Convert IRA To Roth During Lifetime

Bob Smith and Mary Smith

Presented by:John Q. Smith, CLU

For Evaluation Purposes Only10735 David Taylor Drive

Suite 350Charlotte, North Carolina 28262

Phone: 1.800.438.6017Mobile Phone: 704.549.1100

Fax: 704.549.5700Email: [email protected]

These pages depict certain wealth preservation strategies concerning possiblemethods for taking distributions from your qualified retirement plan. Forpurposes of this analysis, several of your qualified retirement plans may beaggregated and shown as one single plan. This report provides only broad,general guidelines, which may be helpful in shaping your thinking about anddiscussing your wealth preservation needs with your professional advisors. Thisreport provides estimates based on our general understanding of current tax laws.

Each scenario shown illustrates your current situation or an alternative strategyand its possible effects on the financial situation you provided. Inclusion of oneor more of these strategies does not constitute a recommendation of that strategyover any other strategy.

Calculations contained in this analysis are estimates only based on theinformation you provided, such as the value of your assets today, and the rate atwhich the assets appreciate. The actual values, rates of growth, and tax rates maybe significantly different from those illustrated. These assumptions are only a“best guess.” No guarantee can be made regarding values, as all rates are thehypothetical rates you provided. These computations are not a guarantee offuture performance of any asset, including insurance or other financial products.

No legal or accounting advice is being rendered either by this report or throughany other oral or written communications. Nothing contained in this report isintended to be used on any tax form or to support any tax deduction. Unlessindicated, the tax aspect of the federal Generation-Skipping Transfer Tax(GSTT) is not reflected. The GSTT is similar to an additional level of estate taxon certain transfers to grandchildren, or individuals two or more generationsremoved from the transferor. State laws vary regarding the distribution of

property, and individual circumstances are unique and subject to change. Youshould discuss all strategies, transfers, and assumptions with your legal and taxadvisors.

To implement a strategy, it may be necessary to restructure the ownership ofproperty, or change designated beneficiaries before specific will or trustprovisions, prepared by the client’s counsel, become effective. The transferof a life insurance policy may not result in its removal from the estate of theprior owner for three years.

Strategies may be proposed to support the purchase of various products such asinsurance and other financial products. When this occurs, additionalinformation about the specific product (including a prospectus, if required, oran insurer provided policy illustration) will be provided for your review.

IMPORTANT: The projections or other information generated by thisinvestment analysis tool (Qualified Plan Distribution Analysis) regarding thelikelihood of various investment outcomes are hypothetical in nature, do notreflect actual investment results and are not guarantees of future results.

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirementsimposed by the IRS, this notice is to inform you that any U. S. federal taxadvice contained in this presentation is not intended or written to be used, andcannot be used, for the purpose of (i) avoiding penalties under the InternalRevenue Code or (ii) promoting, marketing or recommending to another partyany transaction or matter addressed in this presentation.

Important Notes

This presentation is not a financial plan.Version 2.0.0 c. 6.0.0.0

Presented by: John Q. Smith, CLUFor Evaluation Purposes Only

July 31, 20092 of 13

Converting Your IRAto a Roth IRA

Should you pay taxes now so that retirement distributions willbe tax-free?

for

Bob Smithand

Mary Smith

This presentation is not a financial plan.Presented by: John Q. Smith, CLUFor Evaluation Purposes Only

July 31, 20093 of 13

Traditional IRAsContributions are limited to $5,000 for 2009 ($6,000 if 50 or over) and are generally tax deductible.•If you are covered by a retirement plan at work and your modified adjusted gross income (MAGI) is $89,000 - $109,000 in 2009 (married, filing jointly),deductibility phases out and is eliminated thereafter. If your spouse is covered by a retirement plan at work, but you are not, the phase out is $166,000 - $176,000for married, filing joint. (The phase out is $55,000 - $65,000 for single taxpayers.)

•

Funds grow tax-deferred, but are taxed as ordinary income upon distribution.•Minimum distributions are required annually beginning on the Required Beginning Date (RBD1), which is based on your age 70½.•Distributions taken prior to age 59½ are subject to a 10% early distribution penalty tax, with certain exceptions.•Distributions after your death (or your spouse's death) are taxed as ordinary income to the beneficiary as distributions are received.•At your death (or your spouse's death), the entire account value is includible in the gross estate for federal estate tax purposes, and may be subject to estate taxes.•

Roth IRAsContributions are limited to $5,000 for 2009 ($6,000 if 50 or over) and are NOT income tax deductible.•Ability to contribute is phased out if you earn $166,000-$176,000 for married, filing jointly in 2009, andeliminated thereafter. The phase out is $105,000 - $120,000 for single taxpayers.

