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Variable annuities are long-term investment vehicles designed for retirement where all interest, dividends, and capital gains accumulate tax deferred. Taxable distributions and certain deemed distributions are subject to ordinary income tax and if taken prior to age 59½ may also be subject to a 10% federal income tax penalty. Early surrender charges may also apply. In addition to tax deferral, variable annuities offer death benefits, income protection benefits, annuity payout options, and professionally managed equity based and fixed income investment options. Please note that there are certain fees and charges associated with variable annuities such as mortality and expense risk charges, administrative charges, and fund operating expenses. As with other variable investments, the investment return and principal value of an investment will fluctuate, therefore when redeemed, an investor's units, may be worth more or less than the original cost. In addition, any guarantees associated with the variable annuity are based on the claims-paying ability of the issuing company and do not apply to the investment performance or safety of the underlying funds in the variable annuity.
A mutual fund is an investment vehicle that pools the money of many investors, and has varying degrees of risk depending upon the fund’s portfolio. Mutual funds may invest in stocks, bonds, or cash and include the opportunity for the investor to purchase shares with various pricing arrangements designed to meet their needs. There are fees and expenses associated with investing in mutual funds, including portfolio management fees and expenses and sales charges, which will affect the return on your investment. These fees and charges may be front- or back-end sales charges or annual expenses. In addition, mutual funds generally allow shareholders to sell shares at any time and receive current market value. Mutual fund investments, when held outside of a qualified retirement plan, are subject to tax. You should consult with a qualified tax advisor before investing. The investment return and principal value of an investment will fluctuate so that shares when redeemed, may be worth more or less than their original cost.
This information is written in connection with the promotion or marketing of the matter(s) addressed in this material. The information cannot be used or relied upon for the purpose of avoiding IRS penalties. These materials are not intended to provide tax, accounting or legal advice. As with all matters of a tax or legal nature, your clients should consult their own tax or legal counsel for advice.
Have you ever changed jobs?
The average person:
• Changes jobs every 4 years
• Changes careers 7 to 8 times during his/her lifetime
The decisions
you make each
time you change
jobs affect your
retirement.
Source: Department of Labor, Employee Tenure Summary, 2004
Source: ERBI Retirement Confidence Survey, 2004
The “Have” and “Have Not” Planned
ARE YOU SAVING ENOUGH?
Pre-Retirement Income
Assets Needed for 20 yr
Retirement
$75,000$100,000
$1,012,959$1,350,612
$150,000 $2,025,919
$200,000 $2,701,225
$250,000 $3,376,531Assumes income must increase by 3% over 20 years.
How much will your retirement cost?
Are you retiring soon?
Does Your Retirement Plan Address These Realities?
Longer Life Expectancies Inflation
Social Security
Rising Health Care Costs
9792 100AGE 90
9488 100AGE
50% Chance 25% Chance
90
9285
Retirement may last longer than you expected
Male Age 65
Female Age 65
Couple Both
Age 65
10095AGE 90
50% Chance of one survivor
25% Chance of one survivor
95
50% Chance 25% Chance
Source: The National Underwriter Company, Tax Facts on Insurance & Employee Benefits, 2005.
Inflation: The Silent Enemy
The Effect of Inflation Since 1950 Value of $100,000
Source: Bureau of Labor Statistics, 2004.
(In
Th
ou
sa
nd
s)
(Years)
$66,000
$45,000$30,000
$20,000
$100,000
$13,000
Skyrocketing Healthcare
Source: Ned Davis Research, April 2005 Projections are based on the rate of inflation calculated from prices from 1984 to 2004. Annual rate of increase for Energy: 2.18%, Food: 3.02%, and Medical Commodities and Services: 5.43%. This illustration is purely hypothetical and the actual inflation rate may be higher or lower than what we’ve indicated, these are just projections that can be used to get an idea of how much things might cost based on past inflation.
Energy Food Medical Commodities and Services
Social Security Income Income that needs replacing
Social Security: The More You Earn,The Less It Replaces
Annual Income of
$30,000
Annual Income of
$60,000
Annual Income of
$90,000
$23,250
$6,750$23,208 $23,220
$36,792 $66,780
Source: Social Security Administration, 2005
Decisions at Life’s Crossroads Will Affect Your Retirement
Cash out now and use the money1
Understanding Your Options What Could You Do With the Money in Your Employer Plan:
Leave your assets with your previous employer
Roll over your assets to an IRA, or to your new employer’s qualified plan
1 If you separate from service with your employer during or after the year you reach age 55, any distribution you take from your employer’s qualified plan will not be subject to the additional 10% tax penalty. 1 Taxable distributions (and certain deemed distributions) are subject to ordinary income tax, and if made prior to age 59½, may also be subject to a 10% federal income tax penalty. Early surrender charges may also apply.
Cash distribution from employer’s plan which
is then taxed as ordinary income.
Disadvantages• Distribution subject to 20% mandatory
federal withholding.
• 10% early withdrawal penalty may apply.1
• Loss of tax-deferred accumulation.
UNDERSTANDING YOUR OPTIONS:
Taking a Cash Distribution1
Advantages• Immediate access to cash.
• No restriction on investment choices.
