Docstoc

Roth IRA

Document Sample
Roth IRA Powered By Docstoc
					     Welcome!

Retirement Account
   Optimization
        Housekeeping Items
•   Washrooms
•   Refreshments
•   Make yourself at home here
•   Today’s program will be about 1 hour
•   Hold questions until the end of the
    workshop
           FREE information
          FREE refreshments
              FREE dinner
          So what’s the catch?
                RELAX
I am not going to ask you to buy anything
          or sign anything today.
My hope is that you will find
this information useful and
interesting enough to invite
me for a more personal visit
          together.
There are no costs to you for our
  personal meetings together.
    Not a fee based planner.
If you implement some of my
    recommendations, I am
 compensated by companies
   you choose to work with.
    What if I have another planner?


We are often asked to review existing
plans for confirmation or suggestions.


If you like our ideas or suggestions, we
    ask that you do that work with us.
In today’s presentation, we are going to
 study the past as well as look into the
                 future.
               The GOAL?
  Protect and Preserve your retirement
account against two factors that I believe
  will alter everyone’s financial future.
Give me your
 feedback!


 Evaluation
   Form
      How is this for an idea?

  Retirement without taxes!

The Retirement Account
 Optimization Strategy
                              Roth IRA

Perhaps the most important
strategic tax planning tool in
America
Created by Senator William Roth
Taxpayer Relief Act of 1997




                                         Senator William Roth
                                         Deceased December 13, 2003
                              Roth IRA

It is possible for you, your spouse
and your heirs to enjoy a lifetime of
federal income tax-free benefits
Created by Senator William Roth
Taxpayer Relief Act of 1997




                                         Senator William Roth
                                         Deceased December 13, 2003
Roth IRA

           Treasury
           Publication
           590




           Senator William Roth
           Deceased December 13, 2003
Roth IRA


“A Roth IRA is   Page 59
an individual
retirement
plan…It can be
either an
account or an
annuity.”
                 Senator William Roth
                 Deceased December 13, 2003
Roth IRA


“…if you         Page 59
satisfy the
requirements,
qualified
distributions
are tax free.”
                 Senator William Roth
                 Deceased December 13, 2003
Roth IRA


              Page 64
“You can
convert a
traditional
IRA to a
Roth IRA.”
              Senator William Roth
              Deceased December 13, 2003
Roth IRA


“You can        Page 59
leave
amounts in
your Roth
IRA as long
as you live.”
                Senator William Roth
                Deceased December 13, 2003
   Roth IRA Contributions

Unlike traditional IRAs
contributions can be made to a
Roth IRA even after you reach
age 70 ½.



           Treasury Publication 590 (page 58). Ultimate IRA Resource by Tax Facts 2004.
Publication
   590
Request a
  copy!
The Retirement Account Optimization
             Strategy
Today, we are going to explore an
approach to help you evaluate if it is
possible and advantageous for you to
convert your existing traditional retirement
account into a Roth IRA.

   IRA                                                     Roth
  Taxable                                                   Tax
                                                           Free*
             * Certain conditions must be met to qualify
Your traditional retirement account

Are you looking forward to the day when
you will be able to withdraw funds from
your IRA at a lower tax rate?




   IRA                                                    Roth
  Taxable                                                  Tax
                                                          Free*
            * Certain conditions must be met to qualify
Your traditional retirement account

Do you think that day will ever come when
you can pull money from your IRA and pay
at a lower tax rate?




   IRA                                                    Roth
  Taxable                                                  Tax
                                                          Free*
            * Certain conditions must be met to qualify
Your traditional retirement account

Do you believe taxes will be HIGHER or
LOWER in the future for you and your
family?




   IRA                                                    Roth
  Taxable                                                  Tax
                                                          Free*
            * Certain conditions must be met to qualify
Your traditional retirement account

The reason I ask these questions is that if
taxes are going to be LOWER in the future,
it might be beneficial for you to remain in a
traditional IRA.



   IRA                                                     Roth
  Taxable                                                   Tax
                                                           Free*
             * Certain conditions must be met to qualify
        Tax Pressure on the System

Let’s examine the facts from…
Congressional Budget Office
Social Security Administration
Census Bureau
Leading Experts

                                 Forces are already in motion
                                 that will dramatically change
                                 the American way of life and
                                 the choices we will all need to
                                 make in the future.
        Tax Pressure on the System

Let’s examine the facts from…
Congressional Budget Office
Social Security Administration
Census Bureau
                                 Fortunately, with proper
Leading Experts
                                 planning and knowledge, we
                                 can prepare in advance and
                                 significantly improve our
                                 retirement as well as positively
                                 impact the people and things
                                 we care about most.
                      Tax Pressure on the System

   • Americans are living longer than ever before.
   • For many, retirement will now last 20 to 30 years or longer.
   • This fact has changed the face of Social Security.