•

Funds grow tax deferred and are generally not taxable upon withdrawal.•No minimum distributions are required from Roth IRAs, during your (or your spouse's) lifetime.•Withdrawals of contributions to Roth IRAs, prior to age 59½, are not subject to the 10% earlywithdrawal penalty tax. Withdrawals of earnings within 5 years of establishing a Roth IRA are taxed asordinary income. Earnings taken prior to age 59½ are taxed as ordinary income, and may be subject to a10% early withdrawal penalty tax, with certain exceptions.

•

Distributions after your death are received by the beneficiary income-tax free.•At your death (or your spouse's death), the entire account value is includible in the gross estate forfederal estate tax purposes, and may be subject to estate taxes.

•

Conversions (from a Traditional IRA to a Roth IRA)A Conversion is a taxable event. The entire (or partial) amount of the Traditional IRA (less any non-deductible contributions) is taxable as ordinary incomeupon conversion (or distribution). The conversion amount may move you into a higher marginal income tax bracket. Due to a special provision in the tax law, foramounts converted in 2010, half the conversion can be reported as taxable income in 2011 and the other half is reported in 2012.

•

Prior to 2010, if your MAGI exceeds $100,000, you are not eligible to convert a Traditional IRA to a Roth IRA. After 2009, the income limit is eliminated.•If you pay the taxes out of the Traditional IRA, it will reduce the benefits of the conversion to a Roth IRA, and if you are under age 59½, the amount used to payincome taxes will be subject to the 10% early distribution penalty tax.

•

Withdrawals of converted amounts within 5 years of each separate conversion to Roth IRAs may be subject to a 10% early distribution penalty tax andwithdrawals of earnings may be subject to a 10% early distribution penalty tax and/or taxed as ordinary income.

•

Distributions from a Traditional IRA must be deposited into a Roth IRA within 60 days (not applicable for trustee-to-trustee transfers).•You do not have to convert your entire Traditional IRA. A partial conversion is allowed, but you must follow the same rules as any other distribution regardingnondeductible contributions.

•

Understanding IRAs, Roth IRAs, ConversionsKey Concepts & Rules

1The RBD is no later than April 1st following age 70½ for traditional IRAs, SEPs, SIMPLEs. For qualified retirement plans, the later of April 1 of the year following the year inwhich the participant reaches age 70½ or retires, if less than a 5% owner.


July 31, 20094 of 13

Pay Taxes Now or Later?The deciding factor between choosing an IRA or RothIRA is whether you prefer paying taxes on yourcontributions (Roth IRA) or on your distributions(Traditional IRA). So when will your taxes be higher –during your working years or during retirement? Whencomparing, be sure to consider your income level duringeach phase (both income and withdrawals from assets),in addition to potential legislative changes.

The Flexibility of the Roth IRAA major advantage of the Roth IRA is the flexibility ofdistributions before and during retirement:

Early Distributions (pre-59 ½) — Traditional IRAsmay charge a 10% penalty, with some exceptionswhile there is no penalty on withdrawals ofcontributions from a Roth IRA

•

Values at RetirementWorking Years - 20% Tax

Retirement Years - 40% TaxWorking Years - 30% Tax

Retirement Years - 30% TaxWorking Years - 40% Tax

Retirement Years - 20% Tax

$45,107

$184,429$138,322

$69,161

$161,375 $163,375

$92,224

$138,322 $184,429

Roth IRATraditional IRA Roth IRATraditional IRA Roth IRATraditional IRA

Traditional IRA Options are Equal Roth IRA

High - Working Years TaxesLow - Retirement Years Taxes

Account Balances at Retirement

Taxes

Low - Working Years TaxesHigh - Retirement Years Taxes

These graphs assume $5,000 deposits at the beginning of 20 years in an IRA growing at 8% annually. Roth IRA contributions are reduced based on the Working Years tax rate.

