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HERE ARE THE TYPES OF RETIREMENT PRODUCTS WE OFFER
Annuities
Mutual Funds
Traditional IRA's
Roth IRA's
Coverdell Education Savings
College Planing
SEP IRA's
Simple IRA's
401-K
ANNUITIES
What is a Fixed Tax-Deferred Annuity?
A Fixed Tax-deferred annuity, also referred to as a tax-deferred annuity. is a contract between you and an insurance company for a guaranteed interest bearing policy with guaranteed income options. The insurance company credits interest, and you don't pay taxes on the earnings until you make a withdrawal or begin receiving an annuity income. Your annuity contract earns a competitive return that is very safe.
Savings Advantages
Many people today are using tax-deferred annuities as the foundation of their overall financial plan instead of certificates of deposit or savings accounts. Although CD's and Annuities are very similar there are significant differences between the two. The most important difference is that annuities allow for the deferral of the taxes due on the interest earned until the interest is withdrawn! By postponing that tax with a tax-deferred annuity, your money compounds faster because you can earn interest on dollars that would have otherwise been paid to the IRS. Later. if you decide to take a monthly income, your taxes can be less because they will be spread out over a period of years. Like Certificates of Deposits, annuities have a penalty for early surrender, however most annuity contracts have a liberal "free withdrawal" provision which includes "interest only" and usually up to 10% free withdrawal per year.
Tax Advantages
You pay NO taxes while your money is compounding. You can also pay a lower tax on random withdrawals because you control the tax year in which the withdrawals are made, and only pay taxes on the interest withdrawn, Tax deferral gives you control over an important expense - your taxes. Any time you control an expense, you can minimize it. The longer you can postpone this particular expense, the greater your gain when compared to the gain you would make with a fully taxable account.
Tax-Deferred?
Tax-deferred means postponing your taxes on interest earnings until a future point in time. In the meantime you earn interest on the money you're not paying in taxes. You can accumulate more money over a shorter period of time, which ultimately will provide you with a greater income.
Tax-Deferred Advantage
To illustrate the increased earnings capacity of tax-deferred interest, compare it to a fully-taxable earnings. $25,000 at 6.0% will cam $1,500 of interest in a year. A 28% tax bracket means that approximately $420 of those earnings will be lost in taxes, leaving only $1,080 to compound the next year. If these same earnings were tax-deferred. the full $1,500 would be available to earn even more interest. The longer you can postpone taxes, the greater the gain.
Safety
Your tax-deferred annuity is safe. A qualified legal reserve life insurance company is required to meet its contractual obligations to you. These reserves must. at all times, be equal to the withdrawal value of your annuity policy. In addition to reserves, state law also requires certain levels of capital and surplus to further increase policyholder protection. Legal reserve refers to the strict financial requirements that must be met by an insurance company to protect the money paid in by all policyholders. These reserves must be at all times, equal to the withdrawal value (principal plus interest less early withdrawal fees, if any) of every annuity policy. State insurance laws also require that a life insurance company must maintain certain minimum levels of capital and surplus, which provide additional policyholder protection.
No More 1099's
There is no withholding tax while your annuity is compounding; it is completely tax-deferred. If you request a distribution (random withdrawals or annuity income), taxes will be withheld - unless you elect differently. Your election not to withdraw can be made at the time you make your request. Because the interest is tax-deferred, it is not necessary to issue a From 1099 while your money is compounding. Only when your interest is distributed (withdrawal or annuity income) will a Form 1099 be sent, reflecting the amount of interest actually received.
When Does My Money Mature
An annuity policy does not "mature" like a bond or certificate of deposit. Both your principal and interest will automatically continue to earn interest until withdrawn or you reach age 100. You can let your money continue to grow, make withdrawals, or begin receiving an annuity income at any time.
What is the Penalty Tax and When Does it Apply?
