Welcome to our ROTH IRA CONVERSION Workshop Your Host: <Insert Broker/Dealer disclosure here> Welcome to our Roth IRA Conversion workshop. My name is __________ and I will be your host.

Overview of Roth IRA’s Tonight’s Agenda Strategies for Roth IRA Conversions Questions & Answers Tonight’s agenda is a very focused one. We will have an overview of Roth IRAs. We will then discuss strategies for Roth IRA conversions, and finally, we’ll take some questions.

Five Key Areas of Financial Planning Protection Retirement Plan Investments Tax Planning Estate Planning As you have probably heard me say before, especially those of you who are clients, there are five key areas of financial planning. Those areas are protection, retirement planning, investments, tax planning and estate planning. One of the responsibilities we have as your financial advisor is to coordinate all five of these key areas. For tonight’s presentation, we will focus on something in the retirement planning area.

Senator William Roth of Delaware What is a ROTH IRA ? A Roth IRA is an Individual Retirement Account (IRA) that was Established by the Taxpayer Relief Act of 1997 and is allowed under the tax law of the United States. It was named for its chief legislative sponsor, the late Senator William Roth of Delaware. A Roth IRA differs in several significant ways from other IRAs. So what is an Roth IRA? By definition, a Roth IRA is an Individual Retirement Account (IRA) that was Established by the Taxpayer Relief Act of 1997 and is allowed under the tax law of the United States. It was named for its chief legislative sponsor, the late Senator William Roth of Delaware. A Roth IRA differs in several significant ways from other IRAs. Senator William Roth of Delaware

Some Basics of Roth IRA’s 100% of growth is tax-exempt No Required Minimum Distributions at age 70½ Currently there is a Modified Adjusted Gross Income (MAGI) limitation for contributions 10% penalty if withdrawals made and owner is under 59 ½ 10% penalty if withdrawals made within five years of conversion or contribution Is a Retirement Planning Strategy Here are some of the basics of Roth IRAs. First and foremost, 100% of the growth in a Roth IRA is tax exempt. When you take out money from a traditional IRA, you are then taxed on that money, in a Roth IRA, any of the growth in a Roth IRA is exempt from all taxes. Next, there is no required minimum distribution at age 70 ½ for a Roth IRA. Traditional IRAs require that at age 70 ½, at the latest, you must start taking distributions. A Roth IRA does not have this requirement. Currently, there is a Modified Adjusted Gross Income, or MAGI, limitation for contributions to a Roth IRA. This means most of us who make a certain amount of money are not allowed to contribute to a Roth IRA. It is also important to note that there is a 10% penalty if you make a withdrawal within the first 5 years of converting or contributing to a Roth. So therefore, even though some of us may consider converting to a Roth, we have to take into account that if you need money from your IRA, you cannot take anything out within the first 5 years of that conversion without incurring a penalty. For some taxpayers, traditional IRAs can possibly produce tax deductions, whereas a Roth IRA contribution is always non-deductible; and finally, a Roth IRA is a very strong retirement planning strategy. Please keep in mind that like with other IRAs, with a Roth IRA there is a 10% penalty if withdrawals are made and owner is under age 59½.

Roth IRA Contributions vs. Roth IRA Conversions A Roth IRA Contribution is merely placing your annual yearly allowed amount into a ROTH IRA. A Roth IRA Conversion is the movement of funds from a traditional IRA to a ROTH IRA. Let’s define two key concepts with regards to Roth IRAs. These are contributions and conversions. A Contribution is merely placing your annual yearly allowed amount into a ROTH IRA. Therefore, each and every year, some of us may be able to contribute to a Roth IRA. A Conversion, on the other hand, is the movement of funds from a traditional IRA to a ROTH IRA.

Roth IRA Opportunities $132,000 Modified Adjusted Gross Income (MAGI) limitation on Roth contributions for single filers, $194,000 for married filing jointly. In 2010, the $100,000 Adjusted Gross Income (AGI) limitation was removed for conversions. For 2016, anyone can convert to a Roth IRA. Here are some of opportunities that Roth IRAs offer that everyone should be aware of: For Roth IRA contributions there is still a Modified Gross Income limitation. Prior to 2010, married couples with gross income over $100,000 could not contribute or convert to a Roth IRA. However, starting in 2010, the $100,000 Adjusted Gross Income (AGI) limitation will no longer apply for Roth IRA conversions. Therefore, some of us may still not be able to contribute to a Roth, but you may be able to convert to a Roth. If converting from a Traditional IRA to a Roth IRA, you will owe ordinary income taxes in the year of your conversion on any previously deducted Traditional IRA contributions and on all earnings.

