Carter Roth and Debbie Roth

Transcription

1 Carter Roth and Debbie Roth N. Main St. Suite Minneapolis, Minnesota 555 Phone: Fax:

2 Table of Contents Important Notes Maximizing Conversion at Death 3 Comparing IRA with Conversion Keep Traditional IRA 5 Convert IRA to Convert IRA to Using Life Insurance Understanding IRAs, s, Conversions 9 Retirement Savings Options Should Spouse Convert to? 3 Assumptions

3 Important Notes These pages depict certain wealth preservation strategies concerning growth, and tax rates may be significantly different from those possible methods for taking distri from your qualified retirement illustrated. These assumptions are only a best guess. No plan and may recommend strategies that propose the purchase of a guarantee can be made regarding values, as all rates are the new life insurance policy. For purposes of this analysis, several of your hypothetical rates you provided. These computations are not a qualified retirement plans may be aggregated and shown as one single guarantee of future performance of any asset, including insurance or plan. This report provides only broad, general guidelines, which may be other financial products. helpful in shaping your thinking about and discussing your wealth preservation needs with your professional advisors. This report provides No legal or accounting advice is being rendered either by this report estimates based on our general understanding of current tax laws. This or through any other oral or written communications. Nothing retirement income distribution analysis may be used as supporting contained in this report is intended to be used on any tax form or to documentation in the development of a financial plan offered as an support any tax deduction. Unless indicated, the tax aspect of the advisory service by Thrivent Investment Management Inc., subject to federal Generation-Skipping Transfer (GSTT) is not reflected. The the Investment Advisers Act of 9. However, the analysis may also be GSTT is similar to an additional level of estate tax on certain transfers used to support other recommendations outside the context of an to grandchildren, or individuals two or more generations removed investment advisory relationship, and does not, in and of itself, from the transferor. State laws vary regarding the distribution of constitute a financial plan. property, and individual circumstances are unique and subject to change. You should discuss all strategies, transfers, and Each scenario shown illustrates your current situation or an alternative assumptions with your legal and tax advisors. strategy and its possible effects on the financial situation you provided. Inclusion of one or more of these strategies does not constitute a To implement a strategy, it may be necessary to restructure the recommendation of that strategy over any other strategy. ownership of property, or change designated beneficiaries before specific will or trust provisions, prepared by the client s counsel, Calculations contained in this analysis are estimates only based on the become effective. The transfer of a life insurance policy may not information you provided, such as the value of your assets today, and result in its removal from the estate of the prior owner for three years. the rate at which the assets appreciate. The actual values, rates of Version.. c August, 5 of

4 Important Notes Strategies may be proposed to support the purchase of various Insurance products issued or offered by, the products such as insurance and other financial products. When this marketing name for for Lutherans, Appleton, WI. occurs, additional information about the specific product (including a Not all products are available in all states. Securities and prospectus, if required, or an insurer provided policy illustration) will be investment advisory services are offered through Thrivent provided for your review. Investment Management Inc., 5 Fourth Ave. S., Minneapolis, MN 555, a FINRA and SIPC member and a wholly owned subsidiary These computations do not apply the net unrealized appreciation of Thrivent. representatives are registered (NUA) technique to your qualified plan distri. NUA is a representatives of Thrivent Investment Management Inc. They are technique which allows a former employee to pay taxes at the most also licensed insurance agents/producers of Thrivent. favorable long-term capital gain rate on the appreciation value of any employer securities held within the employer's retirement plan. Please Guarantees are based on the financial strength and claims-paying consult with your tax advisor to see if this technique is available to you. ability of the issuing insurance company. IMPORTANT: The projections or other information generated by this This material, in and of itself, does not constitute a financial plan investment analysis tool (Retirement Plan Distribution Analysis) nor should it be viewed or interpreted as creating an investment regarding the likelihood of various investment outcomes are advisory relationship subject to the Investment Advisers Act of hypothetical in nature, do not reflect actual investment results and are 9. Fee-based financial planning services are available through not guarantees of future results. qualified investment advisor representatives only. IRS CIRCULAR 3 NOTICE: To ensure compliance with requirements and its respective associates and employees imposed by the IRS, this notice is to inform you that any U. S. federal cannot provide legal, accounting, or tax advice or services. Work tax advice contained in this presentation is not intended or written to with your representative, and as appropriate, be used, and cannot be used, for the purpose of (i) avoiding penalties your attorney and/or tax professional for additional information. under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed For additional important disclosure information, please visit in this presentation. thrivent.com/disclosures. Version.. c August, 5 of