An IRS penalty tax, currently 10%, may be payable on any withdrawal of interest or qualified premium made prior to age 59 1/2. (exceptions may apply)
Avoid Probate
If a premature death should occur, the accumulating funds within your annuity may be transferred to your named beneficiaries, avoiding the expense, delay, frustration and publicity of the probate process. Like most assets, the annuity is part of your taxable estate. Your heirs can chose to receive a lump sum payment, or a guaranteed monthly income.
Types of Annuities
Fixed Annuities
CD Type Annuities
Immediate Annuities
Equity Index Annuities
Tax Sheltered Annuities
Variable Annuities
Split Annuities
Please call for more info!
MUTUAL FUNDS
What is a mutual fund?
A mutual fund allows people with common financial goals to pool their resources together in one professionally managed investment that holds many different securities.
What does mutual funds invest in?
Mutual funds typically invest in securities such as stocks, bonds, money market instruments or other specialized types of investments.
What are stocks?
Stocks represent units of ownership or "shares" in a company. Also known as equities, stocks are traded in U.S. stock markets like the New York Stock Exchange or the Nasdaq - and in similar markets abroad. Due to the variety of economic factors and market forces, stock prices can rise or fall on a daily basis. Although past performance is no guarantee of future performance, stocks, compared to other types of investments, have historically produced the highest long term returns.*
What are Bonds?
Bonds are also known as fixed income securities because they generally pay regular income to shareholders. Essentially, bonds are "IOU's" issued by corporations or governments in exchange for your loan to them. Bond issuers promise to pay you interest on your loan (usually every six months) and to repay the principal amount of the loan itself on a specific maturity date-often in 30 years time. Like stocks, bonds are traded in exchanges or markets in the U. S. and abroad.
What are Money Market investments?
Money market investments (also known as "cash" ) are made in fixed income securities that have less than a year before they mature. Since the objective of money market instruments is short-term income and stability, the risk of losing principal on the investment is minimal. However, the interest you earn is lower than on other fixed income investmentssuch as bonds-and earnings fluctuate with interest rates. So your money market investments may not keep ahead of inflation over the long term.
Benefits of a Mutual Fund?
Professional management
Diversification
Will accept qualified or non qualified money
Usually will accept small amounts to invest
Types of Mutual Funds?
Growth Funds • Value Funds • Income Funds • Growth and Income Funds • Specialty Funds • Global Funds • International Funds • Bond Funds
Performance of stocks as measured by the S&P 500 Index. According to Stocks, Bonds, Bills, and inflation 1999 yearbook.
TRADITIONAL IRA
What is a Traditional IRA?
Savings and Social Security alone won't be enough for retirement. A traditional IRA (Individual Retirement Account) is a great way to save money to supplement your retirement. Even if you're already contributing to your company's 401(k) plan, consider a traditional IRA as the next building block towards building a more comfortable retirement.
Traditional IRAs differ from Roth IRAs in that money going in is pre-taxed, and you only pay taxes when you withdraw.
Tax Advantages
IRAs offer certain tax advantages and benefits that can help you now (and later).
- Tax-deductible contributions - Contributions to a traditional IRA are fully
deductible if neither you nor your spouse participates in an
employer-sponsored retirement plan (401(k), 403(b) or pension plan).
If you or your spouse do contribute to an employer-sponsored retirement plan,
the amount you can deduct depends on your adjusted gross income (AGI).
Refer to IRS Publication 590 for deduction information, or talk to your financial
advisor.
- Tax-deferred earnings - For all investors, earnings in a traditional IRA are
tax-deferred.
This means, you do not pay taxes on earnings until you withdraw them.
