1. Understanding IRAs

2. IRAs
In 1974 ERISA created the IRA for individuals that were not covered by an employer sponsored retirement plan.
The maximum contribution was $1,500.
By 1975, $1.5 billion had been invested
The IRA market has been increasing ever since
As of Q2, 2016 more than $7.6 trillion has been invested
What are these plans, who are the investors and how do you engage them?

3. Agenda Understanding IRAs Understanding the IRA Market
Understanding the IRA investor
Engagement Opportunities

4. Understanding IRAs Traditional Roth Prohibited Transactions
Contributions
Distributions
Rollovers and Transfers
Required Minimum Distributions
Death and Distribution Rules
Roth
Conversions
Prohibited Transactions

5. Traditional IRAs What is a Traditional IRA Qualification Contributions
Deductibility
Premature Distributions
Required Minimum Distributions
Death and Distribution
Prohibited Transactions

6. Who can open a Traditional IRA
Must have received taxable compensation
Cannot attain age 70 ½ by the end of the year
Can contribute whether or not you participate in an employer sponsored retirement plan
Depending on Modified AGI, the contribution may or may not be deductible.
If both spouses have taxable compensation, both may have their own separate IRA
If one spouse has taxable compensation, and your file jointly, each can have an IRA
You cannot share an IRA

7. What is Taxable Compensation
Not Compensation
Wages, Salaries etc.
Earnings and profits from property
Commissions
Interest and Dividend Income
Self-Employment Income
Pension or Annuity Income
Alimony and Separate Maintenance
Deferred Compensation
Nontaxable Combat Pay
Income from Certain Partnerships
Any amounts excluded from income

8. Contribution Limits The lesser of
Up to 100% of your taxable compensation or
$5,500
Spousal IRA*
The Lesser of
The spouse’s taxable compensation less any contribution made to a Traditional or Roth IRA
Catch Up Contributions:
If age 50 or older
$1,000
* Must file jointly and income is less than that of other spouse

9. Contribution Limits
If you contribute less than the maximum in any one year, you cannot make that up in a later year.
If you over contribute in a year, you may allocate the overage to a later year, however until it is allocated in a later year, it may be subject to an excise tax of 6%

10. Contribution Timing
The contribution for any year may be made up until the filing date (Typically April 15 of the following year)
Contributions cannot be made for the year the IRA investor turns age 70 ½. (Note this is different for a Roth IRA)

11. Deductibility The deduction taken by the other spouse
A Traditional IRA may or may not be deductible.
An IRA investor may deduct their IRA contribution unless they or their spouse is covered by an employer sponsored plan.
Full Deduction: The Maximum of:
$5,500 ($6,500 if age 50+)
100% of Compensation
Spousal IRA: The Maximum of:
$5,500 ($6,500 if Spousal IRA Holder is age 50+)
100% of Compensation used by both spouses reduced by:
The deduction taken by the other spouse
Any non-deductible contribution made by the other spouse
Any contributions made to a Roth IRA by the other spouse

12. Deductibility
If your or your spouse is covered by an employer plan, deductibility may be limited
Employer will indicate on Form W-2
Amount of Deduction depends on
Are you or your spouse covered by an employer plan
What was your income
What was your filing status
You may have a full deduction, partial deduction or no deduction

13. Deductibility If YOU are covered by an employer plan: Filing Status
Modified Adjusted Gross Income
Deduction
Single or Head of Household
$61,000 or less
Full Deduction
$61,001 - $70,999
Partial Deduction
$71,000 or more
No Deduction
Married Filing Jointly or Qualifying Widow(er)
$98,000 or less
$98,001 - $117,999
$118,000 or more
Married Filing Separately
Less than $10,000
$10,000 or more

14. Deductibility If YOU are NOT Covered by an Employer Plan Filing Status
Modified Adjusted Gross Income
Deduction
Single, Head of Household or Qualifying Widow(er)
Any Amount
Full Deduction
Married Filing Separately with a Spouse who is not covered by an Employer Plan
Married Filing Jointly with a Spouse Who IS Covered by an Employer Plan
$184,000 or less
$184,001 - $193,999
Partial Deduction
$194,000 or more
No Deduction
Married Filing Separately with a Spouse Who is Covered by an Employer Plan
Less than $10,000
$10,000 or more

15. Modified Adjusted Gross Income
May not be the same as Compensation
May include additional income
May not include certain deductions

