Download ppt - Putnam IRA

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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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You can’t take a distribution before age 59½ without penalty

Calculating required minimumdistributions iscomplicated

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 3,699 3,681

Year 3 3,400 3,699 3,681

Year 4 3,661 3,699 3,681

Year 5 3,940 3,699 3,681

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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



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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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Extend your roadtrip with a Stretch IRA

• Extend tax deferral

• Increase compounding potential

• IRA income for heirs

Age 70½

Age 59½

No penaltyfor

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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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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Bruce dies at age 74. Wendy continues the established distribution

schedule. No rollover is available


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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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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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Betty dies at age 72 after receiving$53,443 in distributions over 3 years

IRA split evenly between sonsMax and Sam

0Y E A R 1Y E A R 2

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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.


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.


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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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 straightforward

3. Tax benefits can continue after the death ofthe 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