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Shifting into retirement Turning IRA assets into income

Shifting into retirement Turning IRA assets into income. You can’t take a distribution before age 59½ without penalty Calculating required minimum distributions is complicated Tax benefits stop at the death of the IRA owner. Don’t be slowed by penalties before age 59½.

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Shifting into retirement Turning IRA assets into income

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  1. Shifting into retirementTurning IRA assets into income

  2. You can’t take a distribution before age 59½ without penalty Calculating required minimumdistributions iscomplicated Tax benefits stop at the death of the IRA owner

  3. Don’t be slowed by penalties before age 59½ • Access your IRA penalty free through substantially equal periodic payments No penaltyfor distributions Age 59½ Age 70½ Penalty for distributions Must begin distributions Withdrawals are subject to income tax, and those made before age 59½ may be subject to an additional 10% tax.

  4. Follow Rule 72(t) straight to penalty-free distributions • You must take systematic payments for five years or until you reach age 59½, whichever is longer • Avoids the usual 10% additional tax on taxable IRA distributions made before age 59½* * Distributions taken prior to reaching age 59½ are normally subject to an additional 10% tax. Distributions of deductible contributions and earnings will be subject to federal income tax.

  5. How does it work?

  6. The road you take makesa difference A one-time switch from either the “amortization” or the “annuity” method to the “life expectancy” method. This hypothetical example assumes a 50-year-old, traditional IRA owner, an account balance of $100,000 with an 8% annualized rate of return, and an interest rate of 1.4% in conjunction with the IRS mortality table. Performance is not indicative of any Putnam fund, which will fluctuate.Not all required years of distribution are shown.

  7. You can’t take a distribution before age 59½ without penalty Calculating required minimumdistributions iscomplicated Tax benefits stop at the death of the IRA owner

  8. Mapping your RMD involves careful planning • You must start taking distributions from your traditional IRA by April 1 of the year after you turn 70½* • IRA regulations make taking distributions easy and relatively favorable from atax standpoint No penaltyfor distributions Age 59½ Age 70½ Penalty for distributions Must begin distributions * Note that these distributions are required of traditional IRA owners. Roth IRA owners are not required to take distributions during their lifetime.

  9. The express route to your RMD has four checkpoints * IRA owners who have a spousal beneficiary who is more than ten years younger than the IRA owner may opt to use the IRS joint life expectancy table.

  10. You can’t take a distribution before age 59½ without penalty Calculating required minimumdistributions iscomplicated Tax benefits stop at the death of the IRA owner

  11. Extend your roadtrip with a Stretch IRA • Extend tax deferral • Increase compounding potential • IRA income for heirs No penaltyfor distributions Age 59½ Age 70½ Penalty for distributions Must begin distributions

  12. Spousal beneficiary • Once RMD for the year of death has been made, a spousebeneficiary may take over decedent’s IRA and treat it as hisor her own (assuming certain requirements are met) • Spouse can calculate RMDs, if required, based onthe uniform distribution table • Name new beneficiaries • Spouse can also transfer funds to a beneficiary IRA • If the beneficiary spouse is under age 59½, he or she can access the IRA assets immediately without incurring a 10% early withdrawal penalty • Spouse beneficiary may still opt to treat the beneficiary IRA as his or her own at any time in the future

  13. How does it work?Spousal beneficiary example Y Y E E A A R R 0 0 Bob(age 65) rolls $200K into an IRA and names wife,Sally(age 60), as sole beneficiary

  14. How does the spousalbeneficiary work? Y Y E E A A R R 0 5 Bob dies at age 70. Before commencing RMDs, Sally (age 65) elects to treat the IRA as her own and designates their son,Bruce (age 40), as her IRA beneficiary RMDs have not started

  15. How does the spousalbeneficiary work? Y E A R 1 0 • Sally dies in year 10 at age 70 before commencing RMDs. • The following year, Bruce (age 45)begins receiving payments based on his (much longer) life expectancy under the new IRS regulations. He names his wife, Wendy, as his beneficiary. Year 11 distribution$12,019 Year 0 Year 10 Year 20 Year 30 Year 40 Year 50 $3.2 million in income based upon an initial investment of $200,000 and cumulative annual distributions of 39 years. This hypothetical illustration assumes an 8% annualized return and that distributions are kept to the required minimum. It does not represent the performance of any Putnam fund or investment. Investors should consider various factors that can affect their decision, such as possible changes to tax laws, the impact of inflation and other risks including periods of market volatility when investment return and principal value may fluctuate with market conditions.