Typical Candidates for Considering a Roth IRA Conversion Person who will always be in highest income tax bracket Person likely to be subject to estate tax Someone who is currently in a low tax bracket but will likely be in a higher income tax bracket in retirement. Someone who can pay the taxes with Non-Qualified funds So who are some of the typical candidates that could consider a Roth IRA conversion? Many of us might consider a conversion of partial or some of our IRA funds, but typically the people that are most likely to consider a conversion are those who will always be in a higher income tax bracket or those who are likely to be subject to estate tax. Someone who is currently in a low tax bracket but will likely be in a higher income tax bracket in retirement should definitely take a look at a Roth. And, someone who can pay the taxes with non-qualified funds. Those of us who have money outside of our IRA to pay the taxes are more likely to look at the possibility of a Roth IRA conversion. Because Roth IRA conversions and recharacterizations may not be appropriate for all investors and individual situations vary, we suggest that you discuss tax issues with a qualified tax advisor. 8

Should I covert my IRA to a ROTH? Should I convert my IRA to a Roth IRA? Although many of us have heard from many different places about this conversion, we suggest that, like any other major investment decision, you proceed with caution.

Understanding the Mathematical Mechanics of a Roth IRA conversion Critical decision factors include: Age Tax Filing Status Tax Bracket AGI Available Non-Qualified Funds Future Tax Bracket Future Income Needs It is important to understand the mathematical mechanics of a Roth IRA conversion before making a decision. In fact, some of these critical decision factors will be either a green light, which say “go” and some of them may be a stop sign to make sure it is in your best interest. Some of the critical decision factors include: Age Tax Filing Status – Do you file taxes as the head of household; do you file as a joint return; or single? Tax Bracket Adjusted gross income The availability of non-qualified funds. In a conversion, many times it makes more sense not to reduce your retirement funds to pay the immediate taxes and therefore you should first check to see that you have money outside the retirement account to pay the taxes. Your future Tax Bracket versus your current tax bracket. Before making a decision you should first consider whether you will be in a higher or lower tax bracket in the future. Also, future income needs. These are some of the decisions factors that you should take a look at to help you decide if you should move forward or if should you hold off.

Critical decision factors include : Understanding the Mathematical Mechanics Critical decision factors include : Tax rate differential (year of conversion vs. withdrawal years) Elect a partial Roth IRA conversion to keep as much of the conversion income as possible in the current marginal tax bracket Need for IRA funds to meet annual living expenses Time horizon In understanding the mathematical mechanics, some of the Critical decision factors include: What would be the tax rate differential. That is, what do you think will be the tax rate the year of conversion versus the withdrawal years. In fact, you may elect a partial Roth IRA conversion to keep as much of the conversion income as possible in the current marginal tax bracket. We will show you this in a couple of minutes. Do you need your IRA funds to meet annual living expenses? What is your time horizon? Someone who is 30 years old has a different time horizon than someone who is 70 years old.

Understanding the Mathematical Mechanics Tax Rate Differential 2016 Tax Brackets Single Married Filing Jointly Head of Household 10% $9,275 $18,550 $13,250 15% $37,650 $75,300 $50,400 25% $91,150 $151,900 $130,150 28% $190,150 $231,450 $210,800 33% $413,350 35% $415,050 $466,950 $441,000 39.6% > $415,050 > $466,950 > $441,000 In understanding the mathematical mechanics and tax rate differential, let’s take a look for illustrative purposes at the 2016 tax brackets. Depending upon whether or not you file as single, married filing jointly, or as a head of household, your income will put you in a different tax bracket.

