lbl7172 (ads177) @2006 allstate insurance company 1 financial focus accessing your retirement money...

LBL7172 (ADS177) @2006 Allstate Insurance Company

1Financial Focus Accessing Your Retirement Money

Not FDIC, NCUA/NCUSIF insured * Not a deposit * No bank or credit union guarantee * Not insured by any federal government agency * May lose value


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Today’s Agenda

The challenges of retirement today

Accessing and gaining control over your retirement money

Investment alternatives

What you can do


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In the early 1900’s most Americans died by age 47. Today, life expectancy at birth is 77*

*Explaining Long Term Care, Ric Edelman,

Investment Advisor, January 2004. P. 94


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The Good News

You can look forward to the longest and healthiest retirement in history.


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The Bad News

You can look forward to the longest, healthiest and most costly retirement in history.


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How Long Will Your Money Last

Calculations assume the growth rate is applied before any withdrawals are made. Withdrawals are a fixed percent of original investment capital. This chart is an educational tool and is not intended to predict future performance of any investment. Investors must be willing to assume a higher degree of risk in exchange for seeking a higher rate of return. Taxes are not included. Consult your investment counselor for information pertinent to your particular financial circumstances.


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Common Concerns

Inflation $8,800 would have bought you a

top-of-the-line Cadillac in 1970

Today, $8,800 would not even buy you the lowest priced car

And a top-of-the-line Cadillac...well that’s going for about $50,000 – a 468% Increase.*

*The Week. July 23, 2004, p. 33


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Managing Risk

Diversification:Spreads risk among many different securities

Asset Allocation:Spreads risk among many different types of investments

Does not assure a profit or protect against loss in a declining market.

Common Concerns


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Accessing Your Retirement Money

Choice

Control

Flexibility


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Retirement Plans That Offer A Way Out

Look in the “summary plan description” for the words “in-service, nonhardship withdrawals”


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Lump Sum Distribution Check

1. Cash it = Big Penalties and access to $Or

2. Roll into IRA = No Penalties and no access to $

Or

3. ?


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72(t) Distributions

“What is a 72(t) distribution?”


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Avoiding Penalties

Save 10%


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72(t) Distribution Strategy - SEPP Money taken out in “substantially equal periodic payments” or SEPP

No minimum age requirement

IRS does not require any reason for withdrawals

Payments must continue for five years or until age 59 1/2 - whichever is longer

Payments generally cannot change during the five year period (or age 59 1/2, if later) - unless the change relates to the annual recalculation of the RMD method or due to switching from the amortization or annuity method to the RMD method.

If the payment schedule is changed and no exceptions apply, a 10% penalty plus interest will be applied to all payments taken


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72(t) Distribution Strategy - SEPP

Generate Cash Flow


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72(t) Distribution Strategy Generate Cash Flow

No Rollover Direct IRARollover

Amount of Distribution $300,000 $300,000

Federal Taxes at 35% (105,000) $0

10% premature distribution penalty (30,000) $0

Amount available for Investment $165,000 $300,000


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The SEPP Solution

Maintain Flexibility Maximize Growth

IRA # 1 IRA # 2

$150,000 $150,000

SEPP distributions Invest for retirement

Income-generating Growth-oriented

Investments investments


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Need more cash Initiate SEPP distributions from IRA # 2

Or

Found a new job! No longer need the cash Divert distributions to another retirement

investment vehicle such as an annuity



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Eligibility for SEPP

If you have an IRA you are eligible

If you have a qualified plan or 403(b) you generally must wait until you leave your employer



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How are penalty-free distributions calculated using SEPP? Required Minimum Distributions

Amortization

Annuitization or Mortality



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How are penalty-free distributions calculated?

Required Minimum Distribution



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Amortization



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Amortization

Annuitization



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72(t) Distribution - SEPP Customize a plan to take out the money you need while keeping the balance invested on a tax-deferred basis



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Beneficiary IRAs Prolong the tax benefits of a traditional IRA across multiple generations



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What are the benefits of a beneficiary IRA? Provides tax-efficient wealth transfer



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What are the benefits of a beneficiary IRA?

Provides income tax-efficient wealth transfer

Helps you maintain control over your IRA



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Investment Alternatives

Have contributed to:

Your 401(k) or company retirement programs?

or IRAs

What’s Next?


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Annuities have two stages in their life cycle

Accumulation stage:

money is fully invested and earningspotentially grow and accumulate on a tax- deferred basis



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Annuitization The investment is converted into payments determined by account value, life expectancy and selected plan payment

A portion of each payment will be considered taxable and the remaining portion will be a non-taxable return of your investment in the contract, which is also called the “basis”. Once the investment in the contract is depleted, all remaining payments will be fully taxable. If the contract is tax-qualified, generally, all payments will be fully taxable. Payments taken prior to age 59 1/2, may be subject to an additional 10% federal tax penalty.



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Annuitization payment-plan options

Life Joint Survivor Period Certain Period Certain with Life



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Fixed Annuities

Earn a fixed interest-rate return

Principal guaranteed by issuing insurance company Based on the claims-paying ability of the issuing insurance company.

Tax-deferred growth of earnings

Additional fees may apply


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Fixed Annuities Surrender charges and tax penalties for early withdrawal may apply

Distributions taken prior to annuitization are generally considered to come from the gain in the contract first. If the contract is tax-qualified, generally all withdrawals are treated as distributions of gain. Withdrawals of gain are taxed as ordinary income and, if taken prior to age 59 1/2, may be subject to an additional 10% federal tax penalty.


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Variable Annuities Earn variable rates of return Variable investment options May offer additional inflation protection Growth potential Guarantee features vary – Additional cost may apply. Guarantees are based on the claims-paying ability of the issuing insurance company.


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Variable Annuities Tax-deferred growth of earnings Additional fees may apply Surrender charges and tax penalties for early withdrawal may apply Distributions taken prior to annuitization are generally considered to come from the gain in the contract first. If the contract is tax-qualified, generally all withdrawals are treated as distributions of gain. Withdrawals of gain are taxed as ordinary income and, if taken prior to age 59 1/2, may be subject to an additional 10% federal tax penalty.


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Variable AnnuitiesVariable annuities are long-term investments designed for retirement

purposes. You should carefully consider the investment objectives,

risks, charges and expenses of the investment alternatives before

purchasing a contract or investing money. These contracts have

limitations and are sold by prospectus only. The prospectus

contains details on the investment alternatives, contract features, the

underlying portfolios, fees, charges, expenses and other pertinent

information. Please read the prospectuses carefully before

purchasing a contract or sending money.


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Guarantees What are my back-up choices?

Guarantees are based on the claims-paying ability of the

issuing insurance company.

Additional fees may apply.

Allstate Advisor variable annuities are flexible-premium deferred annuities issued by Allstate Life Insurance Company; underwritten by Allstate Distributors, L.L.C., both of Northbrook, IL.


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Summing Up The Options

In-service, nonhardship withdrawals

72(t) distribution - SEPP

Beneficiary IRAs

Annuitization


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Your Retirement Strategy Checklist

How a Financial Professional can help you:

Prepare for the financial challenges in retirement.

Organize and actively manage my 401(k)s, IRAs and other

retirement assets.

Determine what options are best for meeting my

retirement goals.

X

X

X


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Your Next Steps

Meet with your Financial Advisor because...


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...YOUR FUTURE IS TOO VALUABLE TO RISK!

Thank you for attending

lbl7172 (ads177) @2006 allstate insurance company 1 financial focus accessing your retirement money...

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