5 Maximizing Conversion at Death More Income -Free Qualified Distri for Retirement Pay Conversion es Out of IRA A surviving spouse may convert the owner's IRA or Qualified If conversion is prior to ½, a % early distribution penalty may be imposed on IRA funds used to pay taxes on the conversion IRA/Qualified Retirement Plan Less money is available in to grow tax deferred, and receive income tax-free qualified distri for retirement needs Retirement Plan directly to a. A non-spouse beneficiary may convert the owner's Qualified Retirement Plan directly to a. The grows income tax deferred, and may be a source of income tax-free qualified distri during retirement. When the IRA or Qualified Retirement Plan is converted to Roth Free Distri IRA, income taxes are due on the taxable amount. If these taxes are paid using funds from the IRA or Qualified Retirement Plan, the es Surviving Spouse will be reduced (income tax and % early distribution penalty may apply). Pay Conversion es Using Life Insurance IRA/Qualified Retirement Plan More funds to accumulate income tax deferred More funds to provide income tax-free qualified distri during retirement Insurance More Free Distri Premiums for policy may be paid using distri from the IRA/Qualified Plan es Using other assets to pay income taxes due at conversion leaves more funds in the Using other assets to pay income taxes due at conversion leaves more funds in the : Surviving Spouse More funds to provide income tax-free qualified distri to your heirs Life insurance3 maximizes your! Life Insurance on the owner s life can provide the funds to pay taxes on the conversion. held outside the IRA or Qualified Plan could be used in addition to, or in place of, the insurance. 3 Subject to plan provisions, income tax, and possible % early distribution penalty. Withdrawals from a are income tax-free if the owner is over age ½ and the funds have been in the 5 years. Life insurance premiums would be an additional cost. August, 5 3 of

6 Comparing IRA with Conversion Should I Convert to a? How Should I Pay the es? Initial Value of IRA: $, Carter's considers conversion in to A Traditional IRA may be converted to a, but income taxes are generally paid on the taxable amount of the Traditional IRA converted to Roth IRA. In exchange, qualified distri from the are received income tax-free. Traditional IRA No Conversion es Using Other for es Using New Life Insurance for es $,, $,, $,,,,,,,, 8, 8, 8,,,,,,,,,, 9 9 Other 9 IRA Other Total IRA/ Other Total IRA/ Other Total 55,3 5,38,3 55,3 5,38,3 55, 5,9,8 8,9 5,9 83,3 8,9,3 5,, 9,, 5 3, 5,38 93,8 5 3, 9, 838, 5 3,8 55,8 893,8 $,3,8 Total Funds if Death at 3 Traditional IRA Total Funds if Death at 3 Total Funds if Death at 3 $,9,3 $,5, For comparison purposes, decedent's income taxes due of $3,8 have been deducted from the Traditional IRA value at death of $8,8. The net to heirs is $,3,8. Income tax rates are assumed to be 3%. Example assumes the net distri after taxes are deposited into the Other. August, 5 of

