Financial Focus Accessing Your Retirement Money

1. Financial Focus Accessing Your Retirement Money Welcome. Before we begin, let me introduce myself, My name is ______________ and I’m with (name of firm). I know your time is valuable and I thank you for participating in today's “Accessing Your Retirement Assets” workshop. Welcome. Before we begin, let me introduce myself, My name is ______________ and I’m with (name of firm). I know your time is valuable and I thank you for participating in today's “Accessing Your Retirement Assets” workshop.

2. Today’s Agenda The challenges of retirement today Accessing and gaining control over your retirement money Investment alternatives What you can do Our agenda today will cover the following topics. First we’ll take a look at retirement today and the challenges many of you may be facing. How many of you have 401(k)s, IRAs, and other assets targeted for retirement, such as, annuities? We will discuss some ways to do this such as non-hardship withdrawals, 72(t) distributions, beneficiary or stretch IRAs and annuitization. We will also briefly spend some time on investment alternatives. Lastly, we’ll discuss how you can use this information with respect to your own investments. So now, sit back, relax and I will show you some strategies and investment options that may make a difference in your life. Our agenda today will cover the following topics. First we’ll take a look at retirement today and the challenges many of you may be facing. How many of you have 401(k)s, IRAs, and other assets targeted for retirement, such as, annuities? We will discuss some ways to do this such as non-hardship withdrawals, 72(t) distributions, beneficiary or stretch IRAs and annuitization. We will also briefly spend some time on investment alternatives. Lastly, we’ll discuss how you can use this information with respect to your own investments. So now, sit back, relax and I will show you some strategies and investment options that may make a difference in your life.

3. In the early 1900’s most  Americans died by age 47. Today, life expectancy at birth is 77* *Explaining Long Term Care, Ric Edelman, Investment Advisor, January 2004. P. 94 Your retirement savings are probably more important now, for you, than for any other generation in history. Thanks to advances in healthcare and a healthier lifestyle, people are generally living longer. Life expectancy for Americans is at an all time high and there is a good chance that you will live well into your 90’s. When do you plan to retire? (Ask for responses.) 65, 67 or 70? How many want to retire earlier than 60 or 65? Do you know how to access your retirement accounts? What accounts do you have targeted for this? You may find that you want to pursue retiring early or need access to your retirement funds prior to retirement age. Today we will discuss strategies to better manage and access your retirement accounts when the time comes and you need a steady stream of payments. Your retirement savings are probably more important now, for you, than for any other generation in history. Thanks to advances in healthcare and a healthier lifestyle, people are generally living longer. Life expectancy for Americans is at an all time high and there is a good chance that you will live well into your 90’s. When do you plan to retire? (Ask for responses.) 65, 67 or 70? How many want to retire earlier than 60 or 65? Do you know how to access your retirement accounts? What accounts do you have targeted for this? You may find that you want to pursue retiring early or need access to your retirement funds prior to retirement age. Today we will discuss strategies to better manage and access your retirement accounts when the time comes and you need a steady stream of payments.

4. The Good News You can look forward to the longest and healthiest retirement in history. The good news is that you can look forward to the longest and healthiest retirement in history.The good news is that you can look forward to the longest and healthiest retirement in history.

5. The Bad News You can look forward to the longest, healthiest and most costly retirement in history. And the bad news is that you can look forward to the longest, healthiest and most costly retirement in history. With increased life expectancies, chances are that you will be spending many years in retirement. If you retire at age 65, you can expect to live another 15-20 years in retirement. That promises to be the longest continuous retirement period in history. That’s a long time to go without a paycheck, so you want to be sure you don’t outlive your money. Now the news is not all bad. You have all taken an important first step by coming here today. We will review some strategies that may help you live through your retirement in the lifestyle you are accustomed to. We want to help you ensure that your retirement is the best it can be.And the bad news is that you can look forward to the longest, healthiest and most costly retirement in history. With increased life expectancies, chances are that you will be spending many years in retirement. If you retire at age 65, you can expect to live another 15-20 years in retirement. That promises to be the longest continuous retirement period in history. That’s a long time to go without a paycheck, so you want to be sure you don’t outlive your money. Now the news is not all bad. You have all taken an important first step by coming here today. We will review some strategies that may help you live through your retirement in the lifestyle you are accustomed to. We want to help you ensure that your retirement is the best it can be.

6. How Long Will Your Money Last How Long Will Your Money Last? COMPARE GROWTH AND WITHDRAWAL RATES TO ESTIMATE HOW LONG YOUR MONEY WILL LAST. This chart helps estimate how long money will last at various withdrawal rates. Simply find the rate at which your money is growing, and follow the chart across until you reach the rate at which you expect to withdraw money from your account. The point at which the two rates intersect is the number of years until your investment capital is depleted. For example, assume your investment capital is growing at an 8 percent rate and you are withdrawing at a 10 percent rate. Reading across the 8 percent line for growth and down the 10 percent column for withdrawal, you see that your money can be expected to last roughly 21 years. Calculations assume the growth rate is applied before any withdrawals are made. Withdrawals are a fixed percent of original investment capital. This chart is an educational tool and is not intended to predict future performance of any investment. Investors must be willing to assume a higher degree of risk in exchange for seeking a higher rate of return. Taxes are not included. Consult your investment counselor for information pertinent to your particular financial circumstances. How Long Will Your Money Last? COMPARE GROWTH AND WITHDRAWAL RATES TO ESTIMATE HOW LONG YOUR MONEY WILL LAST. This chart helps estimate how long money will last at various withdrawal rates. Simply find the rate at which your money is growing, and follow the chart across until you reach the rate at which you expect to withdraw money from your account. The point at which the two rates intersect is the number of years until your investment capital is depleted. For example, assume your investment capital is growing at an 8 percent rate and you are withdrawing at a 10 percent rate. Reading across the 8 percent line for growth and down the 10 percent column for withdrawal, you see that your money can be expected to last roughly 21 years. Calculations assume the growth rate is applied before any withdrawals are made. Withdrawals are a fixed percent of original investment capital. This chart is an educational tool and is not intended to predict future performance of any investment. Investors must be willing to assume a higher degree of risk in exchange for seeking a higher rate of return. Taxes are not included. Consult your investment counselor for information pertinent to your particular financial circumstances.