Understanding the Mathematical Mechanics Tax Rate Differential 39.6% tax bracket Maximum Roth IRA conversion amount 35% tax bracket Target Roth IRA conversion amount 33% tax bracket Current taxable income 28% tax bracket 25% tax bracket Some of the things that we suggest you do in choosing a ROTH conversion strategy is to carefully examine: What is your current taxable income; Consider setting a targeted Roth IRA conversion amount; and Evaluate what a maximum Roth IRA conversion amount would be. Our suggestion is to take a look in the current year how many brackets you will move from your current taxable income to your target and maximum Roth IRA conversion amount and come up with a strategy. For example, your strategy could be that your current taxable income is in the 25% tax bracket and therefore you might target only moving one tax bracket to the 28% bracket with a maximum move to the 33% tax bracket. 15% tax bracket 10% tax bracket

Roth IRA Conversion Timeline Conversion Period Recharacterization Period 2016 January First month in 2016 conversion can take place 12/31/2016 Last day conversion can take place 4/15/2017 Normal filing date for 2016 tax return 10/15/2017 Latest filing date for 2016 tax return. Last day to recharacterize 2016 Roth IRA conversion. 12/31/2017 No Recharacterization A good strategy is to also think about recharacterization. For example, if you look at a Roth IRA conversion timeline - if you convert in 2016, the first day you can do it is obviously January 1, 2016, and the last day is December 31, 2016. However, you can do something called recharacterization. That is, you can reverse the conversion back to your regular IRA. This is a good strategy if your IRA reduces in value. We will show you an example in a moment. To do that, you have until 2017 when you file your taxes for 2016. For many people that would be the April 15th date. For those who extend that filing, you can go as late as October 15th, 2017. All the way up until then, you can possibly recharacterize your Roth IRA conversion and not pay taxes on this conversion.

Tactical Considerations - Recharacterizations Taxpayers may “recharacterize” (i.e. undo) the Roth IRA conversion in current year or by the filing date of the current year’s tax return. Recharacterization can take place as late as 10/15 in the year following the year of conversion. Taxpayers may choose to “reconvert” their recharacterization. Reconversion may only take place at the later of the following two dates: (1) The tax year following the original conversion OR (2) 30 days after the recharacterization You might try to keep those separate Roth IRAs only until the time recharacterization has expired. Let me review some tactical considerations with regards to this recharacterization. What is a recharacterization? A taxpayer may “recharacterize” or undo the Roth IRA conversion in the current year or by the filing date of the current year’s tax return. That is, you can recharacterize a 2016 Roth IRA as late as October 15 in the year following the conversion. Taxpayers may choose to “reconvert” their recharacterization after that. That is, you can place it back in your Roth IRA and try to reconvert again. What do I mean by that? Well, basically you can reconvert either 30 days after the recharacterization or in the tax year following the original conversion. You might try to keep those Roth IRAs separate only until the time recharacterization has expired. The bottom line is, you may end up with multiple IRAs which later we can help you combine.

Tactical Considerations Roth Segregation Conversion Strategy EXAMPLE STEP 1: Create separate IRAs for each asset, asset class or investment sector Traditional IRA #1 ABC Investment: $250,000 Traditional IRA ABC Investment: $250,000 XYZ Investment: $250,000 Let me give you an example for a tactical consideration for a Roth segregation conversion strategy. Step 1: You take a look at your IRA and you have $250,000 in one investment, and $250,000 in another investment. If you want to be able to use a potential recharacterization ability, then what you need to consider doing is first breaking your IRA into two traditional IRAs. Traditional IRA #2 XYZ Investment: $250,000

Tactical Considerations Roth Segregation Conversion Strategy EXAMPLE STEP 2: Convert IRAs to separate Roth IRAs Traditional IRA #1 ABC Investment: $250,000 Roth IRA #1 ABC Investment: $250,000 Step 2: Would be to convert both IRAs to Roth IRAs. Traditional IRA #2 XYZ Investment: $250,000 Roth IRA #2 XYZ Investment: $250,000

Tactical Considerations Roth Segregation Conversion Strategy EXAMPLE STEP 3: Pay income tax on Roth IRA conversion or file tax extension April 15, 2017 Taxpayer IRS Step 3: Would be to file a tax extension on April 15th or pay the income tax on the Roth IRA conversion. So in this example you can on April 15th either pay the income tax on the $500,000 you converted or file an extension. Please be aware: Either a tax return or an extension must be filed by this date. Regardless of what is chosen, the tax liability due on the Roth IRA conversion must be remitted by this date in order to avoid late payment penalties and interest. Income tax liability due on $500,000 conversion amount * NOTE: Either a tax return or an extension must be filed by this date. Regardless of what is chosen, the tax liability due on the Roth IRA conversion must be remitted by this date in order to avoid late payment penalties and interest.

