IRA opportunities at UBS

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1 IRA opportunities at UBS IRAs are highly popular and effective retirement savings vehicles that give your investment earnings the benefit of tax-favored treatment and provide an ideal supplement to employer-sponsored retirement plans. The two main types of IRAs are: Traditional IRA Your savings in a traditional IRA benefit from tax-deferred growth until withdrawn. Contributions may or may not be tax-deductible depending on your income level and whether you (and your spouse, if married) are covered by an employer-sponsored retirement plan. Roth IRA Although contributions to a Roth IRA are made with after-tax dollars, the savings grow taxdeferred, and, if certain requirements are met, your investment earnings may be withdrawn tax-free. The following pages provide more details about traditional and Roth IRAs in a side-by-side comparison. Why open an IRA at UBS? Among the many advantages of keeping your IRA assets at UBS are: Professional experience and personal commitment. We offer the capabilities of a global financial services firm along with the personal guidance of a Financial Advisor who can help you create a retirement strategy aimed at helping you pursue your goals. Depending on your needs, we can help you implement your retirement strategy through both our brokerage and advisory capabilities. Investment flexibility. You can invest IRA assets in a wide range of investments. A listing of many of the available investment options appears on page 3. Efficient recordkeeping. The IRA statement you receive from us provides you with a breakdown of deductible and nondeductible contributions, IRA transfer and rollover information for the current and prior tax years, and comprehensive distribution information. Sweep of cash balances: Keep uninvested cash in your IRA working every day with an automatic sweep each business day to an FDIC-insured account. 1 Automatic account contributions. Our IRA allows you to make automatic contributions through payroll deductions or direct withdrawals from your checking or savings account. 2 Convenient account withdrawals. Once you are ready to start taking, you may start a systematic withdrawal program or elect to add checkwriting services to your IRA. Automated RMD Service. This service allows you to request an automatic withdrawal of your required minimum distribution (RMD) starting at age 70½ in the frequency and method you choose. Further, you may elect to have federal and/or state income tax withholding (where applicable) on the distribution. Start retirement planning now It s never too early or too late to start planning for retirement, and an IRA at UBS can play a vital role in helping you pursue your long-term financial goals. 1 If you are an eligible participant as defined in the UBS Deposit Account Sweep Program Disclosure Statement (available from your Financial Advisor), uninvested cash will automatically sweep to deposit accounts at our affiliate, UBS Bank USA, member FDIC. Federal Deposit Insurance Corporation (FDIC) deposit insurance protects bank deposits of FDIC-insured banks, including deposit accounts at UBS Bank USA, up to $250,000 (including principal and interest) for individual accounts, in accordance with FDIC rules. 2 Availability depends on whether your employer or the other financial institution with whom you do business will accommodate your request to make automatic contributions through payroll deductions or systematic withdrawals from your checking or savings account.

2 IRA rollovers If you retire or otherwise leave your employer, you have a decision to make about the assets in your employer s retirement plan. Your options may include leaving the assets in the plan or withdrawing them. If your withdraw them, you may be able to roll them over to an IRA. There are many issues to consider when making your decision. For example, there are investment considerations such as: Maximizing your investment options Managing your investment costs Accessing investment advice There are also non-investment related considerations such as: Managing non-investment costs such as administrative fees Simplying your accounts Planning for transferring your wealth to the next generation Protecting assets from creditors Accessing your assets What is an eligible rollover distribution? You may generally roll over any distribution from your employer-sponsored retirement plan account except for the following: A distribution that is part of a series of substantially equal periodic payments that are made at least once a year and are paid over: your lifetime (or your life expectancy) your lifetime and your beneficiary s lifetime (or life expectancies) a period of 10 years or more A required minimum distribution A hardship distribution Facts about IRA rollovers There is no dollar limit on the amount you may rollover. The amount of a direct rollover from your employer s plan to an IRA is not subject to the 20% withholding tax your employer would otherwise have to withhold on the taxable portion of your distribution. An indirect rollover in which the assets are first sent to you and you subsequently deposits the assets to the IRA within 60 days, is subject to the 20% withholding Amounts rolled over are subject to the same distribution rules as any other assets in a traditional IRA You can also make ongoing contributions to an IRA into which you have rolled over An important consideration about employer securities If your distribution includes employer stock, you may want to take an in kind distribution of the stock instead of rolling it over into an IRA. By doing so, you may be eligible to defer taxes on the portion of the stock that constitutes net unrealized appreciation (NUA) until the stock is sold, at which point the NUA will be taxed at the current long term capital gains tax rate. When deciding what to do with employer stock in your retirement plan, you should also consider your need to diversify a concentrated holding of just one stock to help protect yourself from potential volatility in the performance of that one company. Due to the complexity of NUA rules, you should also discuss this distribution strategy with your tax advisor if you are considering taking advantage of NUA treatment for your employer stock. Roth IRA rollovers You are also allowed to roll from an employer-sponsored retirement plan directly to a Roth IRA. Please note that Roth IRA conversions are taxable events, and you should consult with a tax advisor for details. If you have made qualified Roth contributions to your employer-sponsored retirement plan, you can also roll those contributions into a Roth IRA. 2