7. Common Concerns Inflation $8,800 would have bought you a top-of-the-line Cadillac in 1970 Today, $8,800 would not even buy you the lowest priced car And a top-of-the-line Cadillac...well that’s going for about $50,000 – a 468% Increase.* *The Week. July 23, 2004, p. 33 Living longer in retirement also gives inflation more of a chance to erode your assets. Because as we all know, over time, the prices of most everything we purchase and the services that we use go up. How many of you remember what you paid for your first car? (Optional: I think I paid $XXX for a XXXX.) Take a look at a fully loaded Cadillac. In 1970 it cost abut $8,800. Today, a top-of-the-line Cadillac costs $50,000. An increase of over 460%! Even a modest inflation rate of 4% dramatically reduces your purchasing power of $1.00 to $0.50 in about 15 years. If you are 50 years old and consider a $50,000 annual income to be enough for retirement, you will need $100,000 by age 65 and $200,000 by age 80 – just to maintain your same lifestyle. Up to now we have touched upon some common concerns facing retirees. It’s clear that that investing your retirement dollars is more important now than ever so I would just like to touch upon two important concepts. Many of us may remember “bear markets” and more recently the technology and dot.com bust. The fact is that we need to have a plan in place that will help reduce the risks of market volatilityLiving longer in retirement also gives inflation more of a chance to erode your assets. Because as we all know, over time, the prices of most everything we purchase and the services that we use go up. How many of you remember what you paid for your first car? (Optional: I think I paid $XXX for a XXXX.) Take a look at a fully loaded Cadillac. In 1970 it cost abut $8,800. Today, a top-of-the-line Cadillac costs $50,000. An increase of over 460%! Even a modest inflation rate of 4% dramatically reduces your purchasing power of $1.00 to $0.50 in about 15 years. If you are 50 years old and consider a $50,000 annual income to be enough for retirement, you will need $100,000 by age 65 and $200,000 by age 80 – just to maintain your same lifestyle. Up to now we have touched upon some common concerns facing retirees. It’s clear that that investing your retirement dollars is more important now than ever so I would just like to touch upon two important concepts. Many of us may remember “bear markets” and more recently the technology and dot.com bust. The fact is that we need to have a plan in place that will help reduce the risks of market volatility

8. Managing Risk Diversification:Spreads risk among many different securities Asset Allocation:Spreads risk among many different types of investments I know you have all heard the terms asset allocation and diversification. But they are so important that I just want to spend a moment to review them with you. Diversification is simple – just don’t put all your eggs in one basket. And asset allocation is another way to reduce risk by purchasing many different types of investments because in general, different market sectors may not always move in the same direction at the same time. By having a diversified portfolio that properly allocates your assets across a range of asset classes, you may over time, reduce the risk of market volatility and potentially enhance returns. Asset allocation does not guarantee a profit or protect against loss in a declining market. I know you have all heard the terms asset allocation and diversification. But they are so important that I just want to spend a moment to review them with you. Diversification is simple – just don’t put all your eggs in one basket. And asset allocation is another way to reduce risk by purchasing many different types of investments because in general, different market sectors may not always move in the same direction at the same time. By having a diversified portfolio that properly allocates your assets across a range of asset classes, you may over time, reduce the risk of market volatility and potentially enhance returns. Asset allocation does not guarantee a profit or protect against loss in a declining market.

9. Accessing Your Retirement Money Choice Control Flexibility As prospective retirees, how many of you are saving for retirement? Of course, almost all. Now, how many of you have given serious thought to how to best convert those savings into an annual income stream? As I thought. Not quite as many. And, what if you want to retire early before 59 ½? Do you know how to access your retirement accounts, then? But that’s one of the reasons you’re here today. So let’s move on and discuss the different options you can use to access your retirement savings. Options that will give you more choices, greater control and increased flexibility over your retirement assets.As prospective retirees, how many of you are saving for retirement? Of course, almost all. Now, how many of you have given serious thought to how to best convert those savings into an annual income stream? As I thought. Not quite as many. And, what if you want to retire early before 59 ½? Do you know how to access your retirement accounts, then? But that’s one of the reasons you’re here today. So let’s move on and discuss the different options you can use to access your retirement savings. Options that will give you more choices, greater control and increased flexibility over your retirement assets.

10. Accessing Your Retirement Money Retirement Plans That Offer A Way Out Look in the “summary plan description”  for the words “in-service, nonhardship  withdrawals” Again, how many of you have 401(k)s? Would you like to know how to get to your 401(k) money before actual retirement age? Many times I have had people share their concern with me about being locked into a retirement plan where the investment choices were either poor or too limiting. For example, you may feel that your plan is too heavily weighted in your company stock. Or maybe, you just want more control over your money to invest in vehicles of your choosing. For some of you, there may be a way out. Your plan may have a provision called an “in-service, nonhardship withdrawal.” Retirement plans with this provision are typically older plans with more features for their employees. This generally means that you do not have to prove a hardship, such as high medical expense or educational expenses, to withdraw your money without penalties. Money from an “in-service nonhardship withdrawal” must be rolled over directly from your existing plan into another retirement plan or IRA to avoid penalties and withholding tax. If you consider using this option, you should avoid taking receipt of the funds by arranging for a direct transfer to your new custodian. You should note that most companies that do offer the in-service, nonhardship provision do not advertise it. Look for it in your "Summary Plan Description" document. As you review your plan you should know that different plans have different rules as to how much you can withdraw, and how often and under what circumstances withdrawals can be taken.Again, how many of you have 401(k)s? Would you like to know how to get to your 401(k) money before actual retirement age? Many times I have had people share their concern with me about being locked into a retirement plan where the investment choices were either poor or too limiting. For example, you may feel that your plan is too heavily weighted in your company stock. Or maybe, you just want more control over your money to invest in vehicles of your choosing. For some of you, there may be a way out. Your plan may have a provision called an “in-service, nonhardship withdrawal.” Retirement plans with this provision are typically older plans with more features for their employees. This generally means that you do not have to prove a hardship, such as high medical expense or educational expenses, to withdraw your money without penalties. Money from an “in-service nonhardship withdrawal” must be rolled over directly from your existing plan into another retirement plan or IRA to avoid penalties and withholding tax. If you consider using this option, you should avoid taking receipt of the funds by arranging for a direct transfer to your new custodian. You should note that most companies that do offer the in-service, nonhardship provision do not advertise it. Look for it in your "Summary Plan Description" document. As you review your plan you should know that different plans have different rules as to how much you can withdraw, and how often and under what circumstances withdrawals can be taken.

