Plan Your Rollover Strategy Understanding Your Distribution Options

Plan Your Rollover Strategy Understanding Your Distribution Options Louis Ventura Insurance and Financial Services Louis Ventura* CLU, Ch. FC 6 Centerpointe Drive, Suite 600 La Palma, Ca 90623 714 228 2723 CA Ins Lic #0618897 *Registered Representative offering securities through NYLIFE Securities LLC, Member FINRA/SIPC. Louis Ventura Insurance and Financial Services is not owned or operated by NYLIFE Securities LLC or its affiliates. SMRU #0377629 PA This seminar is for informational purposes only. Neither Louis Ventura Insurance and Financial Services, nor NYLIFE Securities LLC or its affiliates or registered representatives provide tax, legal or accounting advice. Please consult with your own advisers regarding your specific circumstances.

Understanding Your Needs: Questions To Consider • How long have you been contributing to your company plan? • Are you changing jobs or looking for a new one? • Are you retiring or considering early retirement? • Do you have a need for current income? • Do you know how much to expect from Social Security? 2

Social Security Statements • • • Annual statement Mailed to all workers age 25 or older Includes an estimate of what you will get in return as monthly retirement benefits Statement mailed three months prior to your birthday Note that a new law allows retirees over age 65 to work full time and still collect full benefits regardless of earned income. According to MSNBC, higher-income workers can only expect 28. 9% of their pre-retirement income* to come from Social Security; the rest is up to them What does this all mean? • The decisions you make today on how you manage your retirement plan distribution can have a large impact on how you live during retirement. . *Source: MSNBC, Could You Survive on Social Security, April 2007 3

Things to Consider • • The rollover distribution options available to you The advantages and disadvantages of each option The ability to access investments for income. Impact of current taxes and penalties Level of control you want over you investment options Are there any tax consequences? How do you keep your money growing? What if you need income? Note: Keep in mind that financial professionals are not tax advisors. Therefore, you should consult your tax or legal professional before making any tax-related decisions. 4

Planning Ahead Can Help You Protect Your Future and Help Protect Your Retirement Goals “ Don’t dip into your retirement savings. You’ll lose principal and interest, and you may lose tax benefits. If you change jobs, roll over your savings directly into an IRA or your new employer’s retirement plan. ” –U. S. Department of Labor “Top 10 Ways To Prepare For Retirement” , March 2008. 5

Planning Ahead Can Help You Protect Your Future and Help Protect Your Retirement Goals So, what will you do with your retirement plan distribution? How do you make the right choice for you? • First, decide what your retirement goals and needs are. • Then examine your options to find out what best fits your needs. • Finally, use professional advice to guide and help you avoid the pitfalls; remember, your retirement future is at stake, so get help from your professional advisers. 6

Four Basic Rollover Distribution Strategies Rollover To IRA Retirement Plan Assets Keep Current Plan Rollover to Employer Plan Distribution In Cash 7

Four Basic Rollover Distribution Strategies • Your first option is to take the distribution in cash or securities, pay the appropriate taxes, and then spend or save it. • Your second option is to keep your assets in your current company’s plan. However, if your assets in the plan are $5, 000 or less, you may not have the option of leaving them in the plan. • Your third option is to roll over the distribution into a traditional IRA and continue working to build your assets tax deferred. • Finally, if applicable, your fourth option is to process a direct rollover of your funds to your new employer’s plan. You should check with your new benefits department to ensure this option exists. (Note: This option is not applicable for those who are retired or are considering retirement. ) The ultimate decision on what to do will be based on your personal needs, but let’s take a closer look at the advantages and disadvantages of each. 8

Strategy 1: Take the Distribution in Cash or Securities With No Rollover Advantages: • Access to your money • May be eligible for special tax treatment* • May be appropriate if distribution includes highly appreciated company stock** *This is known as 10 -year income averaging, and it may offer you substantial tax savings. (This option only applies to individuals born before January 1, 1936). **Please consult with a tax professional before making any decisions. ***Note: Exception applies when separation from service occurs after attaining age 55. Disadvantages: • Current income taxes and 20% federal withholding apply • 10% federal income tax penalty may apply if younger than age 59½*** • Lose continued taxdeferred compounding • Spending retirement assets • State Taxes May Apply 9