Required Distributions (after 70 ½) — Traditional IRAs require minimumdistributions each year, while a Roth IRA has no required distributions for the RothIRA owner

•

The Case Against "Taxable Accounts" (Savings Accounts)Contributions to taxable accounts are made after-tax (just like a Roth IRA), but unlike aRoth IRA, interest and dividends generated are taxable each year, and capital gainstaxes are due when liquidating an investment held for more than a year. Thiscombination of taxes can significantly reduce your ability to accumulate retirementfunds over the long-term, and may affect or limit your investment options and thefrequency of changes to your investments over the long- term. The upside is that thereare no penalties or restrictions on withdrawals from taxable accounts before retirement,making them perfect for short-term savings.

Use taxable accounts for short-term savings.Use IRAs and Roth IRAs for long-term retirement funding.

Roth IRATaxable

These graphs compare account balances after 30 years of $5,000 annual contributions (after tax) growing at 8%. All growth in the taxable account is taxed each year at 35% while the Roth IRA grows tax free.

$92,224

$611,729$600,000

$500,000

$400,000

$300,000

$200,000

$100,000

$0

Retirement Savings OptionsIRA vs. Roth vs. Taxable Accounts


July 31, 20095 of 13

Initial Value of IRA: $800,000 Convert in year 2010 to Roth IRA

A traditional IRA may be converted to a Roth IRA, but income taxes must be paid on the moneys transferred to the Roth IRA.In exchange distributions from the Roth IRA may be made, although not required, as tax-free income.

Traditional IRANo Conversion Taxes

Roth IRAUsing Other Assets for Taxes1

Roth IRAUsing IRA for Taxes1

Traditional IRA Other Assets Roth IRA

60 856,000 510,500 1,366,50061 915,920 521,221 1,437,14165 1,200,584 566,402 1,766,98675 1,880,049 998,216 2,878,265

856,000 510,500 1,366,500915,920 521,221 1,437,141

1,200,584 296,360 1,496,9442,361,731 364,819 2,726,550

856,000 510,500 1,366,500641,144 706,373 1,347,517840,409 578,720 1,419,129

1,653,212 712,403 2,365,615

Total Funds at Age 842

$4,123,025Total Funds at Age 84

$4,781,800Total Funds at Age 84

$3,898,292

Age IRA2 Other Assets Total Roth IRA Other Assets Total Roth IRA Other Assets Total

Comparing IRA with Roth IRA ConversionShould I Convert to a Roth IRA? How Should I Pay the Taxes?

1Income tax rates are assumed to be 30%. Example assumes the net distributions after taxes are deposited into the Other Assets.

2IRA balance would be subject to income taxation upon distribution or at death.


July 31, 2009

$4,800,000

4,000,000

3,200,000

2,400,000

1,600,000

800,000

065 70 75 80

Age

65 70 75 80

Age

65 70 75 80

Age

6 of 13

Initial Value of IRA: $800,000

2009 60 56,000 0 856,000 30% 0 0 510,500 0 510,500 1,366,5002010 61 59,920 0 915,920 30% 0 0 521,221 0 521,221 1,437,1412011 62 64,114 0 980,034 30% 0 0 532,166 0 532,166 1,512,2012012 63 68,602 0 1,048,637 30% 0 0 543,342 0 543,342 1,591,9782013 64 73,405 0 1,122,041 30% 0 0 554,752 0 554,752 1,676,793

2014 65 78,543 0 1,200,584 30% 0 0 566,402 0 566,402 1,766,9862015 66 84,041 0 1,284,625 30% 0 0 578,296 0 578,296 1,862,9212016 67 89,924 0 1,374,549 30% 0 0 590,440 0 590,440 1,964,9892017 68 96,218 0 1,470,767 30% 0 0 602,839 0 602,839 2,073,6072018 69 102,954 0 1,573,721 30% 0 0 615,499 0 615,499 2,189,220

2019 70 27.4 110,160 57,435 1,626,446 30% 0 57,435 685,860 17,231 668,629 2,295,0762020 71 26.5 113,851 61,375 1,678,922 30% 17,231 44,145 744,076 18,413 725,664 2,404,5862021 72 25.6 117,525 65,583 1,730,864 30% 18,413 47,170 806,518 19,675 786,843 2,517,7072022 73 24.7 121,160 70,075 1,781,949 30% 19,675 50,401 873,477 21,023 852,454 2,634,4032023 74 23.8 124,736 74,872 1,831,814 30% 21,023 53,849 945,265 22,462 922,803 2,754,617