                       80 -
                              US Life Expectancies


                       70 -




                       60 -




                     1929                            2002
Source: US Census Bureau
                      Tax Pressure on the System

   When Social Security was created normal life expectancy
   was 63 to 64 years.
   Retirement was expected to last 2 to 3 years.

                       80 -
                              US Life Expectancies


                       70 -




                                   Social Security (1934)
                       60 -




                     1929                                   2002
Source: US Census Bureau
                      Tax Pressure on the System

   At what age do you receive FULL Social Security Benefits?



                       80 -
                              US Life Expectancies


                       70 -



         65                        Social Security (1934)
                       60 -




                     1929                                   2002
Source: US Census Bureau
                      Tax Pressure on the System

   Only those folks who lived beyond normal life expectancy
   would receive benefits and likely for only a few of years.


                       80 -
                              US Life Expectancies


                       70 -



         65                        Social Security (1934)
                       60 -




                     1929                                   2002
Source: US Census Bureau
                      Tax Pressure on the System

   Today, nearly every American expects to receive Social
   Security benefits for a much greater period.


                       80 -
                              US Life Expectancies


                       70 -



         65                        Social Security (1934)
                       60 -




                     1929                                   2002
Source: US Census Bureau
                      Tax Pressure on the System

   Instead of 2 to 3 years in retirement, many Americans may
   spend 2 to 3 decades in retirement!
   This increases the obligation on Social Security.
                       80 -
                              US Life Expectancies


                       70 -



         65                        Social Security (1934)
                       60 -




                     1929                                   2002
Source: US Census Bureau
                      Tax Pressure on the System

   The challenge is compounding as record numbers of people
   begin receiving benefits. The first “baby boomer” began
   receiving benefits in 2007.

                       80 -
                              US Life Expectancies


                       70 -



         65                        Social Security (1934)
                       60 -




                     1929                                   2002
Source: US Census Bureau
                      Tax Pressure on the System

   There are over 70 million baby boomers.
   According to the Congressional Budget Office, in 2020
   Social Security will begin paying out more than it takes in.*

                       80 -
                              US Life Expectancies


                       70 -



         65                        Social Security (1934)
                       60 -
                                                                   *Congressional
                                                                   Budget Office 2005
                                                                   Testimony.
                                                                   Statement of
                                                                   Douglas Holtz-
                                                                   Eakin, Director,
                     1929                                   2002   Page 5)
Source: US Census Bureau
                      Tax Pressure on the System
   How will Congress Address this challenge?
   Reduce benefits?
   Increase taxes?
   A combination of the both?
                       80 -
                              US Life Expectancies


                       70 -




                                   Social Security (1934)
                       60 -




                     1929                                   2002
Source: US Census Bureau
                      Tax Pressure on the System
   It turns out that Social Security is not the largest financial
   challenge facing the US government.



                           Medicare & Medicaid




                                                              *Congressional
                                                              Budget Office 2005
                                                              Testimony.
                                                              Statement of
                                                              Douglas Holtz-
                                                              Eakin, Director,
                                                   2050       Page 5)
Source: US Census Bureau
                      Tax Pressure on the System
   By 2050, the cost of Medicare and Medicaid programs
   will expand to an amount, “…which is roughly the
   current size of the entire federal budget”

                                                        Entire Federal
                           Medicare & Medicaid          Budget




                                                             *Congressional
                                                             Budget Office 2005
                                                             Testimony.
                                                             Statement of
                                                             Douglas Holtz-
                                                             Eakin, Director,
                                                 2050        Page 5)
Source: US Census Bureau
                      Tax Pressure on the System
   This extraordinary growth increases the government’s
   appetite for more tax revenue.


                                                        Entire Federal
                           Medicare & Medicaid          Budget




                                                             *Congressional
                                                             Budget Office 2005
                                                             Testimony.
                                                             Statement of
                                                             Douglas Holtz-
                                                             Eakin, Director,
                                                 2050        Page 5)
Source: US Census Bureau
Tax Pressure on the System


        It is already in the
        news…
        “The price you will
        pay to save social
        security and
        medicare”
                     Source: Money Magazine, October 2008
Tax Pressure on the System
Troubled Asset Relief Program (TARP)
           “THE BAILOUT”
          Just how big is it?