16. Reporting Contributions
Deductible – Report on 1040 Forms (and variations)
Non-Deductible – Form 8606
Will prorate deductible versus non-deductible on withdrawal

17. Distributions Distributions Rollover Direct Transfer
Required Minimum Distributions

18. Distributions Generally Taxable as Ordinary Income unless
Rolled Over or Transferred
Qualified Charitable Distribution
Must be over age 70 ½
Maximum annual exclusion is $100,000
Over $100,000 includible in income
$100,000 for spouse as well (filing jointly)
Must have been taxable distribution
Cannot claim charitable deduction unless includible in income
Must be qualifying charitable institution
One time qualified HAS funding distribution
Tax free withdrawal of contributions
Prior to tax filing date
Return of Non-Deductible Contributions
Form 8606
72(t) exception

19. Distributions 72(t) Premature Distribution Penalty
In general, if the IRA owner is under age 59 ½ and the time of distribution, any amounts includible in gross income will be assessed an additional 10% unless:

20. 72(t) Exceptions The IRA Owner has attained age 59 ½
The IRA Owner has died
The IRA owner is disabled as defined in 72(m) 7 of the code
Permanently and totally disabled
Unreimbursed medical expenses in excess of 10% AGI (7.5% if born before January 2, 1952)
For health insurance premiums if unemployed
Qualifying higher education expenses
IRA owner, Spouse, Children, Grandchildren
Tuition, fees, books supplies, room & board
First time home purchase of up to $10,000
IRA Owner spouse, Child, grandchild, parents
Cannot have owner a home in the prior two years
Part of a Series of Substantially Equal Periodic Payments

21. Substantially Equal Periodic Payments
Based of life or life expectancy or joint life or life expectancy of IRA owner and a designated beneficiary
3 Methods
Required Minimum Distribution Method
Annuitization Method
Amortization Method
May be subject to a recapture tax if changes or modifications are made prior to the later of age or 5 years
Opportunity for a One Time Switch to the RMD method. Once made must follow for the duration of the required period

22. Rollovers and Transfers
From a Qualified Plan: Amounts Not Eligible for Rollover
Rollover
Direct Transfer

23. Not Eligible for Rollover
Not all funds can be rolled over from a qualified plan. The following funds cannot be rolled over or transferred:
A required minimum distribution
A hardship withdrawal
A series of substantially equal periodic payments for a life contingent period or a minimum of 10 years
A loan treated as a distribution

24. Rollovers If an eligible rollover distribution
The following plans can be rolled into a Traditional IRA
Another Traditional IRA
An employer’s qualified retirement plan
If an eligible rollover distribution
There may be a 20% withholding
A deferred compensation plan of a state or local government (457 plan)
A Tax Sheltered Annuity (403(b))
The Rollover must be completed within 60 days upon receipt of the rollover funds
If the 60 day deadline is missed and no waiver is received, the distribution becomes a taxable distribution and may be subject to an additional 10% penalty
Can do only 1 rollover of the same funds within a 1 year period

25. Direct Transfer Must be a trustee to trustee transfer
Can do as often as you like

26. Required Minimum Distributions
Must begin distributions by April 1 of the year following the year the IRA Owner attains age 59 ½
If the IRA Owner waits until that date, he/she must take 2 distributions in that year
One for the prior year
One for the current year
There is a 50% penalty tax on any monies that should be paid out but are not (IRA owner did not take the required minimum)
RMDs must be calculated for each IRA but the RMD obligation may be satisfied by 1 IRA.

27. Death and Distribution Rules
Before Required Beginning Date:
If Spouse is the IRA Beneficiary
Spouse may assume ownership
Must be sole beneficiary
Assumed to have assumed ownership if
Additional Contributions are made
Deceased Owner’s RMD is not taken
May roll into own IRA or if permitted:
Qualified Employer Plan
403(a) or (b) plan
457 plan
May act as beneficiary of IRA
Distributions do not need to begin until the year in which the deceased owner would have reached age 70 1/2

28. Death and Distribution Rules
After Minimum Distributions Have Begun
If Spouse is the sole beneficiary
Treat the IRA as their own
Base RMDs on their current age
Base RMDs on the deceased owner’s age at death reducing the distribution period by 1 each year
Withdraw the entire account balance by the end of the 5th year following the owner’s death – if the owner died prior to the required RMD beginning date