7 Keep Traditional IRA No Conversion to at Death Initial Value of IRA: $, Year Spouse 5 5 Life Exp. Earnings & Contri Actual Distri3,58 Traditional IRA Values 55,3 Rate 3.% Income es Paid Reinvested Distri5 Total of 5,38 Less Liability Net 5,38 Qualified &,3 Carter dies and rolls over the IRA to Debbie. 3 5 Life Exp. Earnings & Contri Actual Distri3 Year Spouse 58, 3,5 8, Traditional IRA Values Rate Income es Paid Reinvested Distri5 Total of Less 8 Liability Net Qualified & 8,9 3.% 5,9 5,9 83,3 8,95 3.% 55,5 55,5 8,8 95,5 3.% 53,9 53,9 83,3,8 3,38 3.% 58, 58, 858,5 5,5 35,8 3.% 5,5 5,5 885, 3,93 3, 3.% 5,38 5,38 93,8,8 3, 3.% 583,35 583,35 9, 5,93 3,3 3.% 5,55 5,55 9,85 8 8,8 39,9 3.% 8,8 8,8,, 5 9 9,85 5,89 3.%,85,85,3,8 8,95 3,9 3.% 33,89 33,89,,58 9,835 58,5 3.%,,,5, 8.,,35 3,95 3.%,35,5,,8,3, 9 3.5,39,58 8,8 3.%,,8,55,9 99,,8,58 Life expectancy is based on the Uniform Lifetime Table. See the Assumptions page for additional information. Assumes qualified plan earns 5.% interest. Also includes Employer Contri and Salary Reductions, if any. Actual Distribution is the greater of the distribution required to generate the Desired Distri (see Assumptions pages) or Required Minimum Distribution. es and any applicable penalties are paid at the start of the calendar year following the tax liability. See the Assumptions pages for information on distri from a Traditional IRA with an original after-tax amount of $3,. Actual Distri less es and Penalties. and Cumulative Reinvested Distri are assumed to earn 3.% interest and are taxed at a 3.% income tax rate. Net of liability for income taxes and any penalties. August, 5 5 of

8 Convert to Using Other for es Convert to at Death Initial Value of IRA: $, Year Spouse 5 5 Life Exp. Earnings & Contri,58 Actual Distri3 Traditional IRA Values 55,3 Rate 3.% Income es Paid Reinvested Distri5 Total of 5,38 Less Liability Net 5,38 Qualified &,3 Carter dies in January. Debbie converts $5,3 to a in the following month and pays income taxes using other assets. 3 5 Life Exp. Earnings & Contri Actual Distri3 Roth IRA Values Rate Income es Paid Reinvested Distri5 Total of Less Liability Net Qualified & Year Spouse 58 8,9 8,9 3.% 5,9,99,3 5, 3,5 8,95 3.%,99 -,99 5,538 5,538 38,33 8,5 95,5 3.%,5,5,95 9 3,8 3,38 3.% 5,9 5,9 8, 5,5 35,8 3.% 85,98 85,98 8, 5 3,93 3, 3.% 9, 9, 838,,8 3, 3.% 5,53 5,53 85,9 3 5,93 3,3 3.% 5,8 5,8 89, ,8 39,9 3.% 58,8 58,8 9, 5 9 9,85 5,89 3.% 539, 539, 955,3 8,95 3,9 3.% 55,38 55,38 98,9 9,835 58,5 3.% 5,998 5,998,,53 8,9 8,5 3.% 53,8 53,8,55,5 9 3,3 55,5 3.% 585,89 585,89,9,3 Life expectancy is based on the Uniform Lifetime Table. See the Assumptions page for additional information. Assumes qualified plan/ earns 5.% interest. Also includes Employer Contri and Salary Reductions, if any. After Roth Conversion, also includes amount converted to. Actual Distribution is the greater of the distribution required to generate the Desired Distri (see Assumptions pages) or Required Minimum Distribution. After Roth Conversion, Other are used to the extent possible to pay income taxes on Traditional IRA taxable amounts converted to. es and any applicable penalties are paid at the start of the calendar year following the tax liability. See the Assumptions pages for information on distri from a Traditional IRA with an original after-tax amount of $3,. After Roth Conversion, includes the estimated income taxes on the Traditional IRA taxable amount converted to, except for any after-tax amount. Actual Distri less es and Penalties. After Roth Conversion, Other are used to the extent possible to pay the income taxes on Traditional IRA taxable amounts converted to. and Cumulative Reinvested Distri are assumed to earn 3.% interest and are taxed at a 3.% income tax rate. Net of liability for income taxes and any penalties. August, 5 of

