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
Age
59½
No penalty
for
distributions
Penalty for
distributions
Age
70½
Must begin
distributions
Withdrawals are subject to income tax, and those made before age 59½ may be subject to an additional 10% tax.
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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*
* 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.
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How does it work?
Bob retires at age 50
Sally retires at age 57
He must stick to the
distribution schedule for
9.5 years (until age 59½)
She must stick to the
distribution schedule for
5 years (until age 62)
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The road you take makes
a 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
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.
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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 a
tax standpoint
Age
59½
Penalty for
distributions
No penalty
for
distributions
Age
70½
Must begin
distributions
* Note that these distributions are required of traditional IRA owners. Roth IRA owners are not required to take distributions during their lifetime.
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The express route to your RMD
has four checkpoints
Just keep in mind
Date
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 failure
to withdraw
Equal to 50% of the minimum required
distribution not taken
* 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.
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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
59½
Penalty for
distributions
No penalty
for
distributions
Age
70½
Must begin
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 his
or her own (assuming certain requirements are met)
– Spouse can calculate RMDs, if required, based on
the 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
YE AR
0 0
Bob (age 65) rolls $200K into an
IRA and names wife,
Sally (age 60), as sole beneficiary
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How does the spousal
beneficiary work?
YE AR
0 5
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
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How does the spousal
beneficiary work?
Y E A R
1 0
• 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.
Year 11 distribution
$12,019
Year 0
Year 10
Year 20
Year 30
Year 40
Year 50
$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.
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How does the spousal
beneficiary work?
Year 49 distribution
$270,526
Year 40 distribution
$124,329
Bruce dies at age 74. Wendy continues the
established distribution schedule.
No rollover is available
Year 30 distribution
$54,566
Year 20 distribution
$24,506
Year 11 distribution
$12,019
Year 0
Year 10
Year 20
Year 30
Year 40
Year 50
$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.
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How does the spousal
beneficiary work?
Total of 39 annual distributions
$3,200,000 was distributed
from the account
Year 0
Year 10
Year 20
Year 30
Year 40
Year 50
$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.
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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 may
establish 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?
YE AR
0 0
Betty (age 60) rolls $200K into an IRA
She names her sons — Max, age 34,
and Sam, age 40 — as beneficiaries
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How does the non-spousal
beneficiary work?
YE AR
10 0
Betty begins RMDs using the IRS’s
simple calculation method
Year 10 distribution = $16,480
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How does the non-spousal
beneficiary work?
YE AR
10 2
Betty dies at age 72 after receiving
$53,443 in distributions over 3 years
IRA is split evenly between sons
Max and Sam
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How does the non-spousal
beneficiary work?
YE AR
10 2
Sam (now age 52) decides to liquidate
his portion of the account immediately
Sam’s lump-sum distribution = $243,158
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How does the non-spousal
beneficiary work?
$243,158
140,000
120,000
Y E A R
1 2
Sam receives $243,158.
In the year following Betty’s death,
year 13, Max (now age 47) begins
taking distributions based on his
single life expectancy
100,000
80,000
60,000
40,000
20,000
0
Year
1
Year
10
Year
12
Annual distributions:
Betty
Sam
Year
49
Max
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.
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How does the non-spousal
beneficiary work?
$243,158
140,000
120,000
Y E A R
4 9
Max’s IRA is depleted.
Total of $1,436,936 received
in distributions
100,000
80,000
60,000
40,000
20,000
0
Year
1
Year
10
Year
12
Annual distributions:
Betty
Sam
Year
49
Max
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.
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How does the non-spousal
beneficiary work?
Total distributions
Max has received
over $1 million
more than Sam
$1,436,936
$243,158
$53,443
Betty
Sam
Max
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. Earnings on Sam’s distribution are not reflected. Performance is not indicative of any Putnam fund.
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Three helpful facts on the road
to retirement
1. You can take a distribution before age 59½
without penalty
2. Calculating RMDs is straightforward
3. 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 if
available, containing this and other information
for 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
EO032 296706
9/15
| 29