29. Death and Distribution Rules
Before Required Beginning Date:
If a Non-Spouse was the IRA Beneficiary
Becomes beneficiary of the IRA
Cannot contribute to the IRA
Any basis in contract will be maintained
5 Year Rule
The entire value of the annuity must be distributed by the end of the 5th year following the year of the owner’s death
Required Minimum Distributions
Begin a lifetime income stream based on Required Minimum Distributions using the single life expectancy of the designated beneficiary

30. Death and Distribution Rules
If a Non-Spouse is the IRA Beneficiary
Must calculate the RMD based on the longer of:
The beneficiary’s remaining life expectancy determined in the year following the year of the Owner’s death reduced by 1 each year
The Owner’s remaining life expectancy at death reduced by 1 each year

31. Roth IRA
Unlike a Traditional IRA where your contributions may or may not be deductible, in all cases in a Roth IRA, contributions are non-deductible.
However, if you follow the Roth rules, future distributions are received tax free.
In order to contribute to a Roth IRA, you must qualify.

32. Roth IRA Who can contribute to a Roth IRA Contribution Limits
Distributions
Conversions

33. Roth – Who Can Contribute
Must have Taxable Compensation
Modified AGI must be less than*
$194,000 if married filing jointly or qualifying widow(er)
$132,000 single, head of household, married filing separately**
$10,000 filing separately
No age limit as long as there is taxable compensation
Can contribute to a Roth Spousal IRA if qualified
Contribution Limit: Lesser of
$5,500 ($6,500 of over age 50)
100% taxable compensation
* Contribution limit may be reduced based on Modified AGI
** Cannot have lived with the spouse for any part of the year. If so, $10,000

34. Can you have a Traditional and a Roth IRA?
Yes, but within the overall contribution limit.

35. Contribution Phase Out Amounts
Filing Status
Modified AGI
Contribution Limit
Married Filing Jointly or Qualifying Widow(er)
Less Than $184,000
$5,500 ($6,500 if age 50 or over)
$184,000 - $193,999
Contribution Limit Reduced
$194,000 or More
Not Eligible to Contribute
Single, Head of Household or Married Filing Separately (Did not live with spouse at any time during the year)
Less than $117,000
$117,000 - $131,999
$132,000 or More
Married Filing Separately (Lived with spouse at some time during the year) $0
$1 - $9,999
$10,000 or More

36. Roth Conversion No Income Cap for conversion
Must pay taxes on taxable portion in Traditional IRA
No 10% penalty as long as funds are moved to Roth IRA within 60 days

37. Roth Distributions Contributions Conversion Contributions
Qualifying Distribution
Non-Qualifying Distribution

38. Distributions of Contributions
Contributions to a Roth IRA – because they were made after tax – can be withdrawn any time or without tax penalty
There still may be a product surrender charge

39. Distribution of Conversions
When a Traditional IRA is converted to a Roth IRA, taxes are paid on any taxable amounts
There is no 10% penalty
Once in the Roth IRA, the conversion amount becomes an after tax contribution
Roth IRAs were not meant as a mechanism to access Traditional IRA dollars and avoid the 10% penalty.
Therefore…

40. Distribution of Conversions
Any previously converted amounts withdrawn prior to a 5 year holding period will be accessed a 10% penalty tax unless the IRA owner is
Age 59 ½
Dead
Disabled
$10,000 was withdrawn for a first time home purchase

41. Roth Qualifying Distribution
If the Distribution is a Qualifying Distribution
No Taxes on earnings
No 10% penalty on earnings
A Qualifying Distribution is one which is coming from a Roth IRA that has been established for at least 5 years and:
The Owner is at least age 59 ½
The distribution is for a qualifying first time home purchase ($10,000)
The Owner has become disabled
The Owner has died

42. Roth Non-Qualifying Distribution
If the distribution is not a qualifying distribution, distributions (earnings) may be subject to taxation and potentially a 10% penalty unless: (10% penalty exceptions)
Attainment of age 59 ½
A qualifying first time home purchase ($10,000)
For qualified education expenses
Unreimbursed medical expenses in excess of 10% AGI
Health Insurance Premiums if unemployed
Disability of the Owner
Death of the Owner
Owner takes substantially equal periodic payments

43. Qualified or Non-Qualified Distribution Path
Has it been at least 5 years from the beginning of the year for which the Roth IRA was first set up and a contribution was made No
Yes
Was the Owner at least age 59 ½ at the time of distribution?
Yes
Is the distribution for a qualifying first time home purchase?
Yes
Is the distribution due to a disability?
Is the distribution due to the Owner’s death? No
Yes
The Distribution from the Roth IRA is not a qualified distribution. The portion of the distribution allocable to earnings may be subject to tax and it may also be subject to a 10% penalty.
The distribution from the Roth is a Qualifying Distribution. It is not subject to tax or penalty.