11. Accessing Your Retirement Money Lump Sum Distribution Check 1. Cash it = Big Penalties and access to $ Or 2. Roll into IRA = No Penalties and no access to $ Or 3. ? Now let’s talk about another way to access your retirement plan assets. Have you ever received a lump sum distribution check perhaps when you changed jobs? Went out on disability? Your employer terminated a pension plan? Or maybe you were the beneficiary of a retirement plan? If you get a check when leaving your employer, you have two choices with respect to your retirement account. You can take the check and cash it, or you can roll it into an IRA. If you take it in cash, then you are subject to an income tax withholding of 20%. You will also owe income taxes on the amount of the distribution and may be subject to a 10% premature withdrawal penalty if you are under age 59 1/2. That could all add up to a lot of money! But if you complete a direct rollover from your employer plan to an IRA, you’ll avoid the penalties. But, let’s suppose you’ll need some income from that money but of course don’t want to pay all the taxes and penalties at one time. There is another option. Now let’s talk about another way to access your retirement plan assets. Have you ever received a lump sum distribution check perhaps when you changed jobs? Went out on disability? Your employer terminated a pension plan? Or maybe you were the beneficiary of a retirement plan? If you get a check when leaving your employer, you have two choices with respect to your retirement account. You can take the check and cash it, or you can roll it into an IRA. If you take it in cash, then you are subject to an income tax withholding of 20%. You will also owe income taxes on the amount of the distribution and may be subject to a 10% premature withdrawal penalty if you are under age 59 1/2. That could all add up to a lot of money! But if you complete a direct rollover from your employer plan to an IRA, you’ll avoid the penalties. But, let’s suppose you’ll need some income from that money but of course don’t want to pay all the taxes and penalties at one time. There is another option.

12. Accessing Your Retirement Money 72(t) Distributions “What is a 72(t) distribution?” You can roll your money into an IRA and avoid the penalties but still have access to your money by using the 72(t) distribution option. This can also be used for any IRA account, not just a rollover. I know many of you may be asking yourself, “What is a 72(t) distribution and why such a strange name?” Actually, the term “72(t)” is simply the section of the Internal Revenue Code that imposes the 10% withdrawal penalty for withdrawals from a retirement plan. But most important, it also includes a waiver of this penalty in certain circumstances. The most common exception to this penalty is to take distributions only after you attain age 59-1/2. But what if you want to access your retirement account prior to age 59-1/2?You can roll your money into an IRA and avoid the penalties but still have access to your money by using the 72(t) distribution option. This can also be used for any IRA account, not just a rollover. I know many of you may be asking yourself, “What is a 72(t) distribution and why such a strange name?” Actually, the term “72(t)” is simply the section of the Internal Revenue Code that imposes the 10% withdrawal penalty for withdrawals from a retirement plan. But most important, it also includes a waiver of this penalty in certain circumstances. The most common exception to this penalty is to take distributions only after you attain age 59-1/2. But what if you want to access your retirement account prior to age 59-1/2?

13. Accessing Your Retirement Money Avoiding Penalties Save 10% The bottom line is that by employing one of the several 72(t) distribution exceptions, you can access your retirement assets while avoiding the 10% penalty! I want you all to do an exercise. Think about the approximate value of your personal retirement account. Do you have that number in your head? Now, take 10% of that--employing a 72(t) distribution exception could be a huge savings!The bottom line is that by employing one of the several 72(t) distribution exceptions, you can access your retirement assets while avoiding the 10% penalty! I want you all to do an exercise. Think about the approximate value of your personal retirement account. Do you have that number in your head? Now, take 10% of that--employing a 72(t) distribution exception could be a huge savings!

14. Accessing Your Retirement Money 72(t) Distribution Strategy - SEPP Money taken out in “substantially equal periodic payments” or SEPP No minimum age requirement IRS does not require any reason for withdrawals Payments must continue for five years or until age  59 1/2 - whichever is longer Payments generally cannot change during the five year period (or age  59 1/2, if later) - unless the change relates to the annual recalculation  of the RMD method or due to switching from the amortization or  annuity method to the RMD method. If the payment schedule is changed and no exceptions apply,  a 10% penalty plus interest will be applied to all payments taken Just how can you take advantage of a 72(t) distribution exception? The IRS has very strict guidelines on how to receive penalty free distribution payments. One such method that will avoid the 10% early withdrawal penalty is called the “substantially equal periodic payments” or SEPP method. There is no minimum age requirement to use this method and the IRS does not ask for a reason for the withdrawals. Payments must continue unchanged for five years or until age 59-1/2 - whichever is longer and must be taken at least annually. Only at the end of the five year period or after reaching age 59-1/2, whichever occurs last, can you change the amount. Not before. Payments can also be stopped at that time. Remember that only after five years, or until age 59-1/2 whichever occurs last, can any changes be made. Once payments begin, if they are changed for any reason other than disability or death, the 10% penalty plus interest, will be charged on all payments previously received. Just how can you take advantage of a 72(t) distribution exception? The IRS has very strict guidelines on how to receive penalty free distribution payments. One such method that will avoid the 10% early withdrawal penalty is called the “substantially equal periodic payments” or SEPP method. There is no minimum age requirement to use this method and the IRS does not ask for a reason for the withdrawals. Payments must continue unchanged for five years or until age 59-1/2 - whichever is longer and must be taken at least annually. Only at the end of the five year period or after reaching age 59-1/2, whichever occurs last, can you change the amount. Not before. Payments can also be stopped at that time. Remember that only after five years, or until age 59-1/2 whichever occurs last, can any changes be made. Once payments begin, if they are changed for any reason other than disability or death, the 10% penalty plus interest, will be charged on all payments previously received.