      $700 Billion?
      Tax Pressure on the System
      Troubled Asset Relief Program (TARP)
                  “THE BAILOUT”
         That is not the end of the story…


              $700 Billion?
 “...the Fed (Federal Reserve) now owns or
      finances $1.7 trillion in private sector
                    assets.”
Source: Michael Cemblast, CIO for JP Morgan Private Client Bank
                       Eye on the Market, October 3, 2008
       Tax Pressure on the System
“Should another few hundred billion be drawn…the
Fed would be the largest private sector bank in the
                  United States”


               $700 Billion?
               $1,700 Billion
 Source: Michael Cemblast, CIO for JP Morgan Private Client Bank
                        Eye on the Market, October 3, 2008
       Tax Pressure on the System
The Federal Deposit Insurance Corporation (FDIC)
         has also gotten into the act…

  Deposit guarantees have been increased from
             $100,000 to $250,000




 Source: Michael Cemblast, CIO for JP Morgan Private Client Bank
                        Eye on the Market, October 3, 2008
         Tax Pressure on the System
 The Federal Deposit Insurance Corporation (FDIC)
          has also gotten into the act…

 “FDIC insurance fund is already below its statutory
minimum level, the safety net just got increased by 2.5
      times, and there's no plan to pay for it.”

    “The cost of future bank failures will be more
 expensive and taxpayers will be on the hook for it.”


   Source: Michael Cemblast, CIO for JP Morgan Private Client Bank
                          Eye on the Market, October 3, 2008
     Tax Pressure on the System
                 IMPORTANT!

The FDIC will be able to pay its obligations as it
                ALWAYS has.

You should not be afraid of bank failures if your
   account is below the guaranteed ceiling.
        Tax Pressure on the System
                    IMPORTANT!

   The FDIC will be able to pay its obligations as it
                   ALWAYS has.

Congress can and will appropriate funds to allow the
         FDIC to cover any guarantees.

  What you should consider is if tax payer obligations
like this might increase income tax rates in the future.
   Imagine your IRA no longer taxable


                                       “YOU SIMPLY CANNOT
                                              BEAT A
                                               0%
                                           TAX RATE ON
                                          WITHDRAWALS!”

“The best source of IRA
       Advice”
According to the Wall Street Journal         Source: Parlay your IRA Into a Family Fortune by Ed Slott, CPA
Imagine your IRA no longer taxable


“I personally can't
wait to convert my
       IRA.”



                 Source: The Money Book for the Young Fabulous & Broke by Suze Orman
Imagine your IRA no longer taxable


“Letting your
money compound
tax-free for decades
is an investor's
dream.”

                 Source: The Money Book for the Young Fabulous & Broke by Suze Orman
    Roth IRA CONVERSION


The process of re-characterizing
your retirement account from a
taxable account to one that is
designated as federal income
tax free.
     Roth IRA CONVERSION


Traditional Retirement Accounts
can be converted to a Roth IRA:
 IRAs, Individual Retirement Annuities,
Tax Sheltered Annuities (403b), 401(k)s,
    SEPs, SIMPLE IRAs, 457 Plans


                             Source: Treasury Publication 590, Page 64
  Learn more
  about Roth
     IRA
Re-characterization
   Roth IRA CONVERSION


    So What’s The Catch?
      Dollars within a traditional
retirement account have not always
             been taxed.
   Roth IRA CONVERSION


    So What’s The Catch?
The untaxed dollars converted from a
 Traditional Retirement Account to a
  Roth IRA are generally taxable as
  ordinary income in the year of the
             conversion.
     Roth IRA CONVERSION

         For Example: $100,000 IRA
               25% Marginal Tax Rate

  $25,000
Owed to IRS*


$100,000
   IRA
 Taxable
                * Assumes full liquidation of retirement account.
                   **Certain conditions must be met to qualify
     Roth IRA CONVERSION

         For Example: $100,000 IRA
               25% Marginal Tax Rate

  $25,000
Owed to IRS*


 $75,000
   IRA
  After
  Taxes         * Assumes full liquidation of retirement account.
                   **Certain conditions must be met to qualify
     Roth IRA CONVERSION

         For Example: $100,000 IRA
               25% Marginal Tax Rate

  $25,000                  $25,000
Owed to IRS*
                                   Tax
                            To Convert                              Roth IRA
 $75,000
$100,000
                                                                    $75,000
   IRA
                                                                    Income
  After
 Taxable                                                              Tax
  Taxes         * Assumes full liquidation of retirement account.
                                                                     Free**
                   **Certain conditions must be met to qualify
     A typical Roth IRA CONVERSION

                   For Example: $100,000 IRA
Will tax rates be
higher in the future?   25% Marginal Tax Rate

