| 1 eo032 290287 8/14 shifting into retirement turning ira assets into income not fdic insured may...
TRANSCRIPT
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Shifting into retirement Turning IRA assets into income
Not FDIC Insured
May Lose Value
No Bank Guarantee
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Three misconceptions
1. You can’t take a distribution before age 59½ without penalty
2. Calculating required minimum distributions is complicated
3. Tax benefits stop at the death of the IRA owner
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Don’t be slowed by penalties before age 59½
• Access your IRA penalty free through substantially equal periodic payments
Withdrawals are subject to income tax, and those made before age 59½ may be subject to an additional 10% tax.
Age 70½
Age 59½
No penaltyfor
distributions
Must begin distributions
Penalty for distributions
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* 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.
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*
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How does it work?
Bob retires at age 50
He must stick to the distribution schedule for9.5 years (until age 59½)
Sally retires at age 57
She must stick to the distribution schedule for5 years (until age 62)
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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.
The road you take makesa difference
Distribution method Life expectancy Amortization Annuity
Year 1 $2,924 $3,699$3,681
Year 2 3,148 3,6993,681
Year 3 3,400 3,6993,681
Year 4 3,661 3,6993,681
Year 5 3,940 3,6993,681
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Three misconceptions
1. You can’t take a distribution before age 59½ without penalty
2. Calculating required minimum distributions is complicated
3. Tax benefits stop at the death of the IRA owner
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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
* Note that these distributions are required of traditional IRA owners. Roth IRA owners are not required to take distributions during their lifetime.
Age 70½
Age 59½
No penaltyfor
distributions
Must begin distributions
Penalty for distributions
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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.
Just keep in mindDate You must start taking minimum
distributions by April 1 of the year after you turn 70½
Calculation method
There is one simple calculation method*
Beneficiary You may change beneficiaries whenever you wish without affecting the amount of your lifetime distributions
Penalty for failureto withdraw
Equal to 50% of the minimum required distribution not taken
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Three misconceptions
1. You can’t take a distribution before age 59½ without penalty
2. Calculating required minimum distributions is complicated
3. Tax benefits stop at the death of the IRA owner
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Extend your roadtrip with a Stretch IRA
• Extend tax deferral
• Increase compounding potential
• IRA income for heirs
Age 70½
Age 59½
No penaltyfor
distributions
Must begin distributions
Penalty for distributions
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Spousal beneficiary• Once RMD for the year of death has been made, a spouse
beneficiary 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
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How does it work?Spousal beneficiary example
Bob (age 65) rolls $200K into an IRA and names wife,Sally (age 60), as sole beneficiary
0Y E A RY E A R 0
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How does the spousalbeneficiary work?
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
0Y E A RY E A R 5
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How does the spousalbeneficiary work?
Year 0 Year 50Year 40Year 30Year 20Year 10
Year 11 distribution$12,019
$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.
• 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.
Y E A R 1 0
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How does the spousalbeneficiary work?
Year 0 Year 50Year 40Year 30Year 20Year 10
Year 11 distribution$12,019
$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.
Year 20 distribution$24,506
Year 30 distribution$54,566
Year 40 distribution$124,329
Bruce dies at age 74. Wendy continues the established distribution
schedule. No rollover is available
Year 49 distribution$270,526
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How does the spousalbeneficiary work?
Year 0 Year 50Year 40Year 30Year 20Year 10
$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.
Total of 39 annual distributions$3,200,000 was distributedfrom the account
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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.
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How does the non-spousal beneficiary work?
Betty (age 60) rolls $200K into an IRA
She names her sons — Max, age 34,and Sam, age 40 — as beneficiaries
0Y E A RY E A R 0
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How does the non-spousal beneficiary work?
Betty begins RMDs using the IRS’s simple calculation method
Year 10 distribution = $16,480
0Y E A R 1Y E A R 0
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How does the non-spousal beneficiary work?
Betty dies at age 72 after receiving$53,443 in distributions over 3 years
IRA is split evenly between sonsMax and Sam
0Y E A R 1Y E A R 2
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How does the non-spousal beneficiary work?
Sam (now age 52) decides to liquidatehis portion of the account immediately
Sam’s lump-sum distribution = $243,158
0Y E A R 1Y E A R 2
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0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
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.
How does the non-spousal beneficiary work?
Sam receives $243,158.In the year following Betty’s death,year 13, Max (now age 47) beginstaking distributions based on hissingle life expectancy
$243,158
Year12
Year10
Year1
Year49
Annual distributions: Betty MaxSam
Y E A R 1 2
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0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
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.
How does the non-spousal beneficiary work?
Max’s IRA is depleted.Total of $1,436,936 receivedin distributions
$243,158
Year12
Year10
Year1
Year49
Annual distributions: Betty MaxSam
Y E A R 4 9
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How does the non-spousal beneficiary work?
Max has received over $1 millionmore than Sam
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.
Betty Sam Max
$53,443
$243,158
$1,436,936
Total distributions
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Three helpful facts on the roadto retirement
1. You can take a distribution before age 59½without penalty
2. Calculating RMDs is straightforward3. Tax benefits can continue after the death of
the IRA owner
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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
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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
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Shifting into retirement Turning IRA assets into income
Not FDIC Insured
May Lose Value
No Bank Guarantee