15. Accessing Your Retirement Money 72(t) Distribution Strategy - SEPP Generate Cash Flow Why would you need to use this strategy? Let me give you an example. Consider the person who is forced to accept an early retirement package and is eligible to receive a lump sum distribution from a 401(k) plan. Suppose this person is not ready for retirement but intends to look for a new job. However, in the meantime, there is a monthly cash flow problem and he or she is uncertain of how long it will be before a new job can be found. What are the options?Why would you need to use this strategy? Let me give you an example. Consider the person who is forced to accept an early retirement package and is eligible to receive a lump sum distribution from a 401(k) plan. Suppose this person is not ready for retirement but intends to look for a new job. However, in the meantime, there is a monthly cash flow problem and he or she is uncertain of how long it will be before a new job can be found. What are the options?

16. Accessing Your Retirement Money 72(t) Distribution Strategy Generate Cash Flow No Rollover Direct IRA Rollover Amount of Distribution $300,000 $300,000 Federal Taxes at 35% (105,000) $0 10% premature distribution penalty (30,000) $0 Amount available for Investment $165,000 $300,000 There are basically two choices. He or she can take the money or roll it into an IRA. As you can see from the example above, if you do not elect to roll over the money, $135,000 will be lost immediately to taxes and penalties. (Walk audience through the example.)There are basically two choices. He or she can take the money or roll it into an IRA. As you can see from the example above, if you do not elect to roll over the money, $135,000 will be lost immediately to taxes and penalties. (Walk audience through the example.)

17. Accessing Your Retirement Money The SEPP Solution Maintain Flexibility Maximize Growth IRA # 1 IRA # 2 $150,000 $150,000 SEPP distributions Invest for retirement Income-generating Growth-oriented Investments investments If some income is needed, one solution is to take the $300,000 distribution and split it up by establishing two IRAs. Then, elect to receive SEPP distributions from the first IRA. Growth can be maximized by keeping the assets in the second IRA, invested in growth oriented investments. Since the distribution is split into two rollover IRAs a greater degree of flexibility is achieved. If some income is needed, one solution is to take the $300,000 distribution and split it up by establishing two IRAs. Then, elect to receive SEPP distributions from the first IRA. Growth can be maximized by keeping the assets in the second IRA, invested in growth oriented investments. Since the distribution is split into two rollover IRAs a greater degree of flexibility is achieved.

18. Need more cash Initiate SEPP distributions from IRA # 2 Or Found a new job! No longer need the cash Divert distributions to another retirement investment vehicle such as an annuity Accessing Your Retirement Money Although distributions using the SEPP method cannot be changed in any way just consider the following: If circumstances change and more cash is needed, just simply initiate 72(t) SEPP distributions from the second IRA. Or, if money is not needed, take the distributions and invest them into an appropriate alternative retirement investment vehicle such as an annuity. Unfortunately, this does not avoid income taxation of the SEPP distributions from the IRA.Although distributions using the SEPP method cannot be changed in any way just consider the following: If circumstances change and more cash is needed, just simply initiate 72(t) SEPP distributions from the second IRA. Or, if money is not needed, take the distributions and invest them into an appropriate alternative retirement investment vehicle such as an annuity. Unfortunately, this does not avoid income taxation of the SEPP distributions from the IRA.

19. Eligibility for SEPP If you have an IRA you are eligible If you have a qualified plan or 403(b) you  generally must wait until you leave your  employer As far as eligibility goes, if you have an IRA, you are eligible for SEPP distributions. If you have a qualified plan or 403(b), you must wait until you leave that employer. As far as eligibility goes, if you have an IRA, you are eligible for SEPP distributions. If you have a qualified plan or 403(b), you must wait until you leave that employer.

20. How are penalty-free distributions calculated using SEPP? Required Minimum Distributions Amortization Annuitization or Mortality As I mentioned before, the IRS has strict guidelines on how to receive payments, but they also have strict guidelines on how payments must be calculated. There are three calculation methods for SEPP distributions under section 72(t). They are required minimum distribution, amortization and mortality or annuitization method. Since these three methods will produce different results, there is some flexibility in determining the payment amount. However, once a method is employed, and payments begin, you must stick to the payment schedule. There is one exception, if you use the amortization or annuitization methods you may switch to the required minimum distribution method at any time, but the switch in NOT reversible.As I mentioned before, the IRS has strict guidelines on how to receive payments, but they also have strict guidelines on how payments must be calculated. There are three calculation methods for SEPP distributions under section 72(t). They are required minimum distribution, amortization and mortality or annuitization method. Since these three methods will produce different results, there is some flexibility in determining the payment amount. However, once a method is employed, and payments begin, you must stick to the payment schedule. There is one exception, if you use the amortization or annuitization methods you may switch to the required minimum distribution method at any time, but the switch in NOT reversible.

21. How are penalty-free distributions calculated? Required Minimum Distribution The first method we will go over is the required minimum distribution method. With this method, IRS life expectancy tables and annual account balances are used. You may choose to use a single life expectancy factor or a joint life expectancy factor. Payments using this method will vary slightly from one year to the next since life expectancies and account balances change every year. Of all the methods, this one usually generates the smallest payment amount.The first method we will go over is the required minimum distribution method. With this method, IRS life expectancy tables and annual account balances are used. You may choose to use a single life expectancy factor or a joint life expectancy factor. Payments using this method will vary slightly from one year to the next since life expectancies and account balances change every year. Of all the methods, this one usually generates the smallest payment amount.

22. How are penalty-free distributions calculated? Required Minimum Distribution Amortization With the amortization method, using a “reasonable” interest rate, your account balance is amortized over your life expectancy. In other words, the balance is divided over the owner’s life expectancy and the balance is projected to grow at a certain rate of return. This method creates a level payment and the amount will not vary. It will also produce a larger payment than the required minimum distribution method.With the amortization method, using a “reasonable” interest rate, your account balance is amortized over your life expectancy. In other words, the balance is divided over the owner’s life expectancy and the balance is projected to grow at a certain rate of return. This method creates a level payment and the amount will not vary. It will also produce a larger payment than the required minimum distribution method.