9 Convert to Using New Life Insurance Convert to at Death Initial Value of IRA: $, Year Spouse 5 5 Life Exp. Earnings & Contri,5 Actual Distri3 3 Traditional IRA Values 55, Rate 3.% Income es Paid Reinvested Distri5 Total of 5,38 Less Liability 9 Net 5,9 Qualified &,8 Carter dies in January. Debbie converts $55,95 to a in the following month and pays income taxes using other assets and new life insurance of $5,. 3 5 Life Exp. Earnings & Contri Actual Distri3 Roth IRA Values Rate Income es Paid Reinvested Distri5 Total of Less Liability Net Qualified & Year Spouse 58,, 3.% 9 5,9,8 9,, 3,383 8, 3.%,8 -,8 5, 5, 88,3 8,5 95,9 3.% 58,333 58,333 83, 9 3,55 39,88 3.%,8,8 839, 5,9 35,3 3.% 5,33 5,33 85, 5 3, 3,8 3.% 55,8 55,8 893,8,8 358,88 3.% 53, 53, 9,95 3 5,93 3,3 3.% 55,9 55,9 95,5 8 8,83 395,5 3.% 58,9 58,9 98, ,3 5, 3.% 9,5 9,5,, Life expectancy is based on the Uniform Lifetime Table. See the Assumptions page for additional information. Assumes qualified plan/ earns 5.% interest. Also includes Employer Contri and Salary Reductions, if any. After Roth Conversion, also includes amount converted to. Actual Distribution is the greater of the distribution required to generate the Desired Distri (see Assumptions pages) or Required Minimum Distribution. es and any applicable penalties are paid at the start of the calendar year following the tax liability. See the Assumptions pages for information on distri from a Traditional IRA with an original after-tax amount of $3,. After Roth Conversion, includes the estimated income taxes on the Traditional IRA taxable amount converted to, except for any after-tax amount. Actual Distri less es and Penalties. After Roth Conversion, life insurance proceeds are added to Other and used to pay income taxes on Traditional IRA taxable amount converted to Roth IRA. and Cumulative Reinvested Distri are assumed to earn 3.% interest and are taxed at a 3.% income tax rate. After Roth Conversion, life insurance proceeds are added to Other and used to pay income taxes on Traditional amount converted to. Net of liability for income taxes and any penalties. August, 5 of

10 Convert to Using New Life Insurance 3 5 Life Exp. Earnings & Contri Actual Distri3 Roth IRA Values Rate Income es Paid Reinvested Distri5 Total of Less Liability Net Qualified & Year Spouse 8, 35,988 3.%,89,89,8, 9,99 5,8 3.%,93,93,8,3 8,889 8, 3.% 38, 38,,8,3 9 3,3 5, 3.% 5, 5,,5, Life expectancy is based on the Uniform Lifetime Table. See the Assumptions page for additional information. Assumes qualified plan/ earns 5.% interest. Also includes Employer Contri and Salary Reductions, if any. After Roth Conversion, also includes amount converted to. Actual Distribution is the greater of the distribution required to generate the Desired Distri (see Assumptions pages) or Required Minimum Distribution. es and any applicable penalties are paid at the start of the calendar year following the tax liability. See the Assumptions pages for information on distri from a Traditional IRA with an original after-tax amount of $3,. After Roth Conversion, includes the estimated income taxes on the Traditional IRA taxable amount converted to, except for any after-tax amount. Actual Distri less es and Penalties. After Roth Conversion, life insurance proceeds are added to Other and used to pay income taxes on Traditional IRA taxable amount converted to Roth IRA. and Cumulative Reinvested Distri are assumed to earn 3.% interest and are taxed at a 3.% income tax rate. After Roth Conversion, life insurance proceeds are added to Other and used to pay income taxes on Traditional IRA amount converted to. Net of liability for income taxes and any penalties. August, 5 8 of