Traditional IRA Deductibility Schedule for individuals covered by an employer-sponsored plan
| Year |
Single |
Married |
| 2002 |
$34,000-44,000 |
$54,000-64,000 |
| 2003 |
$40,000-50,000 |
$60,000-70,000 |
| 2004 |
$45,000-55,000 |
$65.00075,000 |
| 2005 |
$50,000-60,000 |
$70,000-80,000 |
| 2006 |
$50,000-60,000 |
$75,000-85,000 |
| 2007 |
$50,000-60,000 |
$80,000-100,000 |
Contributions
Contributions can be made until April 15, 2003 for the 2002 tax year. Traditional IRAs are available to all investors (up to age 70 *) with earned income at least equal to the amount contributed. Beginning in 2002, the maximum annual contribution limits are:
| Year |
Contribution Limit |
| 2002-2004 |
$3,000 |
| 2005-2007 |
$4,000 |
| 2008 |
$5,000 |
In addition to the contribution limits, workers age 50 and older (as of the end of the year) will be able to make "catch-up contributions" as follows:
| Year |
Contribution Limit |
| 2002-2005 |
$500 |
| 2006 and thereafter |
$1,000 |
| 2008 |
$5,000 |
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Withdrawals
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| Penalty-free |
- You can withdraw penalty-free after age 59 *.
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| Penalty |
- If you do not start Required Minimum Distribution (RMD) withdrawals by age 70 1/2 you will face a penalty
- If you withdraw before age 59 *, you will be subject to
a 10% penalty. Certain exceptions do apply.
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| Exceptions to Penalty |
- Higher education costs for you or your family members including tuition, books, supplies and room and board (student must be enrolled at least part time).
- First-time home purchase expenses ($10,000 lifetime limit) to buy, build or rebuild a first home.
- Death or disability.
- Certain medical expenses including qualifying health insurance costs for certain unemployed individuals and un-reimbursed expenses exceeding 7.5% of AGI.
- Withdrawals made in equal installments over the
account holder's life expectancy.
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ROTH IRA
Key Advantages
Tax-free growth.
Tax-free and penalty-free withdrawals of annual contributions at any time.
Tax-free and penalty-free withdrawals of qualified earnings.
No minimum distribution requirements.
Contributions permitted after age 70 1/2 if still receiving wages.
Eligibility and Contribution Schedules
Like a traditional IRA, you can contribute up to $3,000 annually ($3,500 if age 50 or older) to a Roth IRA, if you have earned income. Contributions to a Roth IRA, however, are not tax deductible, You may contribute to both a traditional and a Roth IRA, but your total IRA contributions cannot exceed $3,000 ($3,500 if age 50 or older) for any given tax year. Contributions to the new Education IRA don't affect contributions made to a Roth IRA or traditional IRA.
Full contribution is allowed for any wage-earning individual whose adjusted gross income (AGI) is under $95,000 (single) and $150,000 (married). Partial contributions is allowed for individuals whose AGI is $95,0004110,000 (single) and $150,000-$160,000 (married)
| Modified Adjusted Gross Income |
Roth IRA Contribution |
Single Filers $0-$94,999
$95,000-109,999
$110,000 and above
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Full $3,000 contribution
Partial contribution: $3,000 - [2000
(MAGI - $95,000)]/$15,000
No contribution
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Married Couples Filing Jointly $O-149,999
$150,000-159,999
$160,000 and above
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Full $3,000 contribution
Partial contribution: $3,000 - 12000
(MAGI - 150,000)]/$10,000
No contribution
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COVERDELL EDUCATION SAVINGS
The Coverdell Education Savings Account (formerly known as an education IRA) allows parents, grandparents, relatives and friends to make nondeductible contributions of up to $2,000 annually for a child under the age of 18. (Contributions are not permitted after the child's 18th birthday)
The IRA savings must be used by the time the beneficiary is 30, or may then be rolled over to a Coverdell Account for another eligible beneficiary in the same family. Withdrawals from a Coverdell Account used to pay for qualified primary, secondary and higher education expenses such as room and board and books and tuition are generally tax-free. Distributions of income from the account not used for qualified education expenses are included as income for tax purposes and are subject to the 10% penalty tax.
Who's Eligible to Contribute?
Singles with earned income below $95,000 or married couples filing jointly who earn below $190,000 are eligible to make a full contribution. Partial contributions can be made to a Coverdell Education Savings Account singles with AGI between $95,000 and $110,000 and joint filers with AGI between $190,000 and $210,000.
