Getting the most out of your IRA The STRETCH Option Since your retirement account is so significant to you, I would like to share with you a concept called the STRETCH IRA. This is a great way to make the most of your retirement account.

The STRETCH IRA 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. To make any good decision, it is important to know the big picture issues that affect that decision. This big picture involves the US retirement market. There are more than $11 trillion in tax deferred retirement accounts. The estimated tax burden is $4 trillion! The general accounting office of our federal government is already providing income projections to the administration on how much they plan to collect from these retirement accounts. Your retirement account will be exposed to substantial taxes. The good news is there is something you can do about it. Source: Investment Company Institute Source: Investment Company Institute

The STRETCH IRA 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. I spend a lot of my time educating my clients about this Stretch IRA concept because it allows us to 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. Nearly everyone I talk to finds these ideas appealing, what do you think? 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 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%! So what makes these ideas 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 That lower required distribution reduces your taxes every year. Can you see how that leaves more money in your retirement account? Over the years, this will make a big impact on how much you will have for yourself and for your family. Example: Client age: 70 1/2 IRA Value: $100,000 Old RMD: $12,500 New RMD: $3,649

Stretch It 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. Two primary tables used to drive the STRETCH IRA opportunity. The first table is called the Uniform Distribution Table. Used by you and your spouse to calculate required distributions when you reach age 70 1/2. The 2nd table is called the Beneficiary Life Expectancy Table is utilized by non-spousal beneficiaries of the IRA. The beneficiary’s required distribution is based upon this table.

The STRETCH IRA Avoid the December 31st effect! 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. One challenge to accomplishing these goals is the calendar! I call it avoiding the December 31st effect. 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. Whether your assets are tied up in the market or not, it is very important that you understand the impact as you begin taking required distributions each year.

The STRETCH IRA Let’s look at a real world example for a 71 year old IRA Owner: The S&P 500 Index – One year chart as of Nov. 12, 2002. An IRA with a value of $100,000 on December 31, 2001 would require a 2002 distribution of $3,773.58 On Dec. 31 the S&P 500 Index closed at 1,148.08 21.50% Loss in Value! 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 Let’s look at a real world example for a 71 year old IRA Owner with an IRA valued at $100,000 on December 31, 2001. Based on the uniform distribution table, this would require a 2002 distribution of $3,773.58. Most people elect to take their distributions in the 4th quarter of the year. In this example, the IRA owner executed their distribution in November since they had received a reminder from their financial institution to take their MRD. In this example, the November 1, 2002 value would now be $78,500. In spite of this loss, the MRD remains $3,773.58 because it is based on a value from the past. This further reduces the account value to $74,726.42. Can you see how volatility negatively affects this IRA owner? Even if the market now rebounds, their distribution does not have the opportunity and taxes have been incurred. On Nov. 1 the S&P 500 Index closed at 900.96

The STRETCH IRA $104,245 $3,773.58 $100,000 Balance After RMD Summary: $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. November 1 Less RMD $104,245 $3,773.58 December 31 $100,000 Balance After RMD $100,471.42 On the last page we saw how $100,000 was reduced to $74,726.42 after MRD. Let’s compare that performance to a traditional fixed interest rate (5.0%) during the same period. If this same client had $100,000 on December 31, 2001 earning 5%, their IRA would now have a value of $104,245 on November 1, 2002. The RMD would be the same as in the earlier example - $3,773.58. The difference is substantial. After their distribution, their balance would be $100,471.42 compared to $74,726.42. My philosophy is that during times of distribution, you should be in an asset that is not exposed to market risk. Instead, it should be safe and secure. Doesn’t that make sense to you? Compared to: $74,726.42

The STRETCH IRA #1 Make your spouse your primary beneficiary. Rules to Live By #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. To make the most of this strategy, there are a few rules you will want to live by. They are actually quite simple, but when they are overlooked, the outcome can be quite different. The first rule is 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 IRA #2 Watch out for the oldest beneficiary. 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.” Rule # 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.” This rule allows each beneficiary to take required distributions based on their individual life expectancies. This means each beneficiary receives the maximum value over the longest period of time.

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. When it comes to your taxes, accuracy is important. Rule #3 says to 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. The companies we work with are fully experienced in this area and routinely make required distributions to thousands of clients. In addition, as distribution tables become more attractive, they can make sure you take full advantage. Another important benefit is that there are no charges made for accurately calculating these distributions as they occur each year. Is this true at your current financial institution?

Current IRA Account Value: The STRETCH IRA Sample Stretch IRA Current IRA Account Value: $100,000 Interest rate: 5.25% Client Age: 72 Spouse Age: 70 Beneficiaries: Son, age 40 (50%) Grandson, age 10 (50%) Let me show you a typical example of how this would work for an average family.

Assuming normal life expectancies: The STRETCH IRA Sample 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

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

The STRETCH IRA 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 Important ages that affect IRAs 59 ½ 70½ Our strategy minimizes your tax burden. Many people ask if they can take advantage of this concept with other retirement accounts. They answer is ABSOLUTELY. Once you have retired, it is quite simple to convert your existing retirement account into an IRA. Another thing to consider is the key ages that affect IRAs. Outside of a few exceptions, any money you withdraw prior to age 59 ½ could be subject to a 10% excise tax over and above the ordinary income taxes. Once you pass age 70 ½, you are required to take distributions and begin paying some taxes. Remember, our strategy minimizes this burden to you.

We are here to make the process simple for you! Defuse the tax time bomb Act Now: We are here to make the process simple for you! Do you want to reduce your taxes on your IRA? Can you benefit from the new minimum distribution method? Do you want to continue tax-deferred accumulation for as long as possible? Could your heirs benefit from this concept? Think about who you want your beneficiaries to be. What percentages you wish them to receive? 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. Protecting your money at this stage is very important. Here are some things to think about. Do you want to reduce your taxes on your IRA? Can you benefit from the new minimum distribution method? Do you want to continue tax-deferred accumulation for as long as possible? Could your heirs benefit from this concept? Think about who you want your beneficiaries to be. What percentages you wish them to receive? 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. Allow us to structure a safe, prudent, and powerful Stretch IRA for you today. Now I’d like to tell you about the product I believe will work well for you.