11 Understanding IRAs, s, Conversions Key Concepts & Rules Traditional IRAs Contri are limited to $5,5 for 5 ($,5 if 5 or over) and are generally tax deductible. If you are eligible for a retirement plan at work and your modified adjusted gross income (MAGI) is $98, - $8, in 5 (married, filing jointly), deductibility phases out and is eliminated thereafter. If your spouse is covered by a retirement plan at work, but you are not, the phase out is $83, - $93, for married, filing joint. (The phase out is $, - $, for single taxpayers.) Funds grow tax-deferred, but are taxed as ordinary income upon distribution. Minimum distri are required annually beginning on the Required Beginning Date (RBD ). Distri taken prior to age ½ are subject to a % early distribution penalty tax, with certain exceptions. Distri after your death (or your spouse's death) are taxed as ordinary income to the beneficiary as distri are received. At your death (or your spouse's death), the entire account value is includible in the gross estate for federal estate tax purposes, and may be subject to estate taxes. s Contri are limited to $5,5 for 5 ($,5 if 5 or over) and are NOT income tax deductible. Ability to contribute is phased out if you earn $83,-$93, for married, filing jointly in 5, and eliminated thereafter. The phase out is $, - $3, for single taxpayers. Withdrawals of contri to s, prior to age ½, are not subject to the % early withdrawal penalty tax. Withdrawals of earnings within 5 years of establishing a are taxed as ordinary income. Earnings taken prior to age ½ are taxed as ordinary income, and may be subject to a % early withdrawal penalty tax, with certain exceptions. Funds grow tax deferred and are generally not taxable upon withdrawal. No minimum distri are required from s, during your (or your spouse's) lifetime. The RBD is no later than April st of the year following the year in which the IRA owner attains age ½ for Traditional IRAs, SEPs, and SIMPLE IRAs. For qualified retirement plans, the RBD is the later of April of the year following the year in which the owner reaches age ½ or retires, if less than a 5% owner. August, 5 9 of

12 Understanding IRAs, s, Conversions s (continued) Qualified distri after your death are received by the beneficiary income tax-free, assuming the 5 year period has been satisfied. At your death (or your spouse's death, if spouse is considered owner of at death), the entire account value is includible in the gross estate for federal estate tax purposes, and may be subject to estate taxes. Conversions (from a Traditional IRA or Qualified Retirement Plan to a ) A Conversion is a taxable event. The entire (or partial) amount of the Traditional IRA (less any non-deductible contri) is taxable as ordinary income upon conversion (or distribution). The conversion amount may move you into a higher marginal income tax bracket. Beginning in there is no income limit for conversions. If you pay the taxes out of the Traditional IRA, it will reduce the benefits of the conversion to a, and if you are under age ½, the amount used to pay income taxes will be subject to the % early distribution penalty tax unless an exception applies. Withdrawals of converted amounts within 5 years of each separate conversion to s may be subject to a % early distribution penalty tax and withdrawals of earnings may be subject to a % early distribution penalty tax and/or taxed as ordinary income. Distri from a Traditional IRA must be deposited into a within days (not applicable for trustee-to-trustee transfers). You do not have to convert your entire Traditional IRA. A partial conversion is allowed, but you must follow the same rules as any other distribution regarding nondeductible contri. August, 5 of