          $25,000                   $25,000
        Owed to IRS*
                                            Tax
                                     To Convert                              Roth IRA
          $75,000
         $100,000
                                                                             $75,000
             IRA
                                                                             Income
           After
          Taxable                                                              Tax
           Taxes         * Assumes full liquidation of retirement account.
                                                                              Free**
                            **Certain conditions must be met to qualify
     A typical Roth IRA CONVERSION

                   For Example: $100,000 IRA
Will tax rates be
higher in the future?   25% Marginal Tax Rate

          $25,000
        Owed to IRS*

                                                                            Roth IRA
                                                              Do I want to avoid Required
          $75,000
         $100,000
                                                              Minimum Distributions in the
                                                                            $75,000
             IRA                                              future?
                                                                             Income
           After
          Taxable                                                              Tax
           Taxes         * Assumes full liquidation of retirement account.
                                                                              Free**
                          **Certain conditions must be met to qualify
     A typical Roth IRA CONVERSION

                                If you answer “YES” to
Will tax rates be
higher in the future?             one or both of these
                                       questions

    Converting
       retirement
  your $75,000                                                             Roth IRA
                                                             Do I want to avoid Required
   account to a                                              Minimum Distributions in the
                                                                           $75,000
         IRA                                                 future?
   Roth IRA may                                                             Income
        After
  be appropriate                                                              Tax
            Taxes       * Assumes full liquidation of retirement account.
                                                                             Free**
                         **Certain conditions must be met to qualify
Roth IRA


“You can        Page 59
leave
amounts in
your Roth
IRA as long
as you live.”
                Senator William Roth
                Deceased December 13, 2003
Impact of Required Minimum Distributions vs. Roth IRA with No Distributions
            70 Year Old - $112,486 IRA (25% marginal tax rate) – 5.0% Yield

     Age          Traditional IRA                   Required                    Value Net of               Roth IRA                 Roth IRA
                                                  Distributions                    Taxes                                           Advantage
      70              $115,762                        $4,224                       $86,821                  $86,821                      $0
      71              $117,115                        $4,419                       $87,836                  $91,162                   $3,326
      72              $118,331                        $4,622                       $88,748                  $95,721                   $6,972
      73              $119,394                        $4,833                       $89,546                 $100,507                   $10,961
      74              $120,289                        $5,054                       $90,217                 $105,532                   $15,315
      75              $120,997                        $5,283                       $90,748                  $110,809                  $20,060
      76              $121,500                        $5,522                       $91,125                  $116,349                  $25,224
      77              $121,777                        $5,744                       $91,332                 $122,167                   $30,834
      78              $121,834                        $6,001                       $91,376                 $128,275                   $36,899
      79              $121,625                        $6,236                       $91,219                 $134,689                   $43,470
      80              $121,159                        $6,478                       $90,869                 $141,423                   $50,554
      81              $120,415                        $6,726                       $90,311                 $148,494                   $58,183



Source: Brentmark Software Pension Distribution Planner ver. 6.34. “Traditional IRA” column illustrates hypothetical IRA value without tax impact. Table
assumes no tax rate increase. If future tax rates are higher, the Roth IRA Advantage would be even greater. “Value Net of Taxes” column assumes full
liquidation of IRA to illustrate hypothetical tax obligation. * Net of taxes.
Impact of Required Minimum Distributions vs. Roth IRA with No Distributions
            70 Year Old - $112,486 IRA (25% marginal tax rate) – 5.0% Yield

     Age          Traditional IRA                   Required                    Value Net of               Roth IRA                 Roth IRA
                                                  Distributions                    Taxes                                           Advantage
      70              $115,762                        $4,224                       $86,821                  $86,821                      $0
      71              $117,115                        $4,419                       $87,836                  $91,162                   $3,326
      72              $118,331                        $4,622                       $88,748                  $95,721                   $6,972
      73              $119,394                        $4,833                       $89,546                 $100,507                   $10,961
      74              $120,289                        $5,054                       $90,217                 $105,532                   $15,315
      75              $120,997                        $5,283                       $90,748                  $110,809                  $20,060
      76              $121,500                        $5,522                       $91,125                  $116,349                  $25,224
      77              $121,777                        $5,744                       $91,332                 $122,167                   $30,834
      78              $121,834                        $6,001                       $91,376                 $128,275                   $36,899
      79              $121,625                        $6,236                       $91,219                 $134,689                   $43,470
      80              $121,159                        $6,478                       $90,869                 $141,423                   $50,554
      81              $120,415                        $6,726                       $90,311                 $148,494                   $58,183



