©UFS Presented By: Title: Continuing Education for CPAs Understanding IRAs If You Could Create The...

©UFS

Presented By:

Title:

Continuing Education for CPAs

Understanding IRAs

If You Could Create The Ideal Retirement Savings Plan…

PEANUTS © UFS, Inc.

L0109014844[exp0410][All States][DC]


Understanding IRA’s

Metropolitan Life Insurance Company, New York, NY 10166.

New England Financial is the service mark for New England Life Insurance Company and related companies, 501 Boylston Street, Boston, MA 02116.

MetLife companies.

MetLife Insurance Company is registered with the National Association of State Boards of Accountancy (NASBA), as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State Boards of accountancy have final authority on the acceptance of individual courses for CPE credit.



If You Could Create The Ideal Retirement Savings Plan What Would It Look Like?

• Wide range of funding choices?

• Income tax deferral of growth – no income tax due on returns each year?

• Income tax-free withdrawals at retirement?



Agenda

• The ABCs of IRAs

• Traditional IRAs

• Roth IRAs

• Converting Traditional IRAs to Roth IRAs

• Which IRA is right for you

• Your Next Steps



The ABCs Of IRAs

• Traditional IRAs are accounts or annuities that can enable you to accumulate assets on an income tax deferred basis

– You only pay income tax when you withdraw assets from an IRA

– Depending on whether you're an active participant in certain types of employer-sponsored retirement plans and your adjusted gross income (AGI), you may be able to make income tax deductible contributions

• Roth IRAs offer not only income tax deferral of growth, but tax-free income for retirement

– To qualify as a income tax-free distribution certain requirements must be met

– Contributions are non-deductible and after-tax and your ability to make them depends on your adjusted gross income



The ABCs Of IRAs

What Can Tax-Deferred Growth And Tax-Free Income Mean To You?

$151,662

$80,000

$197,692

$117,692

$197,692

$0

$50,000

$100,000

$150,000

$200,000

$250,000

Currently TaxableAccount

Traditional NondeductibleIRA

Traditional DeductibleIRA

Roth IRA

Non-Taxable Taxable

This hypothetical chart illustrations contributions of $4,000 a year to a currently taxable account, Traditional Non-Deductible IRA, Traditional Deductible IRA and a Roth IRA. Assumes an 8% annual return over 20-years. This example does not represent the performance of any particular product and is intended to show the effects of income tax deferral and taxable growth. “Sample illustration, different assumptions will produce different results.”

Federal Income tax law changes have decreased the income tax rate on both long-term capital gains and qualified dividend income. Accordingly, to the extent that the taxable investment generates long-term capital gains and dividends, the effective tax rate may be significantly lower than the ordinary income tax rate applicable to the taxable portion of payments and withdrawals from Traditional IRAs, non-qualified withdrawals from Roth IRA’s, payments and withdrawals from annuities and other products offering potential income tax-deferred accrual. Withdrawals from IRAs made prior to age 59 ½ are generally subject to an additional 10% federal tax penalty unless exception applies.

Additional assumptions are:

Currently taxable account and Roth IRA invests with after tax dollarsFor currently taxable account, withdrawals made annually to pay taxes on current earnings or interest



The ABCs of IRAs

2009 Beyond Catch Up Contributions

Traditional IRA

$5000 Adjusted annually for inflation

$1,000 per year

Roth IRA $5000 Adjusted annually for inflation

$1,000 per year

How Much Can You Contribute?



The ABCs of IRAs

Value at age 55

Value at age 60

Value at age 62

Value at age 67

Start IRA Contributions at Age 50

$38,016 $93,873 $122,972 $218,701

Start IRA Contributions at Age 55

$0 $38,016 $57,820 $122,972

IRA Contributions Can Add Up

Hypothetical assumes $5,000 annual IRA contribution PLUS $1,000 annual catch up contribution. Contributions to begin on specific day

hypothetical individual turns age specified (i.e., 50 and 55). Values at ages specified are at beginning of turning that age specified (i.e., 55,

60, 62 and 67). Assumes 8% annual investment return. “Sample illustration, different assumptions will produce different results.”

“This illustrates the pre-tax return – it is not tax-effected.”



Traditional IRAs

• Income tax-deferred potential growth

• Flexibility in funding options:

– Mutual funds

– Annuities

– Bank products

– Investment management

accounts

• Contributions could be income tax deductible based on:

– Whether you participate in a 401(k), 403(b) or other employer retirement plan

AND

– Whether you have adjusted gross income as illustrated on the following chart



Traditional IRAs WHO IS ELIGIBLE(2009) FIGURES

100% DEDUCTIBLE PARTIALLY DEDUCTIBLE NON DEDUCTIBLE

Single and participate in retirement plan

$55,000 or less More than $53,000 but less than $65,000 $65,000 or more

Married couples who participate in retirement plan

$89,000 or less More than $89,000 but less than $109,000 $109,000 or more

Married couples filing jointly with one spouse covered by retirement plan

$89,000 or less More than $89,000 but less than $109,000

Non-covered spouse contribution 100% deductible. Covered spouse contribution partially deductible.

More than $109,000 but less than $166,000

Non-covered spouse contribution 100% deductible. Covered spouse contribution non-deductible.


Non-covered spouse contribution partially deductible. Covered spouse contribution non-deductible.

