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Getting the most out of your IRA The STRETCH Option Getting the most out of your IRA The STRETCH Option.

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Presentation on theme: "Getting the most out of your IRA The STRETCH Option Getting the most out of your IRA The STRETCH Option."— Presentation transcript:

1 Getting the most out of your IRA The STRETCH Option Getting the most out of your IRA The STRETCH Option

2 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 IRA Source: Investment Company Institute

3 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. The STRETCH IRA

4 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: $12,500New RMD: $3,649 The STRETCH IRA

5 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 beneficiarys required distribution is based upon this table. Stretch It

6 Q: Why is December 31 st important to you and your IRA? A: It is the account value from Dec. 31 st of the prior year that determines your RMD amount for this year. Q: When can December 31 st work against you? A: When your IRA is tied directly to market performance – Stocks, Bonds, Mutual Funds. The STRETCH IRA Avoid the December 31 st effect!

7 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 IRA Lets look at a real world example for a 71 year old IRA Owner:

8 The STRETCH IRA Summary: $100,000 reduced to $74,726.42 after RMD. Lets 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

9 #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 spouses life expectancy when they inherit the IRA. The STRETCH IRA Rules to Live By

10 The STRETCH IRA Rules 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.

11 The STRETCH IRA Rules to Live By #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.

12 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 IRA Sample Stretch IRA

13 $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 The STRETCH IRA Sample Stretch IRA

14 Initial IRA Value $100,000 Total potential distribution utilizing the STRETCH IRA concept: $ 411,519 The STRETCH IRA Sample Stretch IRA

15 Important ages that affect IRAs 59 ½70½ Our strategy minimizes your tax burden. What type of money can be transferred to an IRA? Other IRAs401(k)TSA-403(b)SIMPLE IRA 457 Plan (except non-profits)Other company sponsored plans Defined Benefit PlanDefined Contribution Plan The STRETCH IRA

16 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 bomb Act Now:

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