Source: Brentmark Software Pension Distribution Planner ver. 6.34. “Traditional IRA” column illustrates hypothetical IRA value without tax impact. Table
assumes no tax rate increase. If future tax rates are higher, the Roth IRA Advantage would be even greater. “Value Net of Taxes” column assumes full
liquidation of IRA to illustrate hypothetical tax obligation. * Net of taxes.
Impact of Required Minimum Distributions vs. Roth IRA with No Distributions
            70 Year Old - $112,486 IRA (25% marginal tax rate) – 5.0% Yield

     Age          Traditional IRA                   Required                    Value Net of               Roth IRA                 Roth IRA
                                                  Distributions                    Taxes                                           Advantage
      70              $115,762                        $4,224                       $86,821                  $86,821                      $0
      71              $117,115                        $4,419                       $87,836                  $91,162                   $3,326
      72              $118,331                        $4,622                       $88,748                  $95,721                   $6,972
      73              $119,394                        $4,833                       $89,546                 $100,507                   $10,961
      74              $120,289                        $5,054                       $90,217                 $105,532                   $15,315
      75              $120,997                        $5,283                       $90,748                  $110,809                  $20,060
      76              $121,500                        $5,522                       $91,125                  $116,349                  $25,224
      77              $121,777                        $5,744                       $91,332                 $122,167                   $30,834
      78              $121,834                        $6,001                       $91,376                 $128,275                   $36,899
      79              $121,625                        $6,236                       $91,219                 $134,689                   $43,470
      80              $121,159                        $6,478                       $90,869                 $141,423                   $50,554
      81              $120,415                        $6,726                       $90,311                 $148,494                   $58,183



Source: Brentmark Software Pension Distribution Planner ver. 6.34. “Traditional IRA” column illustrates hypothetical IRA value without tax impact. Table
assumes no tax rate increase. If future tax rates are higher, the Roth IRA Advantage would be even greater. “Value Net of Taxes” column assumes full
liquidation of IRA to illustrate hypothetical tax obligation. * Net of taxes.
Impact of Required Minimum Distributions vs. Roth IRA with No Distributions
            70 Year Old - $112,486 IRA (25% marginal tax rate) – 5.0% Yield

     Age          Traditional IRA                   Required                    Value Net of               Roth IRA                 Roth IRA
                                                  Distributions                    Taxes                                           Advantage
      70              $115,762                        $4,224                       $86,821                  $86,821                      $0
      71              $117,115                        $4,419                       $87,836                  $91,162                   $3,326
      72              $118,331                        $4,622                       $88,748                  $95,721                   $6,972
      73              $119,394                        $4,833                       $89,546                 $100,507                   $10,961
      74              $120,289                        $5,054                       $90,217                 $105,532                   $15,315
      75              $120,997                        $5,283                       $90,748                  $110,809                  $20,060
      76              $121,500                        $5,522                       $91,125                  $116,349                  $25,224
      77              $121,777                        $5,744                       $91,332                 $122,167                   $30,834
      78              $121,834                        $6,001                       $91,376                 $128,275                   $36,899
      79              $121,625                        $6,236                       $91,219                 $134,689                   $43,470
      80              $121,159                        $6,478                       $90,869                 $141,423                   $50,554
      81              $120,415                        $6,726                       $90,311                 $148,494                   $58,183


                                                                                                                 64% MORE*
Source: Brentmark Software Pension Distribution Planner ver. 6.34. “Traditional IRA” column illustrates hypothetical IRA value without tax impact. Table
assumes no tax rate increase. If future tax rates are higher, the Roth IRA Advantage would be even greater. “Value Net of Taxes” column assumes full
liquidation of IRA to illustrate hypothetical tax obligation. * Net of taxes.
 Eliminating
  Required
  Minimum
Distributions
     Age          Traditional IRA                   Required                    Value Net of               Roth IRA                 Roth IRA
                                                  Distributions                    Required
                                                                                   Taxes                                           Advantage
      70              $115,762                        $4,224                       $86,821  $86,821   $0
      71              $117,115                        $4,419                       Distributions from
                                                                                   $87,836  $91,162 $3,326
      72
      73
                      $118,331
                      $119,394
                                                      $4,622
                                                      $4,833
                                                                                   a traditional $10,961
                                                                                   $88,748
                                                                                   $89,546
                                                                                            $95,721
                                                                                           $100,507
                                                                                                    $6,972