  16. Year 49 distribution$270,526 Year 40 distribution$124,329 Bruce dies at age 74. Wendy continues the established distribution schedule. No rollover is available Year 30 distribution$54,566 How does the spousalbeneficiary work? Year 20 distribution$24,506 Year 11 distribution$12,019 Year 0 Year 10 Year 20 Year 30 Year 40 Year 50 $3.2 million in income based upon an initial investment of $200,000 and cumulative annual distributions of 39 years. This hypothetical illustration assumes an 8% annualized return and that distributions are kept to the required minimum. It does not represent the performance of any Putnam fund or investment. Investors should consider various factors that can affect their decision, such as possible changes to tax laws, the impact of inflation and other risks including periods of market volatility when investment return and principal value may fluctuate with market conditions.

  17. How does the spousalbeneficiary work? Total of 39 annual distributions $3,200,000 was distributedfrom the account Year 0 Year 10 Year 20 Year 30 Year 40 Year 50 $3.2 million in income based upon an initial investment of $200,000 and cumulative annual distributions of 39 years. This hypothetical illustration assumes an 8% annualized return and that distributions are kept to the required minimum. It does not represent the performance of any Putnam fund or investment. Investors should consider various factors that can affect their decision, such as possible changes to tax laws, the impact of inflation and other risks including periods of market volatility when investment return and principal value may fluctuate with market conditions.

  18. Non-spousal beneficiaries • IRA owner may designate a non-spousal beneficiary, including a minor • Upon reaching age 70½, owner begins RMDs • When IRA owner dies, the beneficiary mayestablish RMDs based on his/her own life expectancy and name a new beneficiary,*even if RMDs have already started * Special rules may apply if the designated non-spouse beneficiary is a non-person, such as an estate, trust, or charitable organization.

  19. How does the non-spousal beneficiary work? Y Y E E A A R R 0 0 Betty (age 60) rolls $200K into an IRA She names her sons — Max, age 34,and Sam, age 40 — as beneficiaries

  20. How does the non-spousal beneficiary work? Y Y E E A A R R 0 1 0 Betty begins RMDs using the IRS’s simple calculation methodYear 10 distribution = $16,480

  21. How does the non-spousal beneficiary work? Y Y E E A A R R 0 1 2 Betty dies at age 72 after receiving$53,443 in distributions over 3 years IRA is split evenly between sonsMax and Sam

  22. How does the non-spousal beneficiary work? Y Y E E A A R R 0 1 2 Sam (now age 52) decides to liquidatehis portion of the account immediately Sam’s lump-sum distribution = $243,158

  23. How does the non-spousal beneficiary work? $243,158 Y E A R 1 2 Sam receives $243,158.In the year following Betty’s death,year 13, Max (now age 47) beginstaking distributions based on hissingle life expectancy Year1 Year10 Year12 Year49 Betty Sam Max Annual distributions: This hypothetical example assumes an 8% annualized return with distributions on an initial $200,000 investment based initially on the uniform distribution table. After the owner’s death, distributions are based on the non-recalculated single life expectancy of a single beneficiary. Distributions are taken at the end of the year and are kept to the required minimum. Performance is not indicative of any Putnam fund.

  24. How does the non-spousal beneficiary work? $243,158 Y E A R 4 9 Max’sIRA is depleted.Total of $1,436,936 receivedin distributions Year1 Year10 Year12 Year49 Betty Sam Max Annual distributions: This hypothetical example assumes an 8% annualized return with distributions on an initial $200,000 investment based initially on the uniform distribution table. After the owner’s death, distributions are based on the non-recalculated single life expectancy of a single beneficiary. Distributions are taken at the end of the year and are kept to the required minimum. Performance is not indicative of any Putnam fund.

  25. How does the non-spousal beneficiary work? Total distributions Max has received over $1 millionmore than Sam $1,436,936 $243,158 $53,443 Betty Sam Max This hypothetical example assumes an 8% annualized return with distributions on an initial $200,000 investment based initially on the uniform distribution table. After the owner’s death, distributions are based on the non-recalculated single life expectancy of a single beneficiary. Distributions are taken at theend of the year and are kept to the required minimum. Earnings on Sam’s distribution are not reflected. Performance is not indicative of any Putnam fund.

  26. Three helpful facts on the roadto retirement • You can take a distribution before age 59½without penalty • Calculating RMDs is straightforward • Tax benefits can continue after the death ofthe IRA owner

  27. What’s next? • Consider how much IRA income you may need in retirement • Complete a Putnam IRA checklist and inventory • Check your IRA beneficiary designations, but know that they can be changed without affecting RMDs • Ask your financial representative about ways to help make the most of your IRA

  28. This information is not meant as tax or legal advice. Please consult your legal or tax advisor before making any decisions. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus ifavailable, containing this and other informationfor any Putnam fund or product, call your financial representative or call Putnam at 1-800-225-1581.Please read the prospectus carefully before investing. Putnam Retail Management putnam.com

  29. Shifting into retirementTurning IRA assets into income

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