401(k) & IRA Rollover Options

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1 Our Advisor and Fidelity Insight Diversification Dedicated Support Smart move ṢM 401(k) & IRA Rollover Options STRATEGIES FOR JOB CHANGERS AND RETIREES. Not FDIC Insured May Lose Value No Bank Guarantee FOR INVESTORS

2 Agenda Why people take their money out of retirement plans before retirement Understanding your distribution options Next steps you can take

3 Changing jobs? Retiring early? Close to retirement? YOU RE NOT ALONE The median tenure with a current employer for employed wage and salary workers is 4.9 years. 1 The average person born in the later years of the baby boom held 10 jobs from ages 18 to The average age for retirement has dropped from 65 to An estimated 25 million Americans will retire between EBRI Employee Tenure: Stable Overall, but Male & Female Trends Differ, March 2005, Vol. 26. No Bureau of Labor Statistics, Employee tenure: September 21, The baby boom covers those individuals born between 1946 and National Bureau of Economic Research, The Economics of Aging, June 22, Employers underestimate Retirement Effect, AICPA July 20, 2006.

4 Your distribution options 1 Take the distribution in cash Leave the money in your former employer s retirement plan Roll the eligible assets into your new employer s retirement plan Roll the eligible assets into a Rollover IRA

5 Distribution option 1 TAKE THE DISTRIBUTION IN CASH 45% of participants in 2004 cashed out when they changed jobs, even though they had to pay a 10% penalty on their personal income tax. 1 If you took your distribution in cash, how much could you potentially lose to taxes and penalties? A 10% B 25% C 35% D 43% (k) Plans are still coming up short, Number 43, by Alicia H. Munnell and Annika Sunden, March Pretax contributions and any earnings in a tax-deferred retirement plan are taxable as ordinary income in the year they are distributed and may also be subject to a 10% early distribution penalty if taken before age 59½.

6 Taking cash has significant tax consequences Potential implications of a $30,000 early cash distribution of an eligible rollover amount from a 401(k) plan assuming: 20% mandatory federal income tax withholding 10% early-distribution penalty 5% additional federal income taxes are owed Taxes & penalties $10,500 $19,500 Money remaining Among the options available for 401(k) assets are directly rolling over the assets to another tax-deferred retirement account or taking a lump-sum cash distribution. This chart illustrates the potential impact of taxes and penalties that a cash distribution from a 401(k) plan might trigger if taken before age 59½, assuming a 25% federal ordinary income tax rate.

7 Tax-deferred vs. taxable account Potential advantages of $30,000 (pretax) rolled directly to an IRA versus taking a lump-sum cash distribution and investing the net proceeds of $19,500 (after-tax)* in a taxable account $350,000 Potential growth after taxes $300,000 Taxable Account $250,000 Rollover IRA $240,223 $200,000 $150,000 $100,000 $50,000 $33,626 $44,261 $76,143 $122,117 $131,302 $0 10 Years 25 Years 35 Years Any portion of a cash distribution not rolled over within 60 days from the participant s receipt of the distribution, including the 20% withheld, is considered income in the year distributed and may also be subject to a 10% penalty if you are under 59½. If you wish to roll over the 20% that was withheld, you will have to fund it from another source and then seek the return of the amount withheld when you file your federal tax return. *The $19,500 assumes the $30,000 cash distribution was subject to a 25% federal ordinary income tax rate and a 10% early distribution penalty. This hypothetical compares a $30,000 (pretax) distribution from a 401(k) plan taken as a direct rollover to a Rollover IRA to a lump-sum early cash distribution from a 401(k) plan with the net proceeds of $19,500 (after-tax) invested in a taxable account and after-tax amounts potentially available with each. Assumptions include a 7% annual rate of return and an imputed constant blended annual income tax rate of 20% on taxable account earnings. State and local taxes and account fees and expenses are not taken into account. If they were deducted, performance would be lower. The hypothetical is not intended to predict or project the investment performance of any security. Your own results will vary.

8 The cost of waiting A Hypothetical Example Investor A Total account value $40,000 total invested $343,414 Investor B $104,000 total invested $293, Investor A Investor B Hypothetical investment of Hypothetical investment of $4,000 per year from ages 30 to 39 $4,000 per year from ages 40 to 65 Total amount invested = $40,000 Total amount invested = $104,000 Total investment value = $343,414 Total investment value = $293,935 (pretax) after 36 years (pretax) after 26 years This hypothetical is not intended to predict or project investment performance. Your own results will vary. It assumes systematic $4,000 pretax, annual investment to a SIMPLE IRA on 1/1 for the years indicated above and a 7% annual rate of return. No distributions are taken during the entire period. Taxes, fees, and expenses are not taken into account. If account fees and expenses were deducted, performance would be lower. Pretax contributions and any earnings will be taxed at the time of distribution and may also be subject to an early withdrawal penalty if distributed before age 59½. Systematic investing does not ensure a profit and does not protect against loss in a declining market.

9 Distribution option 2 LEAVE THE MONEY IN YOUR FORMER EMPLOYER S RETIREMENT PLAN Potential Advantages Potential Disadvantages No immediate decision required Limited investment flexibility (if certain requirements are met) Potentially limited distribution Continues tax-deferred status options, particularly for nonspouse beneficiaries No current taxation Potential fees for participants No early-distribution penalties who are no longer employed Offers federal creditor protection; taxable accounts do not Multiple retirement plans with separate account statements

10 Distribution option 3 ROLL ASSETS OVER TO A NEW EMPLOYER S RETIREMENT PLAN Potential Advantages Potential Disadvantages Continues tax-deferred status New plan may not accept rollovers No current taxation Possibly limited investment No early distribution penalties choices Consolidated investment and Potentially limited distribution reporting options* May offer investment options Potential surrender and other unavailable in current plan types of charges may apply Offers federal creditor protection; taxable accounts do not *Starting in 2007, nonspouse beneficiaries may now roll over inherited workplace savings plan assets to an inherited IRA.