      74              $120,289                        $5,054                       retirement account
                                                                                   $90,217 $105,532 $15,315
      75              $120,997                        $5,283                       $90,748 $110,809 $20,060
      76              $121,500                        $5,522                       may increase the
                                                                                   $91,125 $116,349 $25,224
      77
      78
                      $121,777
                      $121,834
                                                      $5,744
                                                      $6,001
                                                                                   taxes you pay $30,834
                                                                                   $91,332
                                                                                   $91,376
                                                                                           $122,167
                                                                                           $128,275
                                                                                                    on
                                                                                                    $36,899
      79              $121,625                        $6,236                       your Social $43,470
                                                                                   $91,219 $134,689
      80              $121,159                        $6,478                       $90,869 $141,423 $50,554
      81              $120,415                        $6,726                       Security Benefits
                                                                                   $90,311 $148,494 $58,183



Source: Brentmark Software Pension Distribution Planner ver. 6.34. “Traditional IRA” column illustrates hypothetical IRA value without tax impact. Table
assumes no tax rate increase. If future tax rates are higher, the Roth IRA Advantage would be even greater. “Value Net of Taxes” column assumes full
liquidation of IRA to illustrate hypothetical tax obligation. * Net of taxes.
                       “Threshold” or “Provisional” Income


                 SINGLE                  MARRIED
                                                       • 85%
                   34,000+               44,000+     • Taxable


               25,000                     32,000       • 50%
             to 34,000                   to 44,000   • Taxable


                 25,000                  32,000        • Not
                 & under                 & under     • Taxable



Source: Social Security Administration
     Age         Traditional IRA                 Required               Value Net of   Roth IRA    Roth IRA

      70             $115,762
                                               Distributions
                                                   $4,224
                                                                            Distributions
                                                                           Taxes
                                                                          $86,821      $86,821
                                                                                                  Advantage
                                                                                                     $0
      71
      72
                     $117,115
                     $118,331
                                                   $4,419
                                                   $4,622
                                                                            from a ROTH
                                                                          $87,836
                                                                          $88,748
                                                                                       $91,162
                                                                                       $95,721
                                                                                                   $3,326
                                                                                                   $6,972
      73
      74
                     $119,394
                     $120,289
                                                   $4,833
                                                   $5,054
                                                                            IRA do not
                                                                          $89,546
                                                                          $90,217
                                                                                       $100,507
                                                                                       $105,532
                                                                                                   $10,961
                                                                                                   $15,315
      75
      76
                     $120,997
                     $121,500
                                                   $5,283
                                                   $5,522
                                                                            increase your
                                                                          $90,748
                                                                          $91,125
                                                                                       $110,809
                                                                                       $116,349
                                                                                                   $20,060
                                                                                                   $25,224
      77
      78
                     $121,777                      $5,744                   taxes on Social
                                                                          $91,332
                                                                          $91,376
                                                                                       $122,167
                                                                                       $128,275
                                                                                                   $30,834
                                                                                                   $36,899
                     $121,834                      $6,001
      79             $121,625                      $6,236                   Security
                                                                          $91,219      $134,689    $43,470
      80             $121,159                      $6,478                 $90,869      $141,423    $50,554
      81             $120,415                      $6,726                   benefits.
                                                                          $90,311      $148,494    $58,183



Treasury Publication 590 (Page 65) and Appendix B Worksheet (Page 83)
  Reducing
potential taxes
  on Social
   Security
   benefits
A typical Roth IRA CONVERSION


  Do I want to avoid the
    “TAX BURDEN”
  being passed onto my
      beneficiaries?
                           Qualified

          Roth IRA      distributions to
                      beneficiaries are not
                            taxable




Page 68   “Generally, the entire
          interest in the Roth
          IRA must be
          distributed by the end
          of the 5th calendar
          year after the year of
          the owner’s death.”
                           Qualified

          Roth IRA      distributions to
                      beneficiaries are not
                            taxable




Page 68   “If paid as an annuity,
          the entire interest
          must be payable over
          a period not greater
          than the designated
          beneficiary’s life
          expectancy...”
                            Qualified

          Roth IRA       distributions to
                       beneficiaries are not
                             taxable




Page 68   This means the
          beneficiary can
          “STRETCH” their
          Roth IRA benefits
          over their lifetime on
          an income tax free
          basis!
            Roth IRA STRETCH

                                  Current Roth IRA Account Value:

                                                $100,000
                       Interest rate:                                                5.0%
                       Roth IRA Owner Age:                                           65
                       Spouse Age:                                                   65
                       Beneficiaries:                                                Son, age 43 (50%)
                                                                                     Grandson, age 16 (50%)



Source: Brentmark Software Pension Distribution Planner ver. 6.34. Assumes owner and spouse make no distributions from Roth IRA.
           Roth IRA STRETCH
                                                                                                                 ROTH Federal
                    Roth IRA Account Value:
                                                                              $843,495                         Income Tax-Free!




