LBL7172 (ADS177) @2006 Allstate Insurance Company 1 Financial Focus Accessing Your Retirement Money...
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Transcript of 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
LBL7172 (ADS177) @2006 Allstate Insurance Company
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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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Accessing Your Retirement Money
Retirement Plans That Offer A Way Out
Look in the “summary plan description” for the words “in-service, nonhardship withdrawals”
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Accessing Your Retirement Money
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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Accessing Your Retirement Money
72(t) Distributions
“What is a 72(t) distribution?”
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Accessing Your Retirement Money
Avoiding Penalties
Save 10%
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Accessing Your Retirement Money
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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Accessing Your Retirement Money
72(t) Distribution Strategy - SEPP
Generate Cash Flow
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Accessing Your Retirement Money
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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Accessing Your Retirement Money
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
Accessing Your Retirement Money
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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
Accessing Your Retirement Money
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How are penalty-free distributions calculated using SEPP? Required Minimum Distributions
Amortization
Annuitization or Mortality
Accessing Your Retirement Money
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How are penalty-free distributions calculated?
Required Minimum Distribution
Accessing Your Retirement Money
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How are penalty-free distributions calculated?
Required Minimum Distribution
Amortization
Accessing Your Retirement Money
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How are penalty-free distributions calculated?
Required Minimum Distribution
Amortization
Annuitization
Accessing Your Retirement Money
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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
Accessing Your Retirement Money
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Beneficiary IRAs Prolong the tax benefits of a traditional IRA across multiple generations
Accessing Your Retirement Money
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What are the benefits of a beneficiary IRA? Provides tax-efficient wealth transfer
Accessing Your Retirement Money
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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
Accessing Your Retirement Money
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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
Accessing Your Retirement Money
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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.
Accessing Your Retirement Money
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Annuitization payment-plan options
Life Joint Survivor Period Certain Period Certain with Life
Accessing Your Retirement Money
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Investment Alternatives
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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Investment Alternatives
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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Investment Alternatives
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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Investment Alternatives
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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Investment Alternatives
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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Investment Alternatives
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