23. How are penalty-free distributions calculated? Required Minimum Distribution Amortization Annuitization To annuitize means that you convert the accumulated value in your deferred annuity to a series of periodic payments that last a certain number of years, for your lifetime, or for your lifetime and that of another person, whichever you choose. We will discuss this again in more detail later. Annuitization is calculated by dividing your account balance by an annuity factor. This factor is obtained from a mortality table using a “reasonable” rate of interest and provide the largest level payment.To annuitize means that you convert the accumulated value in your deferred annuity to a series of periodic payments that last a certain number of years, for your lifetime, or for your lifetime and that of another person, whichever you choose. We will discuss this again in more detail later. Annuitization is calculated by dividing your account balance by an annuity factor. This factor is obtained from a mortality table using a “reasonable” rate of interest and provide the largest level payment.

24. 72(t) Distribution - SEPP Customize a plan to take out the money you  need while keeping the balance invested on a  tax-deferred basis SEPP distributions under section 72(t) allow you to tap into your IRA and convert that retirement account into an actual income stream. If you are interested in SEPP distributions, it is important to meet with a professional and take a careful look at your financial situation, cash flow and goals. Then set up a distribution plan that works for you. The greatest advantage of SEPP distributions is that you can carefully customize a plan that will allow you to take just what you need while keeping the rest of your savings invested on a tax-deferred basis.SEPP distributions under section 72(t) allow you to tap into your IRA and convert that retirement account into an actual income stream. If you are interested in SEPP distributions, it is important to meet with a professional and take a careful look at your financial situation, cash flow and goals. Then set up a distribution plan that works for you. The greatest advantage of SEPP distributions is that you can carefully customize a plan that will allow you to take just what you need while keeping the rest of your savings invested on a tax-deferred basis.

25. Beneficiary IRAs Prolong the tax benefits of a traditional IRA  across multiple generations Up to now we have been talking about ways that you can access your retirement assets. What if you don’t want to access all of your retirement assets for yourself, but want to leave as much as possible for your children or grandchildren? In other words, you think you will not need all, or part, of the money for your own retirement needs and you want to turn your traditional IRA into a legacy account for your children. Then you might consider the beneficiary or “stretch” IRA. It works by having the original investor name beneficiaries who are young, such as children or grandchildren. After the death of the account owner, these beneficiaries take out distributions over their own life expectancy, which will reduce taxes by keeping more assets in a tax-deferred account over a longer period of time. What a beneficiary IRA really does is extend the duration of traditional IRA distributions to successor beneficiaries, beyond the death of an originally designated beneficiary. I know that’s a mouthful, so let me explain further.Up to now we have been talking about ways that you can access your retirement assets. What if you don’t want to access all of your retirement assets for yourself, but want to leave as much as possible for your children or grandchildren? In other words, you think you will not need all, or part, of the money for your own retirement needs and you want to turn your traditional IRA into a legacy account for your children. Then you might consider the beneficiary or “stretch” IRA. It works by having the original investor name beneficiaries who are young, such as children or grandchildren. After the death of the account owner, these beneficiaries take out distributions over their own life expectancy, which will reduce taxes by keeping more assets in a tax-deferred account over a longer period of time. What a beneficiary IRA really does is extend the duration of traditional IRA distributions to successor beneficiaries, beyond the death of an originally designated beneficiary. I know that’s a mouthful, so let me explain further.

26. What are the benefits of a beneficiary IRA? Provides tax-efficient wealth transfer As you know, when you reach age 70 ½ you are required to withdraw a certain amount from your traditional IRA. If you take out the minimum amount, and designate a younger beneficiary, you are extending the life of your IRA. When a younger person inherits the IRA, the balance can be paid out over their life expectancy, basically “stretching” the length of time that withdrawals can be taken from that IRA. What this ultimately does is extend the period of tax-deferred earnings of the assets in the account beyond the lifetime of the original owner. An additional benefit is that payments to beneficiaries are NOT subject to the 10% penalty tax, even if the beneficiary is under age 59 ½.As you know, when you reach age 70 ½ you are required to withdraw a certain amount from your traditional IRA. If you take out the minimum amount, and designate a younger beneficiary, you are extending the life of your IRA. When a younger person inherits the IRA, the balance can be paid out over their life expectancy, basically “stretching” the length of time that withdrawals can be taken from that IRA. What this ultimately does is extend the period of tax-deferred earnings of the assets in the account beyond the lifetime of the original owner. An additional benefit is that payments to beneficiaries are NOT subject to the 10% penalty tax, even if the beneficiary is under age 59 ½.

27. What are the benefits of a beneficiary IRA? Provides income tax-efficient wealth transfer Helps you maintain control over your IRA Most of the planning that goes along with the beneficiary IRA can be changed. So, if your financial situation changes and you need more income, you can simply take larger distributions. Or, if your beneficiary’s circumstances change and they need more income after the death of the owner, he or she can usually take distributions above the required minimum. You can also change your beneficiary at any time. This change will not affect your required minimum distributions. Of course, like any other investment strategy, you should seek the help of a professional to determine if a beneficiary IRA is right for you. Most of the planning that goes along with the beneficiary IRA can be changed. So, if your financial situation changes and you need more income, you can simply take larger distributions. Or, if your beneficiary’s circumstances change and they need more income after the death of the owner, he or she can usually take distributions above the required minimum. You can also change your beneficiary at any time. This change will not affect your required minimum distributions. Of course, like any other investment strategy, you should seek the help of a professional to determine if a beneficiary IRA is right for you.

28. Investment Alternatives Have contributed to: Your 401(k) or company retirement programs? or IRAs What’s Next? We have talked about accessing your retirement assets and strategies that can give you more choices, control and flexibility over your money. But now I would just like to briefly discuss an investment alternative that has been considered a retirement income staple for decades. If you have contributed the maximum to your 401(k), put as much money as you can into an IRA and still have some money left to invest for retirement, you might want to consider an annuity. Annuities are issued by insurance companies. You can invest your money in a fixed option or a variable option and, in exchange, the company pays you in the future a stream of income payments over a period of time.We have talked about accessing your retirement assets and strategies that can give you more choices, control and flexibility over your money. But now I would just like to briefly discuss an investment alternative that has been considered a retirement income staple for decades. If you have contributed the maximum to your 401(k), put as much money as you can into an IRA and still have some money left to invest for retirement, you might want to consider an annuity. Annuities are issued by insurance companies. You can invest your money in a fixed option or a variable option and, in exchange, the company pays you in the future a stream of income payments over a period of time.