Married couples filing separately

$0 $1 - $10,000 $10,001



Traditional IRAs

Distributions are subject to income tax to the extent of earnings and deductible contributions

• If you’re under age 59 ½, you’ll be subject to a 10% federal tax penalty unless you meet certain conditions



Traditional IRAs

• You can transfer money between existing Traditional IRAs or from an employer-sponsored retirement plan to a Traditional IRA without income tax liability

• A non-spouse beneficiary may directly rollover a deceased participant's eligible retirement plan amounts into an inherited IRA



Traditional IRAs

• On April 1 of the year following the year you reach age 70 ½, you must begin taking required minimum distributions (RMDs) from your IRA each year, except in 2009

• If you can’t deduct your IRA contributions due to participation in an employer-sponsored plan and AGI limitations you may still contribute to a Traditional IRA

• However, your initial contributions will be made on an after tax basis



Roth IRAs

• Like Traditional IRAs, Roth IRAs offer income tax-deferred potential accumulation of assets

• A Roth IRA potentially provides income tax-free distributions if:

– It has been in existence for at least five years and:

– The owner has reached age 59 ½ or

– Death or disability occurs or

– Withdrawals are qualifying first time home purchase



Roth IRAs

CONTRIBUTION ELIGIBILITY

FILING SINGLE FILING JOINT MARRIED FILING SEPARATE

Full $105,000 or less $166,000 or less NA

Partial More than $105,000 but less than $120,000


$0 - $10,000

None $120,000 or more $176,000 or more NA

2009



Roth IRAs

• Just like a Traditional IRA, you may contribute up to the allowable limit of $5,000 (for 2009) or 100% of compensation-whichever is less

• Because your contributions are made on an after tax basis, contributions generally may be withdrawn at any time without the 10% federal tax penalty if certain conditions are met

• However, the tax penalty will apply to amounts attributable to a conversion contribution made within the 5-taxable year period ending with the current taxable year



Roth IRAs

• Like Traditional IRAs, Roth IRAs, offer a wide variety of funding options based on your objectives and risk tolerance

• Unlike with Traditional IRAs, contributions to a Roth IRA may be made after age 70 ½

• At your death, your beneficiaries may receive the proceeds of your Roth IRA free from federal income tax

• For distributions to be tax-free the Roth IRA must be in existence for at least at five years and satisfy one of four alternative specified conditions



Roth IRAs

• You can transfer assets from one Roth IRA to another without income tax liability

• Effective in 2008,you can rollover assets directly from a non-IRA qualified plan to a Roth IRA



• Do you expect your tax bracket to be the same or higher in retirement?

• Do you expect your tax bracket to be lower in retirement?

• Upon conversion, your Traditional IRA balance, excluding any non-deductible contributions, will be included in your income for tax purposes

Converting Traditional IRAs to Roth IRAsWhich IRA Is Right For You?



Which IRA Is Right For You?

Do you want the potential of income tax free earnings (after owning the account for five years and upon obtaining age 59 ½)?

Do you want to continue contributing after age 70 ½ if you have earned income?

Do you want to leave all your money invested after age 70 ½?

Do you think your income tax rate is lower now then it will be when you retire?

Do you want to be able to pass on income tax-free earnings to your beneficiaries?



Which IRA Is Right For You?

Do you qualify to deduct all or part of your annual IRA contributions?

Do you think your tax rate will be lower in retirement then it is now?

Do you want a fully deductible IRA for a spouse who is not participating in an employer plan, while you are (if joint AGI is not more than $166,000 in 2009)?

Do you want to be able to contribute to an IRA no matter how high your income?



Your Next Steps

• Examine your retirement plan option with your employer

• Determine which IRAs make the most sense for you

• Consider which IRA funding vehicles best meet your needs

• Make sure you make your 2008 contribution by April 15th of 2009



MetLife

As a leader in individual insurance, employee benefits and investments for retirement, MetLife can help you plan a smooth transition from your working life to your life after work. You can depend on your MetLife representative to help you understand the issues that stand between you and your objectives. And you can also be sure that your representative will help you address those issues with strategies that are designed specifically for you. At MetLife, we help create personal financial freedom for you and the people in your life who matter most. It’s what we’ve been doing for over 140 years, with unparalleled strength and financial stability.



Disclosure

Peter Rosengard is an investment advisor representative and a registered representative of MetLife Securities, Inc. (MSI), which is a registered investment advisor and a member of FINRA/SIPC. Insurance offered through the Enterprise General Agency, Inc. (EGA), Somerset, NJ 08873, and the Metropolitan Life Insurance Company (MLIC), New York, NY 10166. Products and services offered through R4 Employee Benefit SolutionsTM and R4 EnterprisesTM are not guaranteed, endorsed or recommended by MLIC, MSI or the EGA. R4 Risk & Wealth SolutionsTM is a marketing name for Peter Rosengard’s firm.



Circular 230 Notice

Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this document is not intended to and cannot be used by anyone to avoid IRS penalties. This document supports the

promotion and marketing of insurance products. You should seek advice based on your particular circumstances from an independent tax advisor. MetLife, its agents,

and representatives may not give legal or tax advice.

Any discussion of taxes herein or related to this document is for general information purposes only and does not purport to be complete or cover every situation. Tax

law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on

the facts and circumstances. You should consult with and rely on your own independent legal and tax advisers regarding your particular set of facts and

circumstances.

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