13 Retirement Savings Options IRA vs. Roth vs. able Accounts Pay es Now or Later? The deciding factor between choosing an IRA or is whether you prefer paying taxes on your contri () or on your distri (Traditional IRA). So when will your taxes be higher during your working years or during retirement? When comparing, be sure to consider your income level during each phase (both income and withdrawals from assets), in addition to potential legislative changes. es Stay the Same Both are Equal es Lower in Retirement Traditional IRA is Better es es Traditional IRA es Higher in Retirement is Better es Traditional IRA Traditional IRA (Conceptual purposes only. See your personalized illustration for information based on your specific circumstances.) The Flexibility of the A major advantage of the is the flexibility of distri before and during retirement: Withdrawals from Traditional IRAs may be subject to an additional % penalty tax, with some exceptions, while there is no penalty tax on withdrawals of contri from a (assuming distri are qualified and not from assets converted within 5 years) Required Distri (after ½) Traditional IRAs require minimum distri each year, while a has no required distri for the owner. August, 5 of

14 Retirement Savings Options The Case Against "able Accounts" (Savings Accounts) Contri to taxable accounts are made after-tax (just like a ), but unlike a, interest and dividends generated are taxable each year, and capital gains taxes are due when liquidating an investment held for more than a year. able Account vs $, $,9 5,, This combination of taxes can significantly reduce your ability to accumulate retirement funds over the long-term, and may affect or limit your investment options and the frequency of changes to your investments over the long-term. The upside is that there are no penalties or restrictions on withdrawals from taxable accounts before retirement, making them perfect for short-term savings. Use taxable accounts for short-term savings. Use IRAs and s for long-term retirement funding. 3, $3,,, able These graphs compare account balances after 3 years of $5, annual contri (after tax) growing at 8%. All growth in the taxable account is taxed each year at 35% while the grows tax free. August, 5 of

15 Should Surviving Spouse Convert to Providing the Most Income Deferred Accumulations and Income -Free Qualified Distri Owner dies, and leaves retirement plan to spouse Owner dies, and leaves retirement plan to spouse IRA/Qualified Retirement Plan Surviving spouse rolls over plan to Spousal IRA Income es due when Spouse receives taxable distri Spousal IRA Spouse takes at least the required minimum distri during retirement and is taxed on distri, except after tax amount, if any3 Pay Later es Surviving Spouse IRA/Qualified Retirement Plan Surviving spouse converts to Pay Now Spouse pays income taxes on the taxable amount of the conversion with other assets or IRA/Qualified Plan funds. Spouse may receive income tax-free distri for retirement KEEP SPOUSAL IRA Income es due when Spouse converts to es Surviving Spouse CONVERT TO ROTH IRA When are taxes due? As Distri are Received At Death Income taxes on accumulations? No No Income taxes on retirement distri? Yes - Except after tax amount, if any No - If qualified distri Best when income tax rate will... Decrease Increase Is spouse required to take distri? Yes - At age ½ based on the Uniform Lifetime Table No - Distri are not required May cause Social Security Benefits to be taxable income? Yes - able distri are considered taxable income No - Qualified distri are not considered income Income taxes paid by Spouse s heirs? Yes - Income taxes due on taxable distri to heirs No - Income taxes not due on qualified distri 3 Spousal IRA is a Traditional IRA of a surviving spouse funded all or in part with the deceased spouse's qualified retirement plan. Required Minimum Distri must start at age ½ and are based on the Uniform Lifetime Table. Distri received before age ½ will be subject to the additional % early distribution penalty tax, unless an exception applies. Spouse must be at least ½, and the 5 taxable year holding period must be satisfied. August, 5 3 of

16 Assumptions General Assumptions Carter's DOB: February, 95 Debbie's DOB: May 9, 958 Contact Information: 33 Tulip St Chicago, Illinois 58 Home Phone: Business Phone: Address: Calculations assume that the value of (excluding life insurance) is equal to $5,. These assets are assumed to earn 3.% interest. Hypothetical rates of return illustrated are not associated with any particular investment product. In some scenarios, new life insurance proceeds of $5, are illustrated after the death of the participant. Calculations assume an ordinary income tax rate of 3.%. The Account Balance and Other are grown pro-rata based on the date entered. Traditional IRA/Qualified Plan Assumptions Current Traditional IRA/Qualified Plan amount is $,, which includes the employee cost basis amount of $3,, and assumes a growth rate of 5.%. Calculations assume all non-deductible and after-tax contri (also known as basis, investment in the contract, and non-taxable portion) are included in the original after-tax amount of $3,. Hypothetical rates of return illustrated are not associated with any particular investment product. August, 5 of