29. Annuities have two stages in their life cycle Accumulation stage: money is fully invested and earnings potentially grow and accumulate on a tax- deferred basis So what is next? You may want to consider annuities as a retirement supplement. Annuities are an investment alternative to the stocks and bonds market. Variable annuities may be an investment alternative to the stock and bond market. Annuities have two stages in their life cycle. The first, the Accumulation stage is the time when your annuity balance is invested and potentially can accumulate investment earnings. And because it is an annuity, these earnings grow tax-deferred. So what is next? You may want to consider annuities as a retirement supplement. Annuities are an investment alternative to the stocks and bonds market. Variable annuities may be an investment alternative to the stock and bond market. Annuities have two stages in their life cycle. The first, the Accumulation stage is the time when your annuity balance is invested and potentially can accumulate investment earnings. And because it is an annuity, these earnings grow tax-deferred.

30. Annuitization The investment is converted into payments determined by account value, life expectancy and selected plan payment A portion of each payment will be considered taxable and the remaining portion will be a non-taxable return of your investment in the contract, which is also called the “basis”. Once the investment in the contract is depleted, all remaining payments will be fully taxable. If the contract is tax-qualified, generally, all payments will be fully taxable. Payments taken prior to age 59 1/2, may be subject to an additional 10% federal tax penalty. The annuitization phase is the time when the investment balance is converted into a stream of payments. Under one common annuitization option the issuing insurance company will pay you a fixed amount for the rest of your life guaranteeing you won’t outlive your money. Of course, there is no guarantee that the annuity payments will be sufficient to meet your income needs. The payment amount will be determined by your account value, life expectancy and selected payment plan. Guarantees are based on the claims-paying ability of the issuing insurance company. If you annuitize prior to age 59-1/2, part of your annuity payment may be subject to the 10% penalty. I will explain in a few minutes what I mean by selected payment plan. The annuitization phase is another way to access some of your savings. When non-qualified money is annuitized, the contributions made to the annuity are returned in equal tax-free amounts over the payment period, and the balance of the amount received in each payment would be taxed. Besides annuitization, there is another way to supplement your payout from annuities. It is to set up a systematic withdrawal plan. This is a regularly scheduled payment plan which can help provide you with a steady payout stream. You simply decide what percentage of your investment you want to withdraw each year. Then set up a plan to liquidate a portion of your assets to generate income. It also allows you to make new investments while your money grows tax-deferred. However, you should be aware that with a systematic withdrawal plan there is no guarantee you won’t outlive your money since you are systematically liquidating a portion of your assets. Amounts withdrawn from an annuity may be subject to ordinary income tax, and if you are under 59-1/2, a 10% federal tax penalty may also apply.. Now, let me explain selected payment plans.The annuitization phase is the time when the investment balance is converted into a stream of payments. Under one common annuitization option the issuing insurance company will pay you a fixed amount for the rest of your life guaranteeing you won’t outlive your money. Of course, there is no guarantee that the annuity payments will be sufficient to meet your income needs. The payment amount will be determined by your account value, life expectancy and selected payment plan. Guarantees are based on the claims-paying ability of the issuing insurance company. If you annuitize prior to age 59-1/2, part of your annuity payment may be subject to the 10% penalty. I will explain in a few minutes what I mean by selected payment plan. The annuitization phase is another way to access some of your savings. When non-qualified money is annuitized, the contributions made to the annuity are returned in equal tax-free amounts over the payment period, and the balance of the amount received in each payment would be taxed. Besides annuitization, there is another way to supplement your payout from annuities. It is to set up a systematic withdrawal plan. This is a regularly scheduled payment plan which can help provide you with a steady payout stream. You simply decide what percentage of your investment you want to withdraw each year. Then set up a plan to liquidate a portion of your assets to generate income. It also allows you to make new investments while your money grows tax-deferred. However, you should be aware that with a systematic withdrawal plan there is no guarantee you won’t outlive your money since you are systematically liquidating a portion of your assets. Amounts withdrawn from an annuity may be subject to ordinary income tax, and if you are under 59-1/2, a 10% federal tax penalty may also apply.. Now, let me explain selected payment plans.

31. Annuitization payment-plan options Life Joint Survivor Period Certain Period Certain with Life When you annuitiize your contract, you can choose from four different payment-plan options. The Life option is when payments are made as long as you live. Once you die, the payments will stop. Joint Survivor payments are made as long as you or someone else live. Once you both die the payments will stop. Period Certain is just like it sounds. Payments are made for a certain number of years and once that pre-determined period is complete, the payments will stop. And finally there is Period Certain with Life. Payments are made for a certain number of years or as long as you live, whichever is longer. Usually, once you have selected an annuitization plan, your payment amount and length of payment cannot change. However, there are some companies that do offer the option of changing your plan should your needs change.When you annuitiize your contract, you can choose from four different payment-plan options. The Life option is when payments are made as long as you live. Once you die, the payments will stop. Joint Survivor payments are made as long as you or someone else live. Once you both die the payments will stop. Period Certain is just like it sounds. Payments are made for a certain number of years and once that pre-determined period is complete, the payments will stop. And finally there is Period Certain with Life. Payments are made for a certain number of years or as long as you live, whichever is longer. Usually, once you have selected an annuitization plan, your payment amount and length of payment cannot change. However, there are some companies that do offer the option of changing your plan should your needs change.