1Taxable distributions (and certain deemed distributions) are subject to ordinary income tax, and if made prior to age 59½, may also be subject to a 10% federal income tax penalty. Early surrender charges may also apply. If you separate from service with your employer during or after the year you reach age 55, any distribution you take from your employer’s qualified plan will not be subject to the additional 10% tax penalty.
The Penalties of Cashing Out
$25,000
INVESTOR 1 Taxable distributions (and certain deemed distributions) are subject to ordinary income tax, and if made prior to age 59½, may also be subject to a 10%federal income tax penalty. Early surrender charges may also apply. If you separate from service with your employer during or after the year you reach age 55, andistribution you take from your employer’s qualified plan will not be subject to the additional 10% tax penalty.
Hypothetical Illustration: This example assumes a 28% federal income tax bracket and 10% federal income tax penalty. It does not take into consideration potential state or local taxes.
5. Cash Distribution After Taxes & Penalties $15,500
4. 10% Premature Distribution Penalty Tax (If You’re Under the Age of 59 1/2)
-$2,500
2. 20% Mandatory Federal Income Tax Withholding
-$5,000
1. Distribution Amount From Retirement Plan $25,000
3. Additional Federal Income Tax $2,500 -$2,000
$20,000$18,000$15,500
$25,000$35,408
$69,654
$137,020
The Advantage of a Rollover IRA
$140,000
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$0
$67,760
$41,440
$15,500$25,344
$25,000$35,408
$69,654
$137,020
1. IRA Rollover - A $25,000 distribution is rolled over as a qualified exchange. The full amount is allowed to accumulate tax deferred for the corresponding time periods. Ending value will be subjected to an applicable ordinary income tax rate upon withdrawal.
2. Cash Distribution - A $25,000 distribution is taken in cash. The distribution incurs a 28% federal income tax liability and 10% federal income tax penalty. The resulting $15,500 is invested in a taxable investment. The earnings from this initial investment will be taxed each year at 28% and deducted from the balance.
This hypothetical illustration assumes a $25,000 eligible rollover distribution, a 7% interest rate and a 28% tax bracket.
Start 10 Years 20 Years 30 Years1 Taxable distributions (and certain deemed distributions) are subject to ordinary income tax, and if made prior to age 59½, may also be subject to a 10% federal income tax penalty. Early surrender charges may also apply.
.
Leave Your Money in an Employer’s Plan
Advantages
• Avoid current income taxes and 10% early withdrawal penalties.
• Money remains invested and tax-deferred.
Disadvantages
• Investment options are limited. • Plan may limit withdrawals and
exchanges between investments.
• Plan may assess additional fees for maintaining your account.
UNDERSTANDING YOUR OPTIONS:
Leave Your Money in an Employer’s Plan
Are Your Nest Eggs Scattered?
Before consolidating, it is important that you take expenses and sales charges into account. You should know if they will incur sales charges and/or penalties for selling an investment, and also find out if they will be charged additional sales charges for buying a new one.
Roll Your Money Over From Your
Employer’s Plan
Disadvantages• Distributions are taxed as
income; early withdrawals may result in tax penalties.
• IRA’s don’t permit loans—can’t borrow against your assets.
• Contributions aren’t permitted after age 70½.
UNDERSTANDING YOUR OPTIONS:
Roll Your Money Over From Your Employer’s Plan
Advantages• Preserve 100% of your assets so they can
continue to grow tax-deferred.
• Flexibility to choose from a wide range of investment options.
• Easy access to your IRA account(s) via 72(t) distributions.
Make an Appointment Today to Discuss These Topics:
• Changing Jobs
• Retiring Soon
• Extending Your Legacy
• Multiple Retirement Savings Accounts
• Retirement Planning
• In between Jobs
• Inheriting an IRA
• Retiring Early
Portfolio Guidance Planning Expertise Help You With
Your Retirement Needs
195 years of wisdom World-class money
management Resources to build
your Plan to Live“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries, including the issuing companies of the Hartford Life Insurance Company and Hartford Life and Annuity Insurance Company.
This presentation is only a general overview. Tax Laws are complex, subject to change and may apply differently to your particular circumstances.
This information is written in connection with the promotion or marketing of the matter(s) addressed in this material. The information cannot be used or relied upon for the purpose of avoiding IRS penalties. These materials are not intended to provide tax, accounting or legal advice. As with all matters of a tax or legal nature, you should consult your own tax or legal counsel for advice. Variable annuities are issued by Hartford Life Insurance Company and by Hartford Life and Annuity Insurance Company. Variable annuities are underwritten and distributed by Hartford Securities Distribution Company, Inc.
The Hartford Mutual Funds are underwritten and distributed by Hartford Investment Financial Services Company, LLC.
You should carefully consider investment objectives, risks, and charges and expenses of The Hartford Mutual Funds before investing. This and other information can be found in the fund's prospectus, which can be obtained from your investment representative or by calling 888-843-7824. Please read it carefully before you invest or send money.
You should carefully consider the investment objectives, risks, and charges and expenses of Hartford variable annuities and their underlying funds before investing. This and other information can be found in the prospectus for the variable annuity and the prospectuses for the underlying funds, which can be obtained from your investment representative or by calling 800-862-6668. Please read them carefully before you invest or send money.
PTL_RC 2/06
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