getting the most out of your ira the stretch option

Getting the most out of your IRA

The STRETCH Option

Getting the most out of your IRA

The STRETCH Option

The United States Retirement Market:

$11 Trillion In Tax Deferred Accounts.*

The Estimated Tax Burden: $4 Trillion

Your retirement account will be exposed to substantial taxes.

There is something you can do about it.

The STRETCH IRAThe STRETCH IRA

Source: Investment Company InstituteSource: Investment Company Institute

Let us help you:

Substantially reduce the taxes you are currently paying on your retirement account.

Dramatically increase the value of your retirement account so that the money is there when you really need it.

Ultimately leave 2 to 3 times as much to your children or 3 to 4 times as much to your grandchildren.

Keep the power of tax-deferral working to its greatest advantage.


What Makes This Possible?

The IRS has recently made substantial changes to the tax law, making it easier to set up and pass on a retirement account to your heirs.

New Required Minimum Distributions (RMD) have been reduced by as much as 70%!

Example: Client age: 70 1/2 IRA Value: $100,000

Old RMD: $12,500 New RMD: $3,649


Uniform RMD Table Beneficiary Life Expectancy TableAge Divisor Age Divisor Age Divisor Age Divisor70 27.4 0 82.4 46 37.9 92 4.971 26.5 1 81.6 47 37.0 93 4.672 25.6 2 80.6 48 36.0 94 4.373 24.7 3 79.7 49 35.1 95 4.174 23.8 4 78.7 50 34.2 96 3.875 22.9 5 77.7 51 33.3 97 3.676 22.0 6 76.7 52 32.3 98 3.477 21.2 7 75.8 53 31.4 99 3.178 20.3 8 74.8 54 30.5 100 2.979 19.5 9 73.8 55 29.6 101 2.780 18.7 10 72.8 56 28.7 102 2.581 17.9 11 71.8 57 27.9 103 2.382 17.1 12 70.8 58 27.0 104 2.183 16.3 13 69.9 59 26.1 105 1.984 15.5 14 68.9 60 25.2 106 1.785 14.8 15 67.9 61 24.4 107 1.586 14.1 16 66.9 62 23.5 108 1.487 13.4 17 66.0 63 22.7 109 1.288 12.7 18 65.0 64 21.8 110 1.189 12.0 19 64.0 65 21.0 111 1.090 11.4 20 63.0 66 20.2 112 0.891 10.8 21 62.1 67 19.4 113 0.792 10.2 22 61.1 68 18.6 114 0.693 9.6 23 60.1 69 17.8 115 0.594 9.1 24 59.4 70 17.095 8.6 25 58.2 71 16.396 8.1 26 57.2 72 15.597 7.6 27 56.2 73 14.898 7.1 28 55.3 74 14.199 6.7 29 54.3 75 13.4

100 6.3 30 53.3 76 12.7101 5.9 31 52.4 77 12.1102 5.5 32 51.4 78 11.4103 5.2 33 50.4 79 10.8104 4.9 34 49.4 80 10.2105 4.5 35 48.5 81 9.7106 4.2 36 47.5 82 9.1107 3.9 37 46.5 83 8.6108 3.7 38 45.6 84 8.1109 3.4 39 44.6 85 7.6110 3.1 40 43.6 86 7.1111 2.9 41 42.7 87 6.7112 2.6 42 41.7 88 6.3113 2.4 43 40.7 89 5.9114 2.1 44 39.8 90 5.5115 1.9 45 38.8 91 5.2

Two primary tables drive the STRETCH IRA opportunity.

The Uniform Distribution Table. Used by you and your spouse to calculate required distributions when you reach age 70 1/2.

The Beneficiary Life Expectancy Table is utilized by non-spousal beneficiaries of the IRA. The beneficiary’s required distribution is based upon this table.

Stretch It

Q: Why is December 31st important to you and your IRA?

A: It is the account value from Dec. 31st of the prior year that determines your RMD amount for this year.

Q: When can December 31st work against you?

A: When your IRA is tied directly to market performance – Stocks, Bonds, Mutual Funds.


Avoid the December 31st effect!

The S&P 500 Index – One year chart as of Nov. 12, 2002.

On Dec. 31 the S&P 500 Index closed at 1,148.08

On Nov. 1 the S&P 500 Index closed at 900.96

21.50% Loss in Value!

An IRA with a value of $100,000 on December 31, 2001 would require a 2002 distribution of

$3,773.58

In this example, the November 1, 2002 value would now be

$78,500. In spite of this loss, the RMD remains $3,773.58 which reduces the account

value to $74,726.42

The STRETCH IRAThe STRETCH IRALet’s look at a real world example for a 71 year old IRA Owner:

The STRETCH IRAThe STRETCH IRASummary: $100,000 reduced to $74,726.42 after RMD.

Let’s compare that performance to a traditional fixed interest rate (5.0%) during the same period.

December 31

$100,000

November 1

$104,245 $3,773.58

Balance After RMD

$100,471.42

Compared to:

$74,726.42

Less RMD

#1 Make your spouse your primary beneficiary.

This allows your spouse to rollover the IRA to their name, treating it as their own IRA.

Required Minimum Distribution (RMD) is then based on your spouse’s life expectancy when they inherit the IRA.

The STRETCH IRAThe STRETCH IRARules to Live By


#2 Watch out for the oldest beneficiary.

The new regulations require that your designated beneficiaries make the RMD based on the one with the shortest life expectancy. This also can accelerate distributions and increase taxes.

Make sure the company you work with is properly structured to manage multiple beneficiary designations. Use the “separate accounts rule.”


#3 Make sure the RMD is accurate.

Avoid the 50% Penalty!

There is a 50% fine assessed for non-compliance added on top of ordinary income taxes.

Interest rate: 5.25%

Client Age: 72

Spouse Age: 70

Beneficiaries:Son, age 40 (50%)

Grandson, age 10 (50%)

Current IRA Account Value:

$100,000

The STRETCH IRAThe STRETCH IRASample Stretch IRA

$100,000 IRA Value

Assuming normal life expectancies:

Total distributed to Owner & Spouse: $115,009

Total distributed to 40 year old son: $ 83,093

Total distributed to 10 year old grandson: $213,416


Initial IRA

Value

$100,000

Total potential distribution utilizing the STRETCH IRA

concept:

$ 411,519


Important ages that affect IRAs59 ½ 70½

Our strategy minimizes your tax burden.

What type of money can be transferred to an IRA?

Other IRAs 401(k) TSA-403(b) SIMPLE IRA

457 Plan (except non-profits) Other company sponsored plans

Defined Benefit Plan Defined Contribution Plan


We are here to make the process simple for you!

1. Do you want to reduce your taxes on your IRA?

2. Can you benefit from the new minimum distribution method?

3. Do you want to continue tax-deferred accumulation for as long as possible?

4. Could your heirs benefit from this concept?

5. Think about who you want your beneficiaries to be.

6. What percentages you wish them to receive?

7. Gather records for all your retirement accounts.

This will help us gain a better understanding of your current position while comparing it to your actual needs and desires.

8. Allow us to structure a safe, prudent, and powerful Stretch IRA for you today.

Defuse the tax time bombDefuse the tax time bomb

Act Now:

getting the most out of your ira the stretch option

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