44. Roth Distribution Order
When withdrawing money from a Roth IRA, the money will come out in the following order:
Contributions to the Roth IRA
Roth conversion amounts
Taxable conversion amounts
Non-taxable conversion amounts
Earnings on all contributions

45. Roth Required Minimum Distributions
Roth IRAs are not subject to Required Minimum Distribution Rules
Note: RMD Rules may apply to the beneficiary of a Roth IRA in the event of the owner’s death.

46. Death and Distribution Rules
If Spouse was sole beneficiary
May treat Roth IRA as own
May delay distribution until the date the Roth IRA Owner would have attained age 70 ½
If Non-Spouse Beneficiary:
Entire interest in the Roth IRA must be distributed by the end of the 5th calendar year following the year of the Roth IRA Owner’s death.
Contract may be distributed over the life or life expectancy of the designated beneficiary
Must be payable over a period not greater than the designated beneficiary's life expectancy
Must begin before the end of the calendar year following the year of the Roth IRA Owner’s death

47. Distribution Comparison
Traditional IRA
Roth IRA
Required Minimum Distributions
Must begin by April 1 of the year following the year of attainment of age 70 1/2.
Not required unless the Roth IRA was inherited as a result of death. See Death and Distribution Rules
Taxation of Distributions
Taxable as ordinary income except for any non-deductible contributions
Generally not taxed as long as criteria is followed.

48. Prohibited Transactions
Taking a loan
Using as security for a loan
Selling property to the IRA
Investment in collectibles
Artworks
Rugs
Antiques
Metals
Gems
Stamps
Coins
Alcoholic Beverages
Certain Other Tangible Personal Property
Can invest in Gold or Silver coins, Platinum coins or certain bullion

49. The IRA Market IRAs represent 27% of all retirement plan assets.
Individual Retirement Accounts: 27%
Private Defined Contribution Plans (including 401(k)) 19%
Private Defined Benefit: 12%
Federal Government: 13%
State and Local Government: 20%
Private Insured Plans: 9%
IRA Owners value saving for retirement, help them begin to create a retirement savings strategy and model income streams.
Source: Board of Governors of the Federal Reserve System, “Financial Accounts of the United States: Flow of Funds, Balance Sheets and Integrated Macroeconomic Accounts”, Fourth Quarter 2014

50. The IRA Market Traditional IRAs represent 73.3 of all IRAs
41.3 % initiated with contributions
34.7% initiated by rollover
Rollovers represent the largest average balance: $150,261 by individual
The average IRA balance by individual is $119,804
According to a 2014 report from the Pension Policy Center, $2.1 Trillion is predicted to be rolled over in the next 5 years.* (Pension Policy Center, Retirement Savings Flows and Financial Advice: Should You Rollover Your 401(k), John A. Turner, Bruce W. Klein, April 2014)
Source: “Individual Retirement Account Balances, Contributions, and Rollovers, 2013; with Longitudinal Results 2010 – 2013: The EBRI Database, Craig Copeland, Ph.D., Employee Benefit Research Institute, May 2015, No. 414

51. The IRA Market 46.6% of IRA owners are between the ages if 45 and 64
Average balance by individual by age:
Age
Average Balance by Individual
45-49
$68,683
$91,976
$122,957
$165,139
$212,812
70+
$219,790
Source: “Individual Retirement Account Balances, Contributions, and Rollovers, 2013; with Longitudinal Results 2010 – 2013: The EBRI Database, Craig Copeland, Ph.D., Employee Benefit Research Institute, May 2015, No. 414

52. IRA Strategies Asset Consolidation Protected Income Stream
Reduce Upcoming RMDs
Retirement Plan Rollovers
IRA Review
IRA Tax Diversification
Using Non-Qualified Annuities to Supplement Non-Deductible Traditional IRAs
What else???