32. Investment Alternatives Fixed Annuities Earn a fixed interest-rate return Principal guaranteed by issuing insurance company  Based on the claims-paying ability of the issuing  insurance company. Tax-deferred growth of earnings Additional fees may apply Annuities come in two basic types: fixed and variable. Decades ago, the only type of annuity you could buy was a fixed annuity. They are generally more conservative than other types of annuities. They earn a fixed rate of return and the principal is guaranteed by the issuing company. Annuities are not insured or guaranteed by the FDIC. Guarantees are based on the claims-paying ability of the issuing insurance company. Guarantees do not apply to the investment performance or safety of amounts held in the variable accounts. Mortality and expense (M&E) risk charges, contract charges and administrative expense fees apply. Also, surrender charges and a contract maintenance fee may apply. Charges vary depending on the product. A transfer fee may also apply if the number of transfers exceed the specified limit. Distributions taken prior to annuitization are generally considered to come from the gain in the contract first. If the contract is tax-qualified, generally all withdrawals are treated as distributions of gain. Withdrawals of gain are taxed as ordinary income and, if taken prior to age 59 1/2, may be subject to an additional 10% federal tax penalty. Annuities come in two basic types: fixed and variable. Decades ago, the only type of annuity you could buy was a fixed annuity. They are generally more conservative than other types of annuities. They earn a fixed rate of return and the principal is guaranteed by the issuing company. Annuities are not insured or guaranteed by the FDIC. Guarantees are based on the claims-paying ability of the issuing insurance company. Guarantees do not apply to the investment performance or safety of amounts held in the variable accounts. Mortality and expense (M&E) risk charges, contract charges and administrative expense fees apply. Also, surrender charges and a contract maintenance fee may apply. Charges vary depending on the product. A transfer fee may also apply if the number of transfers exceed the specified limit. Distributions taken prior to annuitization are generally considered to come from the gain in the contract first. If the contract is tax-qualified, generally all withdrawals are treated as distributions of gain. Withdrawals of gain are taxed as ordinary income and, if taken prior to age 59 1/2, may be subject to an additional 10% federal tax penalty.

33. Investment Alternatives Fixed Annuities Surrender charges and tax penalties for early  withdrawal may apply Distributions taken prior to annuitization are generally  considered to come from the gain in the contract first. If the  contract is tax-qualified, generally all withdrawals are treated  as distributions of gain. Withdrawals of gain are taxed as  ordinary income and, if taken prior to age 59 1/2, may be  subject to an additional 10% federal tax penalty. Annuities come in two basic types: fixed and variable. Decades ago, the only type of annuity you could buy was a fixed annuity. They are generally more conservative than other types of annuities. They earn a fixed rate of return and the principal is guaranteed by the issuing company. Annuities are not insured or guaranteed by the FDIC. Guarantees are based on the claims-paying ability of the issuing insurance company. Guarantees do not apply to the investment performance or safety of amounts held in the variable accounts. Distributions taken prior to annuitization are generally considered to come from the gain in the contract first. If the contract is tax-qualified, generally all withdrawals are treated as distributions of gain. Withdrawals of gain are taxed as ordinary income and, if taken prior to age 59 1/2, may be subject to an additional 10% federal tax penalty. Annuities come in two basic types: fixed and variable. Decades ago, the only type of annuity you could buy was a fixed annuity. They are generally more conservative than other types of annuities. They earn a fixed rate of return and the principal is guaranteed by the issuing company. Annuities are not insured or guaranteed by the FDIC. Guarantees are based on the claims-paying ability of the issuing insurance company. Guarantees do not apply to the investment performance or safety of amounts held in the variable accounts. Distributions taken prior to annuitization are generally considered to come from the gain in the contract first. If the contract is tax-qualified, generally all withdrawals are treated as distributions of gain. Withdrawals of gain are taxed as ordinary income and, if taken prior to age 59 1/2, may be subject to an additional 10% federal tax penalty.

34. Investment Alternatives Variable Annuities Earn variable rates of return Variable investment options May offer additional inflation protection Growth potential Guarantee features vary – Additional cost may apply.  Guarantees are based on the claims-paying ability of the  issuing insurance company. After fixed annuities became popular, variable annuities came along. Generally, they are less conservative than other types of annuities. They have a higher investment growth potential and can also act as a hedge against inflation. But with that comes greater investment risk. Variable annuities may also offer additional features such as a death benefits which guarantee that the annuity beneficiaries will receive no less than the amount that was invested in the contract. Withdrawals have the effect of reducing the death benefit. After fixed annuities became popular, variable annuities came along. Generally, they are less conservative than other types of annuities. They have a higher investment growth potential and can also act as a hedge against inflation. But with that comes greater investment risk. Variable annuities may also offer additional features such as a death benefits which guarantee that the annuity beneficiaries will receive no less than the amount that was invested in the contract. Withdrawals have the effect of reducing the death benefit.

35. Investment Alternatives Variable Annuities Tax-deferred growth of earnings Additional fees may apply Surrender charges and tax penalties for early withdrawal may apply Distributions taken prior to annuitization are generally  considered to come from the gain in the contract first. If the  contract is tax-qualified, generally all withdrawals are treated as  distributions of gain. Withdrawals of gain are taxed as ordinary  income and, if taken prior to age 59 1/2, may be subject to an  additional 10% federal tax penalty. Mortality and expense (M&E) risk charges, contract charges and administrative expense fees apply. Also, surrender charges and a contract maintenance fee may apply. Charges vary depending on the product. A transfer fee may also apply if the number of transfers exceed the specified limit. Market timing is not allowed. See prospectus for complete details and restrictions. Distributions taken prior to annuitization are generally considered to come from the gain in the contract first. If the contract is tax-qualified, generally all withdrawals are treated as distributions of gain. Withdrawals of gain are taxed as ordinary income and, if taken prior to age 59 ½, may be subject to an additional 10% federal tax penalty. Guarantees are based on the claims-paying ability of the issuing insurance company. Mortality and expense (M&E) risk charges, contract charges and administrative expense fees apply. Also, surrender charges and a contract maintenance fee may apply. Charges vary depending on the product. A transfer fee may also apply if the number of transfers exceed the specified limit. Market timing is not allowed. See prospectus for complete details and restrictions. Distributions taken prior to annuitization are generally considered to come from the gain in the contract first. If the contract is tax-qualified, generally all withdrawals are treated as distributions of gain. Withdrawals of gain are taxed as ordinary income and, if taken prior to age 59 ½, may be subject to an additional 10% federal tax penalty. Guarantees are based on the claims-paying ability of the issuing insurance company.