Strategy 2: Keep Assets in Your Current Plan, if Your Account Balance Exceeds $5, 000 Advantages: • Potentially more attractive investment options • Avoids current income tax and penalties • Continued tax-deferred compounding Disadvantages: • Access to assets may be limited • Your rights in the plan may change • Investment options or performance may be unsatisfactory 10

Strategy 3: Rollover the Distribution Into an IRA Two methods: • Indirect rollover to an IRA – You can either take the distribution in cash and then roll it over into an IRA • Direct rollover to an IRA – You can instruct your employer to transfer the funds directly to a new custodian 11

Strategy 3: Indirect Rollover to an IRA Take the distribution in cash and then roll it over into an IRA. Advantages: • Temporary access to 80% of proceeds • Continued tax-deferred compounding Disadvantages: • Amount not rolled over is taxed • 20% will be withheld for federal income tax • You must replace the 20% being withheld • A 10% federal income tax penalty may apply Note: If you receive a distribution from your retirement plan, you have 60 days from the date you receive it to roll over all or part of it into a traditional IRA or another company plan 12

Strategy 3: The Impact of Taxes on an Indirect Rollover For example, if you receive a distribution: You receive a $200, 000 distribution $ 40, 000 was withheld (20% of $200, 000). You roll over $160, 000 As a result, $40, 000 is included in ordinary income and is subject to a 10% federal income tax penalty. To avoid tax and penalty, you need to replace the $40, 000 that was withheld. 13

Strategy 3: Direct Rollover to an IRA Instruct employer to send assets directly to a new custodian. Advantages: Disadvantages: • Continued tax-deferred • Loans are not permitted compounding • Broad range of investment options • Avoid 20% withholding and current income taxes • May be eligible to roll over into new employer’s retirement plan later 14

Strategy 4: Direct Rollover to New Employer’s Plan* Advantages: • Continued tax-deferred compounding • May offer attractive investment options • Avoid current income tax implication • Possible loan option Disadvantages: • May have limited investment options • Investment options or performance may be unsatisfactory • Your rights in the plan may be different than your previous employer’s plan *If you are retiring or between jobs, this option would not be available. Before considering this option, you need to verify if You generally lose the your new employer will allow it. Do some research. Find out if • there is a waiting period. Make sure that the investment options ability to roll assets out in your new retirement plan are competitive and broad enough to meet your long-term needs. Contact your Benefits Coordinator prior to retirement to verify what type of services your new plan offers. 15

Reminder • Distributions from a company plan that are not eligible to roll over into an IRA include: –Required minimum distributions –Periodic payments scheduled for 10 years or more –Periodic payments based on certain life expectancies –Certain other distributions Under The Economic Growth and Tax Relief Reconciliation Act of 2001, after-tax contributions and earnings are now eligible to be rolled over if the new plan allows, and can account for it, separately. However check with your tax adviser for certain other distributions that may apply in your specific case. 16

457(b) Plans • If you are or were a government or state worker with a 457(b) governmental plan, you now have increased flexibility and expanded options • 457(b) governmental plan assets can be rolled over into other defined contribution plans such as a 401(k), 403(b), and an IRA under The Economic Growth and Tax Relief Reconciliation Act of 2001 • You will have the ability to consolidate retirement accounts and actively control your investments 17

Additional Factors to Consider • Size of the distribution – Understand the tax considerations • Retirement needs – When will you need the money and how much do you need to retire? • Time horizon – How close are you to retirement? • Investment options – What are the options in the plan you are considering for your retirement distribution? 18

The Importance of Professional Guidance • • Retirement planning analysis Personalized Strategies Sophisticated financial tools Monitor strategies and help make adjustments as necessary The information contained herein is general in nature and is provided solely for educational and informational purposes. Financial professionals are not tax, accounting, or legal advisers. You should consult your own tax, accounting, or legal professional regarding your particular circumstances. 19

Thank You Louis Ventura Insurance and Financial Services Louis Ventura* CLU, Ch. FC 6 Centerpointe Drive, Suite 600 La Palma, Ca 90623 714 228 2723 Louis. Ventura@ft. newyorklife. com *Registered Representative offering securities through NYLIFE Securities LLC, Member FINRA/SIPC. Louis Ventura Insurance and Financial Services is not owned or operated by NYLIFE Securities LLC or its affiliates. This seminar is for informational purposes only. Neither Louis Ventura Insurance and Financial Services, nor NYLIFE Securities LLC or its affiliates or registered representatives provide tax, legal or accounting advice. Please consult with your own advisers regarding your specific circumstances. 20