2024 75 22.9 128,227 79,992 1,880,049 30% 22,462 57,530 1,022,214 23,998 998,216 2,878,2652025 76 22.0 131,603 85,457 1,926,195 30% 23,998 61,459 1,104,678 25,637 1,079,041 3,005,2362026 77 21.2 134,834 90,858 1,970,171 30% 25,637 65,221 1,192,604 27,257 1,165,347 3,135,5182027 78 20.3 137,912 97,053 2,011,030 30% 27,257 69,795 1,286,920 29,116 1,257,804 3,268,8342028 79 19.5 140,772 103,130 2,048,672 30% 29,116 74,014 1,387,399 30,939 1,356,460 3,405,133

2029 80 18.7 143,407 109,555 2,082,525 30% 30,939 78,616 1,494,555 32,866 1,461,689 3,544,2142030 81 17.9 145,777 116,342 2,111,959 30% 32,866 83,476 1,608,785 34,903 1,573,882 3,685,8412031 82 17.1 147,837 123,506 2,136,290 30% 34,903 88,604 1,730,501 37,052 1,693,450 3,829,7402032 83 16.3 149,540 131,061 2,154,770 30% 37,052 94,009 1,860,138 39,318 1,820,820 3,975,5902033 84 15.5 150,834 139,017 2,166,586 30% 39,318 99,699 1,998,144 41,705 1,956,439 4,123,025

Year AgeLife

Exp.1Earnings &

Contributions2

ActualDistributions

3

TraditionalIRA

ValuesTaxRate

IncomeTaxes

Paid4

ReinvestedDistributions

5

Total ofAll Other

Assets6

LessTax

Liability4

NetAll Other

Assets7

Qualified &All Other

Assets

Lifetime Values—Traditional IRAKeeping Traditional IRA

1Life expectancy is based on the participant's life only. See the Assumptions page for additional information.

2Assumes qualified plan earns 7.00% interest. Also includes Employer Contributions and Salary Reductions, if any.

3Actual Distribution is the greater of the pretax distribution required to generate the Desired Distributions (see Assumptions page) or Required Minimum Distribution.

4Taxes and any applicable penalties are paid at the start of the calendar year following the tax liability.

5Actual Distributions less Taxes and Penalties.

6All Other Assets and Cumulative Reinvested Distributions are assumed to earn 3.00% interest and are taxed at a 30.00% income tax rate.

7Net of liability for income taxes and any penalties.


July 31, 20097 of 13

Initial Value of IRA: $800,000* Convert in year 2010 to Roth IRA

2009 60 56,000 0 856,000 30% 0 0 510,500 0 510,500 1,366,500Year Age

LifeExp.1

Earnings &Contributions

2Actual

Distributions3

TraditionalIRA

ValuesTaxRate

IncomeTaxes

Paid4


5

Total ofAll Other

Assets6

LessTax

Liability4

NetAll Other

Assets7


Assets

Converting to a Roth IRA in 2010

2010 61 915,920 0 915,920 30% 0 0 521,221 0 521,221 1,437,1412011 62 64,114 0 980,034 30% 0 0 532,166 128,400 403,766 1,383,8012012 63 68,602 0 1,048,637 30% 128,400 -128,400 412,472 128,400 284,072 1,332,7092013 64 73,405 0 1,122,041 30% 128,400 -128,400 290,264 0 290,264 1,412,3062014 65 78,543 0 1,200,584 30% 0 0 296,360 0 296,360 1,496,944

2015 66 84,041 0 1,284,625 30% 0 0 302,584 0 302,584 1,587,2092016 67 89,924 0 1,374,549 30% 0 0 308,938 0 308,938 1,683,4872017 68 96,218 0 1,470,767 30% 0 0 315,425 0 315,425 1,786,1932018 69 102,954 0 1,573,721 30% 0 0 322,049 0 322,049 1,895,7712019 70 110,160 0 1,683,882 30% 0 0 328,812 0 328,812 2,012,694

2020 71 117,872 0 1,801,753 30% 0 0 335,718 0 335,718 2,137,4712021 72 126,123 0 1,927,876 30% 0 0 342,768 0 342,768 2,270,6442022 73 134,951 0 2,062,827 30% 0 0 349,966 0 349,966 2,412,7932023 74 144,398 0 2,207,225 30% 0 0 357,315 0 357,315 2,564,5402024 75 154,506 0 2,361,731 30% 0 0 364,819 0 364,819 2,726,550

