2. Variable annuities are long-term investment vehicles designed for retirement where all interest, dividends, and capital gains accumulate tax deferred.Taxable distributions and certain deemed distributions are subject to ordinary income tax and if taken prior to age 59 may also be subject to a 10% federal income tax penalty.Early surrender charges may also apply.In addition to tax deferral, variable annuities offer death benefits, income protection benefits, annuity payout options, and professionally managed equity based and fixed income investment options.Please note that there are certain fees and charges associated with variable annuities such as mortality and expense risk charges, administrative charges,and fund operating expenses.As with other variable investments, the investment return and principal value of an investment will fluctuate, therefore when redeemed, an investor's units, may be worth more or less than the original cost.In addition, any guarantees associated with the variable annuity are based on the claims-paying ability of the issuing company and do not apply to the investment performance or safety of the underlying funds in the variable annuity. A mutual fund is an investment vehicle that pools the money of many investors, and has varying degrees of risk depending upon the funds portfolio.Mutual funds may invest in stocks, bonds, or cash and include the opportunity for the investor to purchase shares with variouspricing arrangements designed to meet their needs.There are fees and expenses associated with investing in mutual funds, including portfolio management feesand expenses and sales charges, which will affect the return on your investment.These fees and charges may be front- or back-end sales charges or annual expenses. In addition, mutual funds generally allow shareholders to sell shares at any time and receive current market value.Mutual fund investments, when held outside of a qualified retirement plan, are subject to tax.You should consult with a qualified tax advisor before investing.The investment return and principal value of an investment will fluctuate so that shares when redeemed, may be worth more or less than their original cost. This information is written in connection with the promotion or marketing of the matter(s) addressed in this material.The information cannot be used or relied upon for the purpose of avoiding IRS penalties.These materials are not intended to provide tax, accounting or legal advice.As with all matters of a tax or legal nature, your clients shouldconsult their own tax or legal counsel for advice. 3. Have you ever changed jobs?
The decisionsyou make eachtime you change jobs affect your retirement.Source: Department of Labor, Employee Tenure Summary, 2004 4. Source: ERBI Retirement Confidence Survey, 2004 The Have and Have Not Planned 5. ARE YOU SAVING ENOUGH? Assumes income must increase by 3% over 20 years. How much will your retirement cost? $3,376,531 $250,000 $2,701,225 $200,000$2,025,919 $150,000 $1,012,959 $1,350,612 $75,000 $100,000 Assets Needed for 20 yr Retirement Pre-Retirement Income 6. Are you retiring soon? 7. Does Your Retirement Plan Address These Realities? Longer Life Expectancies Inflation Rising Health Care Costs SocialSecurity 8. Retirement may last longer thanyou expected 97 92 100 AGE 90 94 88 100 AGE 50% Chance 25% Chance 90 92 85 MaleAge 65 FemaleAge 65 CoupleBothAge 65 100 95 AGE 90 50% Chance of one survivor 25% Chance of one survivor 95 50% Chance 25% Chance Source: The National Underwriter Company, Tax Facts on Insurance &Employee Benefits, 2005. 9. Inflation: The Silent Enemy The Effect of Inflation Since 1950Value of $100,000 Source: Bureau of Labor Statistics, 2004. (In Thousands) (Years) $66,000 $45,000 $30,000 $20,000 $100,000 $13,000 10. Skyrocketing Healthcare Source:Ned Davis Research, April 2005Projections are based on the rate of inflation calculated from prices from 1984 to 2004. Annual rate of increase for Energy: 2.18%, Food: 3.02%, and Medical Commodities and Services: 5.43%. This illustration is purely hypothetical and the actual inflation rate may be higher or lower than what weve indicated, these are just projections that can be used to get an idea of how much things might cost based on past inflation.Energy Food Medical Commodities and Services 11. Social Security: The More You Earn, The Less It Replaces Social Security IncomeIncome that needs replacing Annual Income of$30,000 Annual Income of$60,000 Annual Income of$90,000 $23,250 $6,750 $23,208 $23,220 $36,792 $66,780 Source: Social Security Administration, 2005 12. Decisions at Lifes CrossroadsWill Affect Your Retirement
Understanding Your OptionsWhat Could You Do With the Money in Your Employer Plan: Leave your assets with your previous employer Roll over your assets to an IRA, or to your new employers qualified plan 1 If you separate from service with your employer during or after the year you reach age 55, any distribution you take from your employers qualified plan will not be subject to the additional 10% tax penalty.1Taxable distributions (and certain deemed distributions) are subject to ordinary income tax, and if made prior to age 59, may also be subject to a 10% federal income tax penalty. Early surrender charges may also apply. 13. Cash distribution from employers plan which is then taxed as ordinary income.
UNDERSTANDING YOUR OPTIONS: Taking a Cash Distribution 1 1 Taxable distributions (and certain deemed distributions) are subject to ordinary income tax, and if made prior to age 59, may also be subject to a 10% federal income tax penalty. Early surrender charges may also apply. If you separate from service with your employer during or after the year you reach age 55, any distribution you take from your employers qualified plan will not be subject to the additional 10% tax penalty. 14. The Penalties of Cashing Out INVESTOR1Taxable distributions (and certain deemed distributions) are subject to ordinary income tax, and if made prior to age 59, may also be subject to a 10% federal income tax penalty. Early surrender charges may also apply. If you separate from service with your employer during or after the year you reach age 55, an distribution you take from your employers qualified plan will not be subject to the additional 10% tax penalty. Hypothetical Illustration: This example assumes a 28% federal income tax bracket and 10% federal income tax penalty. It does not take into consideration potential state or local taxes.$25,000 $15,5005.Cash Distribution After Taxes & Penalties -$2,5004.10% Premature Distribution Penalty Tax(If Youre Under the Age of 59 1/2) -$5,0002.20% Mandatory Federal Income Tax Withholding $25,0001. Distribution Amount From Retirement Plan -$2,0003.Additional Federal Income Tax $2,500 $20,000 $18,000 $15,500 15. The Advantage of a Rollover IRA $67,760 $41,440 $15,500 $25,344 1. IRA Rollover -A $25,000 distribution is rolled over as a qualified exchange. The full amount is allowed to accumulate tax deferred for the corresponding time periods. Ending value will be subjected to an applicable ordinary income tax rate upon withdrawal. 2. Cash Distribution -A $25,000 distribution is taken in cash. The distribution incurs a 28% federal income tax liability and 10% federal income tax penalty. The resulting $15,500 is invested in a taxable investment. The earnings from this initial investment will be taxed each year at 28% and deducted from the balance. This hypothetical illustration assumes a $25,000 eligible rollover distribution, a 7% interest rate and a 28% tax bracket. Start 10 Years 20 Years 30 Years 1Taxable distributions (and certain deemed distributions) are subject to ordinary income tax, and if made prior to age 59, may also be subject to a 10% federal income tax penalty. Early surrender charges may also apply. . $25,000 $35,408 $69,654 $137,020 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 $25,000 $35,408 $69,654 $137,020 16. Leave Your Money in an Employers Plan
UNDERSTANDING YOUR OPTIONS: Leave Your Money in an Employers Plan 17. Are Your Nest Eggs Scattered?Before consolidating, it is important that you take expenses and sales charges into account. You should know if they will incur sales charges and/or penalties for selling an investment, and also find out if they will be charged additional sales charges for buying a new one. 18.
Roll Your Money Over From YourEmployersPlan