$100,000

Source: Brentmark Software Pension Distribution Planner ver. 6.34. Assumes owner and spouse make no distributions from Roth IRA. Beginning
balance $100,000. Assumed interest rate is 5.0%. Owner is 65, Spouse is 65, Beneficiaries are 43 years old (50%) and 46 years old (50%).
       Traditional Stretch IRA
                                                                                                                   ROTH Federal
                    Using a traditional IRA
                    and the same                                               $843,495                          Income Tax-Free!
                    assumptions




                                                                                                                       $397,464 in IRA
                                                                                                                        Distributions




                                                                                                                      $298,098 Value
                                                                                                                        After Taxes

$100,000

Source: Brentmark Software Pension Distribution Planner ver. 6.34. Assumes owner and spouse make no distributions from Roth IRA. Beginning
balance $100,000. Assumed interest rate is 5.0%. Owner is 65, Spouse is 65, Beneficiaries are 43 years old (50%) and 46 years old (50%). 25%
Marginal Tax Rate.
        The ROTH Advantage
                                                                                                                   ROTH Federal
                                                                               $843,495                          Income Tax-Free!



       That’s 283%                                                                                                     $397,464 in IRA

       more money                                                                                                       Distributions




       net of taxes!                                                                                                  $298,098 Value
                                                                                                                        After Taxes




Source: Brentmark Software Pension Distribution Planner ver. 6.34. Assumes owner and spouse make no distributions from Roth IRA. Beginning
balance $100,000. Assumed interest rate is 5.0%. Owner is 65, Spouse is 65, Beneficiaries are 43 years old (50%) and 46 years old (50%). 25%
Marginal Tax Rate.
 Leaving a
  Federal
Income Tax-
Free Legacy
Now that we have examined the
basics of ROTH IRA Conversion

      Let’s evaluate the


The Retirement Account
 Optimization Strategy
  Retirement Account Optimization


• Recover a portion of the tax cost from
  conversion on a tax-free basis
• Evaluate optimal conversion method
• Convert from a Traditional to a Roth IRA
• Protect assets from Market Volatility
  Retirement Account Optimization


• Recover a portion of the tax for conversion
  Certain deferred annuities pay an up front bonus
  on funds you place in the annuity.
  For example:             $100,000
  10% Bonus:               $ 10,000
  Beginning Value:         $110,000
            Conversion Evaluation

Option One: $100,000 IRA
25% Marginal Tax Rate


                                                                        $82,500 Starting
    $25,000                    $25,000                                       Value
  Owed to IRS*                                                           10% Bonus! $7,500
                                       Tax
                                To Convert                                 Roth IRA
    $75,000
   $100,000
                                                                            $75,000
      IRA
                                                                            Income
     After
    Taxable                                                                   Tax
     Taxes          * Assumes full liquidation of retirement account.
                                                                             Free**
                       **Certain conditions must be met to qualify
               Optimal Conversion

Option Two: $100,000 IRA
                                                                              $110,000
25% Marginal Tax Rate                                                       Starting Value
                                                                            10% Bonus! $10,000


      $25,000                      $25,000
    Owed to IRS*
                                           Tax                                 Roth IRA
                             paid from another                                 $100,000
      $75,000
     $100,000                 source of funds
                                                                                Income
        IRA                                                                       Tax
     Taxable
      After                                                                      Free**
      Taxes             * Assumes full liquidation of retirement account.
                           **Certain conditions must be met to qualify
              Optimal Conversion

Benefit after of Taxes:                $35,000
                                                                        $110,000
Cost of Conversion:                    $25,000                        Starting Value
Net Benefit Day One:                   $10,000                        10% Bonus! $10,000


     $25,000
   Owed to IRS*                                                          Roth IRA
                                                                         Annuity
     $75,000
    $100,000                                                             $100,000
      IRA                                                                 Income
                                                                            Tax
     After
    Taxable                                                                Free**
     Taxes        * Assumes full liquidation of retirement account.
                     **Certain conditions must be met to qualify
             Optimal Conversion

Benefit net of Taxes:           $35,000
                                            $110,000
Cost of Conversion:             $25,000   Starting Value
                                          10% Bonus! $10,000

Optimal Sources to Pay Tax
Assets that have already paid income         Roth IRA
taxes (Non-Qualified Money)                  Annuity
CDs - Excess Funds in Checking               $100,000
Money Market Funds - Savings                  Income
Poorly Performing Investments                   Tax
                                               Free**
Poorly Performing Real Estate
Learn more
about your
  optimal
conversion
 strategy
    Imagine your IRA no longer taxable


     “Letting your
     money compound
     tax-free for decades
     is an investor's
     dream.”