Request more information!
COLLEGE PLANNING
So many education savings vehicles are out there. It’s hard to tell which one is right for your needs. One option you might want to consider is a 529 plan.
Recent tax laws mean that 529 plans offer distinct advantages over traditional options like custodial accounts under the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA).
| Features |
529 |
UGMA/UTMA |
| Control |
Account owner retains control of assets, regardless of beneficiary’s age. |
Child gains unrestricted access to the account at age 18, 21 or 25, depending on the state. |
| Beneficiary Options |
The beneficiary can be changed at any time. |
The beneficiary cannot be changed. |
| Tax Considerations |
No Yearly filing—assets grow tax-deferred until withdrawn, and distribution is federal tax-free2 if used for higher education expenses. |
Income from the account must be included in the yearly tax return of the child or the parents. |
| Estate Considerations |
Contributions are considered completed gifts and are not included in the account owner’s estate. |
If the account owner serves as the custodian, assets are included in his or her estate. |
- High contribution limits compared to other education savings plans - up to $251,0002, including assets and earnings, over the life of the account for each beneficiary
- Investment earnings and qualified withdrawals are federal tax free when used for qualified higher education expenses
- Contributions are considered gifts and are excluded from the account owner's estate
- Qualifies for a special gift tax exclusion - you can contribute $55,000 per beneficiary in one lump sum free of gift tax (up to $110,000 if married and filing jointly)
- Flexible use of assets allows you to use funds for qualified expenses including tuition, fees, room and board, off-campus housing, books, supplies and equipment
- Qualified schools can include public and private 2- and 4-year undergraduate programs, graduate school, law school, medical school and even trade, technical and professional schools
- The account owner maintains control of the assets and has the ability to change a beneficiary at any time to another family member
- Anyone, regardless of income level or age, may contribute to a 529 plan
SEP IRA
SEPs are simple, low-cost plans designed for self-employed individuals and small business owners. These plans are simple and easy-to-administer and allow business owners to make annual discretionary tax deductible contributions of up to 25% of compensation or $40,000 for 2002, whichever is less, for themselves and any eligible employees.
SEPs are ideal for freelancers, independent contractors, part-timers and individuals who earn selfemployment income from activities outside of their full-time jobs
Funding
The employer makes contributions directly to the IRA account of each eligible employee. Contributions can be made up to a maximum of $40,000 for 2002 (adjusted annually for inflation) or 100% of each participant's annual compensation. whichever is less.
Plan set-up/funding deadline - Employer's federal income tax return deadline. including extensions.
Taxation
Employers may deduct a portion of their contributions as a business expense. This portion cannot exceed 25% of total annual compensation for participating employees. Plan contributions and investment earnings grow tax-deferred until withdrawn. Contributions in excess of the 25% limit may be subject to an excise tax Eligibility and Vesting
Eligibility
All employees age 21 and over who have worked for the employer in at least three of the last five years and who have earned an annually adjusted minimum amount ($450 for 2002) must be covered. Certain union employees and certain nonresident aliens may be excluded. The employer may set less restrictive requirements.
Participant vesting -Immediate, 100%.
Testing and Reporting
If more than 60% of the plan's assets belong to key employees, the plan is deemed "top-heavy," and a mandatory 3% contribution is required to all non-key employees.
Withdrawals and Loans
Withdrawals - Most withdrawals before age 59 1/2 are subject to an additional 10% penalty tax.
Loans - Not permitted
SIMPLE IRA
The SIMPLE IRA is a low-cost alternative retirement plan designed for businesses with 100 or fewer employees that don't offer another retirement plan.
Prospects for SIMPLE IRA's
Business owners who don't want the complexity, cost and detailed administration of a 401(k). Stores, restaurants and professional firms-, freelancers, moonlighters and independent contractors. Those who are already covered by a retirement plan at a full-time job are eligible to contribute to a SIMPLE IRA if they have self-employment income. Annual employer contributions are mandatory, so potential sponsors may need to make an ongoing financial commitment.