Year AgeLife

Exp.1Earnings &

Contributions2

ActualDistributions

3

RothIRA

ValuesTaxRate

IncomeTaxes

Paid4


5

Total ofAll Other

Assets6

LessTax

Liability4

NetAll Other

Assets7


Assets

Lifetime Values—Converting Traditional IRA to Roth IRAConverting Traditional IRA to Roth IRA Using Other Assets for Taxes

* Represents the amount of the Traditional IRA(s) to be converted to Roth IRA, as a total or partial Roth IRA conversion.1

Life expectancy is based on the participant's life only. See the Assumptions page for additional information.2

Assumes qualified plan/Roth IRA earns 7.00% interest. Also includes Employer Contributions and Salary Reductions, if any. After Roth Conversion, also includes amountconverted to Roth IRA.

3Actual Distribution is the greater of the pretax distribution required to generate the Desired Distributions (see Assumptions page) or Required Minimum Distribution. After RothConversion, Other Assets are used to the extent possible to pay income taxes on Traditional IRA amounts converted to Roth IRA.

4Taxes and any applicable penalties are paid at the start of the calendar year following the tax liability. After Roth Conversion, includes the estimated income taxes on theTraditional IRA amount converted to Roth IRA. Conversions in year 2010 only will be reported as taxable income equally in 2011 and 2012; therefore, income taxes due arepaid equally in 2012 and 2013.

5Actual Distributions less Taxes and Penalties. After Roth Conversion, Other Assets are used to the extent possible to pay the income taxes on Traditional IRA amountsconverted to Roth IRA.




July 31, 20098 of 13

2025 76 165,321 0 2,527,052 30% 0 0 372,480 0 372,480 2,899,5322026 77 176,894 0 2,703,946 30% 0 0 380,302 0 380,302 3,084,2482027 78 189,276 0 2,893,222 30% 0 0 388,288 0 388,288 3,281,5102028 79 202,526 0 3,095,748 30% 0 0 396,442 0 396,442 3,492,1902029 80 216,702 0 3,312,450 30% 0 0 404,768 0 404,768 3,717,217

2030 81 231,871 0 3,544,321 30% 0 0 413,268 0 413,268 3,957,5892031 82 248,102 0 3,792,424 30% 0 0 421,946 0 421,946 4,214,3702032 83 265,470 0 4,057,894 30% 0 0 430,807 0 430,807 4,488,7012033 84 284,053 0 4,341,946 30% 0 0 439,854 0 439,854 4,781,800

Year AgeLife

Exp.1Earnings &

Contributions2

ActualDistributions

3

RothIRA

ValuesTaxRate

IncomeTaxes

Paid4


5

Total ofAll Other

Assets6

LessTax

Liability4

NetAll Other

Assets7


Assets

Lifetime Values—Converting Traditional IRA to Roth IRAConverting Traditional IRA to Roth IRA Using Other Assets for Taxes


2Assumes qualified plan/Roth IRA earns 7.00% interest. Also includes Employer Contributions and Salary Reductions, if any. After Roth Conversion, also includes amountconverted to Roth IRA.

3Actual Distribution is the greater of the pretax distribution required to generate the Desired Distributions (see Assumptions page) or Required Minimum Distribution. After RothConversion, Other Assets are used to the extent possible to pay income taxes on Traditional IRA amounts converted to Roth IRA.


5Actual Distributions less Taxes and Penalties. After Roth Conversion, Other Assets are used to the extent possible to pay the income taxes on Traditional IRA amountsconverted to Roth IRA.




July 31, 20099 of 13

Initial Value of IRA: $800,000* Convert in year 2010 to Roth IRA

2009 60 56,000 0 856,000 30% 0 0 510,500 0 510,500 1,366,500Year Age

LifeExp.1

Earnings &Contributions

2Actual

Distributions3

TraditionalIRA

ValuesTaxRate

IncomeTaxes

Paid4


5

Total ofAll Other

Assets6

LessTax

Liability4

NetAll Other

Assets7


Assets

Converting to a Roth IRA in 2010

2010 61 641,144 256,800 641,144 30% 0 256,800 783,413 77,040 706,373 1,347,5172011 62 44,880 0 686,024 30% 77,040 -77,040 721,343 89,880 631,463 1,317,4872012 63 48,022 0 734,046 30% 89,880 -89,880 644,883 89,880 555,003 1,289,0492013 64 51,383 0 785,429 30% 89,880 -89,880 566,817 0 566,817 1,352,2462014 65 54,980 0 840,409 30% 0 0 578,720 0 578,720 1,419,129