Source: The Money Book for the Young Fabulous & Broke by Suze Orman
    Imagine your IRA no longer taxable
                                                                                $179,178
                                                                            10 Years
     “Letting your
     money compound
     tax-free for decades                                                           Federal
                                                                                Income Tax

     is an investor's                                                          Free Growth



     dream.”
                                                               $110,0000
                                                                 5% Yield
Source: The Money Book for the Young Fabulous & Broke by Suze Orman
        Roth IRA Optimization


• Recover a portion of the tax cost from
  conversion on a tax-free basis
• Evaluate optimal conversion method
• Convert from a Traditional to a Roth IRA
• Protect assets from Market Volatility
Protect Assets from Market Volatility

                                                                                     $147,745
                                                         5%

           $100,000                                                                      $90,345
                                                                                        Difference




                                                                                       $57,400
                                                      42.6%
                                                     Loss in
                                                     8 Years

Source: www.finance.yahoo.com. S&P 500 Index (2000 to Nov. 18, 2008). Assumes traditional IRA is converted in 2000 and taxes paid
                                             from another non-qualified source.
                                        Getting a Bonus


                                                                                     $162,520
                                                         5%

           $110,000                                                                     $105,120
                                                                                        Difference




                                                                                       $57,400
                                                      42.6%
                                                     Loss in
                                                     8 Years

Source: www.finance.yahoo.com. S&P 500 Index (2000 to Nov. 18, 2008). Assumes traditional IRA is converted in 2000 and taxes paid
                               from another non-qualified source. 10% Annuity Premium Bonus
  Guarantee
  growth and
reduce market
   volatility
Retirement Account Optimization
            Strategy
          Implementation:
This strategy is accomplished by working
   together to evaluate your personal
                 situation.
 Not all products are appropriate for all
                people.
Retirement Account Optimization
            Strategy
            Implementation:
            When we do meet…


“Do you think that you will spend most of the
money in your Retirement Account between
now and the time that you and your spouse
pass away?”
            “YES”

“We do think we will spend
most of the money in our
Retirement Account during our
lives.”

Lifetime Guaranteed Income Plan
Lifetime Guaranteed Income Plan
75 Year old hypothetical example:

$100,000
Growing for 5-years

10.285% Annual cash flow return
$10,285
GUARANTEED for LIFE!
Guarantee a
 lifetime of
   income
            “NO”

“We do not anticipate spending
most of the money in our
Retirement Account during our
lives.”

      Wealth Transfer
             Wealth Transfer
Hypothetical example:

$100,000
Growing for 10-years


$176,000
GUARANTEED Wealth Transfer
  Guarantee
 growth and
how to pass it
    onto
beneficiaries
 income tax-
     free
  If they “STRETCH” the ROTH


  Roth IRA Account Value:
                                                                                                                $843,495

                                                                                                                 ROTH IRA
                                                                                                            Federal Income
                                                                                                              Tax-Free!




$100,000

Source: Brentmark Software Pension Distribution Planner ver. 6.34. Assumes owner and spouse make no distributions from Roth IRA. Beginning
balance $100,000. Assumed interest rate is 5.0%. Owner is 65, Spouse is 65, Beneficiaries are 43 years old (50%) and 46 years old (50%).
STRETCH
Roth IRA
Concept
Any additional
comments are
   greatly
 appreciated!
Retirement Account Optimization
            Strategy
        Our Approach is Different
We will help you assess:
• Your current financial situation.
• Your tax status.
• Your personal goals and
  objectives.
• Your risk tolerance.
• We may also consider other
  information you provide.
Retirement Account Optimization
             Strategy
 It’s About Making Better Decisions
•   Preserve the wealth you have worked so hard
    to accumulate over the years.

•   Reduce your exposure to unnecessary taxes.

•   Reduce your exposure to unnecessary risk.

•   Improve the income you are receiving on your
    savings.

•   Increase the amount of money you leave to
    each other and to your heirs.

•   Reduce the costs and delays associated with
    the transfer of wealth to your heirs.
If you implement some of my
    recommendations, I am
 compensated by companies
   you choose to work with.
Retirement Account Optimization
            Strategy
      The next step…

     Request a
 confidential review
               Retirement Success
               Free Consultation
          Mr. Smith
Name__________________________________________
           777-1234
Telephone#_____________________________________


      X   My preferred day/time for an appointment is:
                  Mon / Tue / Wed / Thu / Fri

                           2:00 AM/PM
                     Time:_______________
    Thank You For Coming!


  Retirement Account
     Optimization

This is event is the primary way
my firm meets new customers.
 Thank You For Coming!


Retirement Account
   Optimization

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:9
posted:12/29/2011
language:
pages:136