17 Assumptions A portion of the distri from the Traditional IRA/Qualified Plan that includes any after-tax amount may not be taxable. These illustrations assume there are no other Traditional IRA/Qualified Plan account balances for calculations that include any after-tax amount. Elections: Distri are at least the Required Minimum Distribution using the Uniform Lifetime Table, if applicable. Assumptions Conversion Occurs: Year is assumed to earn 5.%. Hypothetical rates of return illustrated are not associated with any particular investment product. There are no required minimum distri during participant's or spouse's lifetime (if spouse is considered as owner). Traditional IRA Contri may be tax deductible and earnings are tax-deferred. Annual contribution amounts are limited, and deductibility of contri is based on modified adjusted gross income (MAGI), and not being a participant in an employer-sponsored retirement plan. Consult your tax advisor to determine the maximum tax-deductible contribution amount allowed annually. Contri may also be non-deductible (after-tax), but earnings are tax deferred. These illustrations assume there are no other Traditional IRA/Qualified Plan account balances for calculations that include any after-tax amount. Required minimum distri must begin by age ½. August, 5 5 of

18 Assumptions Contri are not tax deductible but earnings are tax-deferred. Annual contribution amounts are limited, and the ability to contribute is based on modified adjusted gross income (MAGI). Consult your tax advisor to determine the maximum contribution amount allowed annually. Withdrawals of contri to s are not subject to income tax or the % early withdrawal penalty tax. Withdrawals of earnings from a are considered qualified distri after the 5-taxable year holding period for which a contribution or conversion was made to any and the owner is age ½ or older. Withdrawals of earnings within 5 years of establishing a are taxed as ordinary income. Earnings taken prior to age ½ are taxed as ordinary income, and may be subject to a % early distribution penalty tax, with certain exceptions. Conversion of Traditional IRA to Beginning in, there is no income limit for conversions. Amounts converted from the Traditional IRA (except for any after-tax amount) are taxable in the year of the conversion. These illustrations assume there are no other Traditional IRA/Qualified Plan account balances for calculations that include any after-tax amount. Withdrawals of earnings from a are considered qualified distri after the 5-taxable year holding period for which a conversion or contribution was made to any and the owner is age ½ or older. Withdrawals of converted amounts within five years of each conversion to may be subject to the % early distribution penalty tax, and withdrawals of earnings may be subject to the % early distribution penalty tax and/or taxed as ordinary income. August, 5 of

19 Assumptions Distribution Assumptions Early retirement distri are not exempt from the IRC Section (t) penalty. Desired distri from the Traditional IRA/Qualified Plan include: Monthly premiums of $5 for new life insurance with a death benefit of $5, on Carter. Distri subject to ordinary income taxes and % early distribution penalty, if applicable. Distri from the Traditional IRA/Qualified Plan that does not include any after-tax amount are taxable. A portion of the distri from the Traditional IRA/Qualified Plan that includes any after tax amount is not taxable. The non-taxable portion is the amount of the distribution that bears the same ratio to the total amount of the distribution received as the total remaining after-tax amount bears to the Traditional IRA/Qualified Plan account balance at the end of the year. For Traditional IRA/Qualified Plan, distribution calculations do not use a joint beneficiary. For Traditional IRA/Qualified Plan, required minimum distri are based on the Uniform Lifetime Table. Final Regulations Required Minimum Distri are calculated based on the Uniform Lifetime Table. If your beneficiary is your spouse (who is more than years younger than you) distri during your life may be calculated using the Joint and Last Survivor Table. August, 5 of