Funding
The employer must make an annual contribution according to one of the following formulas:
A dollar-for-dollar matching contribution, up to 3% of each employee's compensation. May be less than 3% - but not less than 1% - for two out of every five years. A nonelective contribution equal to 2% of compensation for all eligible employees who have earned at least $5,000 in compensation for the current year, whether or not they participate in salary deferrals. Participants select a percentage of their annual salaries or a flat dollar amount to contribute through payroll deduction. Employees may defer up to 100% of their income, with a maximum contribution of $7,000 a year. In addition, participants age 50 or older may make catch-up contributions of up to $500 annually.
Contribution Deadlines
Employer contributions must be made by the employer's tax-filing deadline, including extensions. Participant salary deferral contributions must be deposited as soon as possible. but no later than the 30th day of the next month.
Plan Set-up
Employers have until October I to establish a new SIMPLE IRA and the plan must be maintained on a calendar year basis thereafter.
Taxation
Employee contributions are made on a pre-tax basis, excludable from income. Contributions and investment earnings grow tax deferred until withdrawal. Employer contributions are deductible (if made by due date, including extensions. for employees tax return).
Eligibility -
Employees must have:
Two years of service during which they have earned $5,000. The expectation of earning $5,000 during the current year (less restrictive requirements are permitted.
Employee notification requirement
An employer must notify eligible employees prior to the employee's 60-day election period that they can make or change salary reduction election to the Simple IRA.
Participant vesting - Immediate, 100%
Early Withdrawal
Early withdrawals (prior to age 59 1/2) may be subject to a 25% penalty tax if taken within the first two years of participation. A 10% penalty tax may be imposed for early withdrawals taken after two years of participation.
Loans - Not permitted
Rollovers and Transfers
SIMPLE IRA to SIMPLE IRA tax-free rollovers or transfers are permitted at any time. Tax-free rollovers or transfers can be made from a SIMPLE IRA to a regular IRA- qualified plan, 403(b), SEP IRA and a 457. Please be sure to check if there are any restrictions associated with a provider's plan before moving your plan. Rollovers may be subject to a 25% penalty tax if taken within the first two years of participation. Rollovers and transfers cannot be made from a regular IRA. qualified plan., 403(b), SEP IRA. and 457 into a SIMPLE IRA.
Testing/Participation
No top-heavy or nondiscrimination testing required.
No minimum participation requirements.
Reporting
No government filing and reporting required.
Eligible employees must be notified prior to the employee's 60-day election period that they can make or change salary reduction elections. A Summary Description, consisting of a completed IRS Form 5304-SIMPLE, must be provided to an employee who becomes eligible to participate. Limited fiduciary responsibility - Since employees control the funding of their investments, the employer fiduciary responsibility is reduced.
401-K
Plan description
A 401(k) is a qualified plan that allows for employee pre-tax contributions. The value of a 401(k) investment grows tax deferred until withdrawn, when it's taxed as ordinary income
Key features
- Permits pre-tax salary deferral contributions.
- Can be added to most Profit Sharing Plans.
- Due to complicated discrimination testing and tax reporting, third-party administrative services are required.
- Employer contributions are tax deductible.
- Employer matching and Profit Sharing contributions are optional.
- Vesting schedule can be applied to employer contributions.
- Participant loans are available.
- Withdrawals are governed by the plan document and may be restricted.1
Who can establish
Businesses, partnerships, S-corporations2 C-corporations2 and nonprofit groups. (No governmentals)
Annual contribution
- Employees can defer up to $11,000 ($12,000 if age 50 or older).
- Deferrals and employer contributions cannot exceed the lesser of 100% of employee's compensation or $40,0003 per employee. Catch-up deferrals are not included in this limit.
- Total deductible employer contributions to the plan cannot exceed 25% of total eligible compensation. Employer contributions do not include employee deferrals.
- Maximum eligible compensation: $200,0003.
Annual fees
From $75.00 to $1,000.00 per year for small businesses plus set-up cost.
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