treatment. Analyze both ways and 
observe how the choice effects your particular retirement. 

         Another critical factor is your estimate of average inflation during 
your retirement. Even if your pension plan has a built in cost-of-living 
(COLA) adjustment it may lag behind actual inflation while your expenses 
grow. For high inflation, earnings on savings will rise directly with 
inflation while pension income may be relatively fixed, this favors rapid pay 
out options. Try several values of inflation to observe this phenomenon.