11 Distribution option 4 ROLL THE ASSETS TO A ROLLOVER IRA Potential Advantages Potential Disadvantages Continues tax-deferred status No ability to take loans which may be available with new No current taxation or penalties employer s plan May offer creditor protection 1 Potential surrender and other Potential to convert to a Roth IRA 2 types of charges may apply 1. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 shields certain retirement assets from creditors in case of bankruptcy. For Rollover IRAs, there is no limit on the assets protected. Please consult a qualified bankruptcy attorney and/or tax professional for further information on the Act and how it may affect your personal situation. 2. Beginning in 2008, if you qualify, you'll be able to directly roll over eligible 401(k) assets into a Roth IRA. Currently, you have to move it to a Traditional IRA first.

12 Account consolidation POTENTIAL ADVANTAGES OF CONSOLIDATING MULTIPLE ACCOUNTS A clear view of your retirement portfolio More investment options Better distribution options Simplicity

13 Strategies for special situations NUA:* A tax-saving strategy that may benefit those with appreciated company stock in an employer-sponsored retirement plan** 72(t) distributions: A withdrawal strategy for those with substantial retirement assets, who may need to distribute them before the age at which distributions can be taken without penalty * To fully utilize this strategy, a lump-sum distribution is usually required. If a lump-sum distribution is not taken, then only the NUA attributable to employer stock purchased with after-tax (non-roth) employee deferrals should be eligible for this special tax treatment. Any assets which are not eligible for NUA treatment, or on which participants do not wish to elect such treatment, can be rolled over to an IRA or to another qualified plan to preserve their tax deferred status. **Sale of company stock may result in commissions or additional expenses. Talk to your stock plan administrator or custodian to understand the costs of selling stock.

14 Your distribution options Take cash Leave in former employer s plan Rollover to new employer s plan Tax-deferred status No Yes Yes Yes Rollover IRA Roth IRA 1 Tax Free Avoid current taxation No Yes Yes (if eligible & IRS early-distribution distribution is directly penalties rolled over) Yes (if eligible distribution is rolled over) Yes (if eligible distribution is rolled over) Offers investment Yes May be limited May be limited flexibility Depends on IRA Depends on IRA Available to all Yes If permitted under May be limited employees plan and balance is $5,000 or more 2 Can add more eligible NA No May be limited Yes Yes money later Eligible for 72(t) NA Maybe; not relevant Maybe; 3 not relevant Yes; not Yes; not distributions if age 55 or older if age 55 or older relevant if 59½ relevant if 59½ or older or older Yes Yes 1. Assets in employer-sponsored plans must be rolled over to a Traditional IRA before they can be converted to a Roth IRA. According to the Pension Protection Act of 2006, as of 1/1/08, assets in employer-sponsored plans may be directly rolled over to a Roth IRA. 2. This may not be an option if your previous employer terminated the plan or if your plan maintains certain cash-out limits. The minimum required account balance may include or exclude any rollovers you may have made into the plan. Please check with your Plan Administrator for the specific plan account requirements for your plan. 3. But not while you are employed.

15 1. Reevaluate your goals TO HELP YOU BETTER PREPARE FOR RETIREMENT: Reassess your goals and current financial situation Develop a plan for pursuing your retirement goals Understand your distribution options Review your overall financial planning strategy

16 2. Understand your options Know the tax implications Be aware of timing issues Direct rollover: assets are directly transferred to the new custodian Indirect rollover: you generally have 60 days to roll over the money you received to the new custodian to avoid taxes* Look ahead weigh the potential effects on long-term planning and future income *Any portion not rolled over within the time limit, including the 20% withheld, is considered income in the year distributed, and may also be subject to a 10% penalty if you are under 59½. If you wish to roll over the 20% that was withheld, you will have to fund it from another source and then seek the return of the amount withheld when you file your federal tax return. The 60-day time limit for rollovers is increased to 120 days for amounts (up to $10,000) distributed from an IRA for a qualified first-time home purchase that does not materialize.

17 3. Review your investments Ensure your investment strategy is in tune with your risk tolerance and time horizon Rebalance your investments moving and consolidating assets is an ideal time to revisit your asset allocation Take advantage of new investment products that may fit your needs Keep current regarding regulation changes that may affect your savings strategy

18 4. Work with a retirement expert Call us today to help you with your rollover options and completing your rollover forms. Your Advisor and Fidelity Insight Diversification Dedicated Support

19 Legal Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact your investment professional for a prospectus or visit advisor.fidelity.com for a Fidelity Advisor fund prospectus containing this information. Read it carefully. Not NCUA or NCUSIF insured. May lose value. No credit union guarantee. The tax and estate planning information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Fidelity does not provide legal or tax advice. Fidelity cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws which may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Fidelity makes no warranties with regard to such information or results obtained by its use. Fidelity disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation. Fidelity Investments & Pyramid Design, Fidelity Advisor Funds, and Fidelity Advisor Freedom Funds are registered service marks of FMR Corp. Fidelity Investments Institutional Services Company, Inc., 82 Devonshire Street, Boston, MA Insight Your Advisor and Fidelity Diversification Dedicated Support Smart move ṢM

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