36. Investment Alternatives Variable Annuities Variable annuities are long-term investments designed for retirement purposes. You should carefully consider the investment objectives, risks, charges and expenses of the investment alternatives before purchasing a contract or investing money. These contracts have limitations and are sold by prospectus only. The prospectus contains details on the investment alternatives, contract features, the underlying portfolios, fees, charges, expenses and other pertinent information. Please read the prospectuses carefully before purchasing a contract or sending money. Variable annuities are long-term investments designed for retirement purposes and are available for individuals, qualified plans, living trusts, and charitable remainder trusts (CRTs). You should carefully consider the investment objectives, risks, charges and expenses of the investment alternatives before purchasing a contract or investing money. These contracts have limitations and are sold by prospectus only. The prospectus contains details on the investment alternatives, contract features, the underlying portfolios, fees, charges, expenses and other pertinent information. To obtain a prospectus or a copy of the underlying portfolio prospectuses, please contact your representative, or call Allstate Life Insurance Company at 800-203-0068. Please read the prospectuses carefully before purchasing a contract or sending money. Variable annuities are not insured by the Federal Deposit Insurance Corporation (FDIC). Withdrawals or surrenders may be subject to ordinary income tax, and if taken prior to age 59-1/2, a 10% federal tax penalty may apply. Withdrawals have the effect of reducing the death benefit and any living benefits. There is no additional tax-deferred status. Thus, an annuity should only be purchased in an IRA or qualified plan if you value some of the other features of the annuity and are willing to incur any additional costs associated with the annuity to receive such benefits.Variable annuities are long-term investments designed for retirement purposes and are available for individuals, qualified plans, living trusts, and charitable remainder trusts (CRTs). You should carefully consider the investment objectives, risks, charges and expenses of the investment alternatives before purchasing a contract or investing money. These contracts have limitations and are sold by prospectus only. The prospectus contains details on the investment alternatives, contract features, the underlying portfolios, fees, charges, expenses and other pertinent information. To obtain a prospectus or a copy of the underlying portfolio prospectuses, please contact your representative, or call Allstate Life Insurance Company at 800-203-0068. Please read the prospectuses carefully before purchasing a contract or sending money. Variable annuities are not insured by the Federal Deposit Insurance Corporation (FDIC). Withdrawals or surrenders may be subject to ordinary income tax, and if taken prior to age 59-1/2, a 10% federal tax penalty may apply. Withdrawals have the effect of reducing the death benefit and any living benefits. There is no additional tax-deferred status. Thus, an annuity should only be purchased in an IRA or qualified plan if you value some of the other features of the annuity and are willing to incur any additional costs associated with the annuity to receive such benefits.

37. Investment Alternatives Guarantees What are my back-up choices? Guarantees are based on the claims-paying ability of the  issuing insurance company. Additional fees may apply. Allstate Advisor variable annuities are flexible-premium  deferred annuities issued by Allstate Life Insurance  Company; underwritten by Allstate Distributors, L.L.C.,  both of Northbrook, IL. Finally, let’s talk about one of the most attractive features of annuities, or any investment for that matter – guarantees. If you are concerned about stability, the guarantee of principal is an attractive feature. The guarantees that annuities come with are solely based on the ability of the issuing insurance company to meet its obligations. In other words, always look at the issuing insurance company’s financial strength before investing. If your major concern is outliving your retirement savings, then the guarantee of receiving income payments for life would certainly give you some ease of mind!Finally, let’s talk about one of the most attractive features of annuities, or any investment for that matter – guarantees. If you are concerned about stability, the guarantee of principal is an attractive feature. The guarantees that annuities come with are solely based on the ability of the issuing insurance company to meet its obligations. In other words, always look at the issuing insurance company’s financial strength before investing. If your major concern is outliving your retirement savings, then the guarantee of receiving income payments for life would certainly give you some ease of mind!

38. Summing Up The Options In-service, nonhardship withdrawals 72(t) distribution - SEPP Beneficiary IRAs Annuitization This just about concludes our discussion. Hopefully some of your questions have been answered about which options and products may help you address your retirement needs either now, or in the future. These options may give you greater choices and help you gain more control and flexibility over your retirement assets. This just about concludes our discussion. Hopefully some of your questions have been answered about which options and products may help you address your retirement needs either now, or in the future. These options may give you greater choices and help you gain more control and flexibility over your retirement assets.

39. Your Retirement Strategy Checklist How a Financial Professional can help you: Prepare for the financial challenges in retirement. Organize and actively manage my 401(k)s, IRAs and other  retirement assets. Determine what options are best for meeting my  retirement goals. This just about concludes our discussion. Hopefully some of your questions have been answered about which options and products may help you address your retirement needs either now, or in the future. These options may give you greater choices and help you gain more control and flexibility over your retirement assets. This just about concludes our discussion. Hopefully some of your questions have been answered about which options and products may help you address your retirement needs either now, or in the future. These options may give you greater choices and help you gain more control and flexibility over your retirement assets.

40. Your Next Steps Meet with your Financial Advisor because... Thanks so much for your time and attention. I’ve really enjoyed being here with you. Your (fill in name of Broker/dealer and Financial Representative’s name) worked with many pre-retirees and retirees, just like you, to help them with their retirement planning. I realize a lot of the information we covered today was rather technical which is why (name of Financial Representative) would like to offer you each a complimentary review of your financial situation. Then you can further discuss the various options covered in today’s seminar, or other options that might be more appropriate for you. Because for the majority of us, a comfortable retirement doesn’t just happen. It requires planning and work. There is no charge for this consultation and you are under no obligation to do business with (name). If you are interested, please provide us with your name and telephone number on the Evaluation Form being passed around. Thanks so much for your time and attention. I’ve really enjoyed being here with you. Your (fill in name of Broker/dealer and Financial Representative’s name) worked with many pre-retirees and retirees, just like you, to help them with their retirement planning. I realize a lot of the information we covered today was rather technical which is why (name of Financial Representative) would like to offer you each a complimentary review of your financial situation. Then you can further discuss the various options covered in today’s seminar, or other options that might be more appropriate for you. Because for the majority of us, a comfortable retirement doesn’t just happen. It requires planning and work. There is no charge for this consultation and you are under no obligation to do business with (name). If you are interested, please provide us with your name and telephone number on the Evaluation Form being passed around.

41. ...YOUR FUTURE IS TOO  VALUABLE TO RISK! Thank you for attending Again, thank you for your time and now, I’d be happy to take your questions – either with the group – or if you prefer, individually a little later in the back. Again, thank you for your time and now, I’d be happy to take your questions – either with the group – or if you prefer, individually a little later in the back.