2015 66 58,829 0 899,238 30% 0 0 590,873 0 590,873 1,490,1112016 67 62,947 0 962,184 30% 0 0 603,281 0 603,281 1,565,4652017 68 67,353 0 1,029,537 30% 0 0 615,950 0 615,950 1,645,4872018 69 72,068 0 1,101,605 30% 0 0 628,885 0 628,885 1,730,4902019 70 77,112 0 1,178,717 30% 0 0 642,092 0 642,092 1,820,809

2020 71 82,510 0 1,261,227 30% 0 0 655,576 0 655,576 1,916,8032021 72 88,286 0 1,349,513 30% 0 0 669,343 0 669,343 2,018,8562022 73 94,466 0 1,443,979 30% 0 0 683,399 0 683,399 2,127,3782023 74 101,079 0 1,545,058 30% 0 0 697,750 0 697,750 2,242,8082024 75 108,154 0 1,653,212 30% 0 0 712,403 0 712,403 2,365,615

Year AgeLife

Exp.1Earnings &

Contributions2

ActualDistributions

3

RothIRA

ValuesTaxRate

IncomeTaxes

Paid4


5

Total ofAll Other

Assets6

LessTax

Liability4

NetAll Other

Assets7


Assets

Lifetime Values—Converting Traditional IRA to Roth IRAConverting Traditional IRA to Roth IRA Using IRA for Taxes

* Represents the amount of the Traditional IRA(s) to be converted to Roth IRA, as a total or partial Roth IRA conversion.1

Life expectancy is based on the participant's life only. See the Assumptions page for additional information.2

Assumes qualified plan/Roth IRA earns 7.00% interest. Also includes Employer Contributions and Salary Reductions, if any. After Roth Conversion, also includes amountconverted to Roth IRA.

3Actual Distribution is the greater of the pretax distribution required to generate the Desired Distributions (see Assumptions page) or Required Minimum Distribution. After RothConversion also includes the estimated income taxes due on the amount of the Traditional IRA converted to Roth IRA.


5Actual Distributions less Taxes and Penalties. After Roth Conversion, includes the estimated income taxes due on the amount of the Traditional IRA converted to Roth IRA.




July 31, 200910 of 13

2025 76 115,725 0 1,768,937 30% 0 0 727,363 0 727,363 2,496,3002026 77 123,826 0 1,892,762 30% 0 0 742,638 0 742,638 2,635,4002027 78 132,493 0 2,025,255 30% 0 0 758,233 0 758,233 2,783,4892028 79 141,768 0 2,167,023 30% 0 0 774,156 0 774,156 2,941,1802029 80 151,692 0 2,318,715 30% 0 0 790,414 0 790,414 3,109,129

2030 81 162,310 0 2,481,025 30% 0 0 807,012 0 807,012 3,288,0372031 82 173,672 0 2,654,697 30% 0 0 823,960 0 823,960 3,478,6562032 83 185,829 0 2,840,525 30% 0 0 841,263 0 841,263 3,681,7882033 84 198,837 0 3,039,362 30% 0 0 858,929 0 858,929 3,898,292

Year AgeLife

Exp.1Earnings &

Contributions2

ActualDistributions

3

RothIRA

ValuesTaxRate

IncomeTaxes

Paid4


5

Total ofAll Other

Assets6

LessTax

Liability4

NetAll Other

Assets7


Assets

Lifetime Values—Converting Traditional IRA to Roth IRAConverting Traditional IRA to Roth IRA Using IRA for Taxes


2Assumes qualified plan/Roth IRA earns 7.00% interest. Also includes Employer Contributions and Salary Reductions, if any. After Roth Conversion, also includes amountconverted to Roth IRA.

3Actual Distribution is the greater of the pretax distribution required to generate the Desired Distributions (see Assumptions page) or Required Minimum Distribution. After RothConversion also includes the estimated income taxes due on the amount of the Traditional IRA converted to Roth IRA.


5Actual Distributions less Taxes and Penalties. After Roth Conversion, includes the estimated income taxes due on the amount of the Traditional IRA converted to Roth IRA.