Tactical Considerations Roth Segregation Conversion Strategy EXAMPLE STEP 4: Recharacterize Roth IRA conversion October 15, 2017* Traditional IRA #1 ABC Investment: $200,000 (Current Value) Roth IRA #1 ABC Investment: $200,000 (Current Value) Recharacterization of IRA using the value at the date of conversion (e.g. $250,000) Roth IRA #2 XYZ Investment: $300,000 (Current Value) Now you still have the ability to recharacterize the Roth IRA conversion until October 15, 2017. So you can, by October 15, 2017, recharacterize and reclaim paid taxes from the original conversion or avoid paying taxes by recharacterizing the conversion. For example, if the first investment went down to $200,000, why pay taxes on $250,000? It would make sense to recharacterize that back to your original IRA. However, if the second investment went to $300,000 or if it is at a positive point, you might want to keep that as a Roth IRA and not recharacterize it. * NOTE: October 15, 2017 is the latest date for which a 2016 recharacterization can take place (either by filing extensions or by filing an amended return). For illustrative purposes only. Not indicative of any specific investment product or timeframe. Material discussed does not reflect investment fees or expenses.

Tactical Considerations Roth Segregation Conversion Strategy EXAMPLE STEP 5: File (or amend) income tax return claiming refund for recharacterization October 15, 2017 Taxpayer The bottom line is, by October 15, 2017, you can file your income tax return, or amend your income tax return and claim a refund on an amended return, or not pay the taxes on your tax return because you used recharacterization. Remember, you probably will not want to pay taxes on something that went down, but you might want to pay taxes and keep a Roth IRA if your IRA has increased in value. This is one of the tactical strategies that we help clients with at our firm. IRS Refund of overpayment on recharacterization of Roth IRA conversion

This decision can be confusing! As you probably have seen already, this decision can be very confusing. It is not as simple as many people and many financial advisors are trying to make it!

Suggested Steps to Take Now Mark Your Calendar Bring in your Current Tax Forms Allow us to help you understand your options So, what do we suggest are some steps to take now? First, mark your calendar to schedule an appointment with us. Next, make sure we have your current 1040 or bring in your current tax forms so we can take a look at your tax bracket and help you make the right decision. And finally, like with all investments, allow us to help you understand your options. This is very important!

The only thing constant is change! As you know, the only thing that is constant is change!

Where do we go from here? So where do we go from here?

Our Role as Your Advisor We won’t be making panicky decisions We will maintain a non-emotional objective We will avoid knee-jerk reactions We will assist you in making decisions you may not regret later WE WILL BE HERE FOR YOU !!!! As you know, our role to our clients as an advisor is to: Make sure you will not make panicky decisions Maintain a non-emotional objective Avoid knee-jerk reactions And to assist you in making decisions you may not regret later! As always, we will be here for you!!! 25

What can you expect from us? Constant communication Roth IRA Conversion Calculation Help We are constantly reviewing economic, tax and investment issues for our clients What can you expect from us? You can expect constant communication. You can expect us to take a look at your Roth IRA conversion possibilities and help you review your options. And as always, you can expect the fact that we are constantly reviewing economic, tax and investment issues for you, our clients.

Available Today Newsletter Tax Report Ability to Schedule an Appointment Other Helpful Information Today we have several things available. We have a copy of our current quarterly newsletter. We also have a copy of our most recent 2016 Tax Report. We have the ability, if you are not a client, to schedule an appointment for you to come in and let us take a look to see whether or not this conversion makes sense for you. We also have some other helpful information that one of our assistants in the back can show you.

We Appreciate the Opportunity to Assist With Your Financial Needs! Thank You! We Appreciate the Opportunity to Assist With Your Financial Needs! Thank you for coming to this Roth IRA Workshop. We appreciate the opportunity to assist you with your financial needs. We would like to take this time to invite any of the guests here today to a complimentary session to help them with their financial needs and goals. Please see one of our assistants at the exit in order to schedule your complimentary session. As you know, we are also making ourselves available to help some of your friends and colleagues. One theme that you have probably heard from our office already is our company’s “Growth Initiative.” It is our goal to offer our services to several other clients just like you. It is primarily through an introduction from our best clients that we have best been able to meet high quality people who can use and benefit from our services. We would be honored if you shared with us the names of one or two other friends, relatives or colleagues so we can invite them in for a complimentary consultation.

Contents Provided by APFA, Inc. © The views expressed are not necessarily the opinion of (insert broker/dealer) Information is based on sources believed to be reliable, however, their accuracy or completeness cannot be guaranteed. This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Contents Provided by APFA, Inc. ©

Questions?