Lindsay, Ont.-based PlanPlus Inc. has released version 6.1 of its PlanPlus Planit financial planning software, which includes enhancements to help advisors determine optimal account withdrawal strategies for their clients.

Most advisors recommend strategies to minimize the amount of tax that a client pays by deferring as much taxable income as possible for as long as possible, however, during retirement this isn’t always the best strategy.

PlanPlus says it took the latest research in optimized investment withdrawal strategies, in order to minimize lifetime taxes and to make it very simple for an advisor to implement.

The basic idea is that if a client is in a low tax bracket early in retirement, it may be better to pull more money from their RRSP early rather than pay taxes at higher marginal rates later. PlanPlus takes it one step further with a proprietary new algorithm that can “top-up”, but also look at reducing from higher bands later in life.

“Just as important as the new algorithm, we measure the value the advisor can bring to their client by utilizing this strategy,” says Shawn Brayman, president & CEO at PlanPlus.

“We worked with Dynamic Mutual Funds who provided some great insights on how to keep some very complex planning issues simple for advisors and clients to digest. The fact that Dynamic makes this capability available free of charge through their advisor portal using PlanPlus Planit is a real benefit to the advisor channel in Canada,” says Brayman.

PlanPlus says the tax optimization feature in the new software release saves advisors a huge amount of time, as the process normally requires some intricate math calculations and trial and error to estimate. The software can process the calculations while quantifying the amount that the strategy has saved the client, which in many situations can be hundreds of thousands of dollars of future taxes.

The latest version of the software also features the “Cash Wedge” planning technique, developed to assist advisors in maintaining the right proportion of a client’s portfolio in cash or maturing fixed income products. The goal is to ensure that sufficient liquid non-equity investments are available to cover a client’s income needs over the next three-year period. As a result a client will not need to cash in equities at the wrong time in the event of another market downturn.