July 31, 200911 of 13

General Assumptions

Bob's DOB: January 1, 1949 and Mary's DOB: May 11, 1950

Calculations assume that the value of All Other Assets (excluding life insurance) is equal to $500,000. These assets are assumed to earn 3.00% interest. Hypotheticalrates of return illustrated are not associated with any particular investment product.

Calculations assume an ordinary income tax rate of 30.00%.

Distribution of amounts equal to non-deductible contributions to your qualified plan are not taxable. These illustrations assume all distributions are taxable income.

The Account Balance and Other Assets are grown pro-rata based on the date entered.

Qualified Plan Assumptions

Current qualified plan amount is $800,000, with a growth rate of 7.00%. Hypothetical rates of return illustrated are not associated with any particular investmentproduct.

There are no Required Minimum Distributions from Qualified Plans for 2009 only.

Elections:

Required Minimum Distributions based on the Single Life Expectancy Table.

Conversion Occurs: Year 2010

Traditional IRA

Contributions may be tax deductible and earnings are tax-deferred, but taxable when withdrawn. Required minimum distributions must begin by age 70½.Deductibility of contributions is based on modified adjusted gross income (MAGI) (for 2009, single $65,000 and married, filing jointly $109,000) and not being aparticipant in an employer sponsored retirement plan.

Roth IRA

Contributions are not tax deductible but earnings are tax-deferred and are generally not taxable upon withdrawal. Contributions are limited to $5,000 for 2009($6,000 if over 50). The ability to contribute is phased out if your MAGI is $166,000 - $176,000 for married, filing jointly in 2009, and eliminated thereafter. (Thephase out is $105,000 - $120,000 for single taxpayers.) Withdrawals of contributions to Roth IRAs are not subject to income tax or the 10% early withdrawal penaltytax. Withdrawals of earnings within 5 years of establishing a Roth IRA are taxed as ordinary income. Earnings taken prior to age 59½ are taxed as ordinary income,and may be subject to a 10% early distribution penalty tax, with certain exceptions. There is no required minimum distributions at any age.

Conversion of Traditional IRA to Roth IRA

Prior to 2010, a Traditional IRA cannot be converted to a Roth IRA if MAGI exceeds $100,000. Amounts converted from the Traditional IRA are taxable in the yearof the conversion. However, amounts converted to Roth IRA in 2010 only will be reported equally in 2011 and 2012; therefore, income taxes are paid equally in 2012and 2013. Withdrawals of converted amounts within five years of each conversion to Roth IRA may be subject to the 10% early distribution penalty tax, andwithdrawals of earnings may be subject to the 10% early distribution penalty tax and/or taxed as ordinary income.

AssumptionsDetails and Assumptions for Calculations


July 31, 200912 of 13

Tax Relief Act of 2001 Compliant

This illustration shows the effect of this law on your estimated estate if you (and your spouse) die in the year shown. The Tax Relief Act of 2001 reduces themaximum rate and increases the applicable exclusion amount each year through 2009 with no estate tax in year 2010. A "sunset provision" voids the new law in 2011and retroactively restores the law effective in 2001.

Distribution Assumptions

Early retirement distributions are exempt from the IRC Section 72(t) penalty.

Distributions from the Traditional IRA are taxable.

Distribution method illustrated is the Safe Harbor Method of IRC Sec. 72(t) with life expectancy method using a reasonable rate of interest of 0.00%. Distributioncalculations do not use a joint beneficiary. Required minimum distributions are based on the Single Life Expectancy Table.

Final Regulations

Required Minimum Distributions are calculated based on the Single Life Expectancy Table. The Uniform Lifetime Table is permitted to be used for lifetimedistributions for calendar years beginning on or after January 1, 2002 and must be used for lifetime distributions for calendar years beginning on or after January 1,2003. If your beneficiary is your spouse (who is more than 10 years younger than you) distributions during your joint lives may be calculated using the Joint andLast Survivor Table.

Compliance with Revenue Ruling 2002-62

Section 72(t) distributions are in compliance with the calculation methods stated in Revenue Ruling 2002-62. The following calculation methods may be illustratedunder this ruling: 1) Extension of the existing Uniform Lifetime Table for use with the Life Expectancy Method. 2) Addition of annuity factor table for use with theAnnuity Method. 3) Addition of interest rate (not more than 120% of the federal mid-term rate) for use with the Amortization and Annuity Methods.

Assumptions (Continued)Details and Assumptions for Calculations


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Convert IRA To Roth During Lifetime