3 Your UBS Financial Advisor will work with you to review the extensive investment options available in a UBS IRA and which could help you meet your retirement planning needs. Investments available in a UBS IRA include Alternative Investments Annuities Closed End Mutual Funds Equities Exchange Traded Funds (ETFs) Investment Advisory Programs Mutual Funds Precious Metals Structured Products Taxable Fixed Income Unit Investment Trusts A broad range of strategies and structures that fall outside the boundaries of traditional asset classes. Examples include: Exchange Funds Hedge Funds Hedge Fund of Funds Managed Futures Real Estate Investment Trusts Over 100 variable, fixed rate, immediate and indexed annuity products from over 20 annuity providers. A publicly traded investment company offering exposure to a variety of portfolios and managers Common Stocks An exchange listed investment company containing a range of asset classes with various investment objectives. A broad range of advisory programs that offer you the level of decision-making and investment options you seek for your goals. Over 5,000 mutual funds from over 300 mutual fund families Gold, silver, platinum and palladium bullion Investments that can provide exposure to various markets with the potential for reduced risk, enhanced returns or enhanced yield. Examples include: Market-Linked CDs Principal Protection Notes Examples include: Adjustable Rate Securities Agencies CDs Commercial Paper Convertibles Corporate Bonds FDIC Insured Bank Deposit High Yield Securities Medium Term Notes Money Markets Mortgage Backed Securities Preferred Securities U.S. Treasury Securities A trust that holds a fixed portfolio of securities in various asset classes with a specific investment objective. 3

4 Traditional IRA Contribution eligibility Anyone under age 70½ with earned income is eligible to make a contribution. (See below for eligibility to make a tax-deductible contribution.) Contribution limits Contributions to a traditional IRA, Roth IRA or a combination of the two cannot exceed the following limits which are adjusted periodically for inflation: 2012: $5, : $5,500 Individuals age 50 and older (includes catch-up contributions): 2012: $6, : $6,500 Tax deductibility of contributions For individuals with earned income who are not covered by an employer-sponsored retirement plan, contributions are fully tax-deductible. For individuals covered by an employer-sponsored retirement plan, tax-deductibility of contributions is phased out for: Single taxpayers with modified adjusted gross income (MAGI) between $58,000 and $68,000 for 2012 and $59,000 and $69,000 for Married taxpayers filing jointly with MAGI between $92,000 and $112,000 for 2012 and $95,000 and $115,000 for Contribution deadlines Tax-filing deadline, not including extensions (generally April 15). Basic rules for Distributions can be taken at any time and are taxed as ordinary income based on the extent to which the individual has earnings and deductible contributions in their traditional IRA. (A 10% penalty may apply for individuals under age 59½.) Tax-advantaged Only the portion of the distribution that represents nondeductible contributions (cost basis) is tax-free. Once nondeductible contributions have been made, each distribution consists partly of nondeductible contributions (basis) and partly of deductible contributions, earnings or gains. Until tax basis is exhausted, each distribution is partly taxable and partly nontaxable. Penalty-free Required minimum Non-wage earning spousal IRA Special tax provisions Distributions taken prior to age 59½ are not subject to the 10% penalty if taken for the following reasons: disability death as 72(t) substantially equal periodic payments for purposes of paying medical expenses in excess of 7.5% of AGI for certain unemployed individuals to pay medical insurance premiums for first-time home purchases (lifetime limit of $10,000 per taxpayer) for qualified higher education expenses due to an IRS levy a qualified military reservist distribution Required minimum (RMDs) must be taken by individuals over age 70½. (A 50% excess accumulation penalty applies on the amount of an RMD that should have been withdrawn but was not.) Non-wage earning spouses who file a joint return can deduct their IRA contributions up to the applicable contribution limit (see above under Contribution limits ), even if the working spouse is covered by an employer-sponsored retirement plan. Tax-deductibility is subject to phase-out for MAGI between $173,000 and $183,000 for 2012 and $178,000 and $188,000 for An individual who works but does not participate in an employer-sponsored retirement plan may make deductible IRA contributions even if his or her spouse participates in an employer-sponsored retirement plan, subject to phase-out for MAGI between $173,000 and $183,000 for 2012 and $178,000 and $188,000 for

5 Roth IRA Anyone with earned income not exceeding the allowable limits may contribute to a Roth IRA. Eligibility to contribute is phased out for: Single taxpayers with MAGI between $110,000 and $125,000 for 2012, and $112,000 and $127,000 for 2013 Married taxpayers filing jointly with MAGI between $173,000 and $183,000 for 2012, and $178,000 and $188,000 for 2013 Married taxpayers filing separately with MAGI between $0 and $10,000 Individuals over age 70½ are eligible to contribute for as long as they have earned income. Participation in an employer-sponsored retirement plan does not affect Roth IRA eligibility. Contributions to a Roth IRA, traditional IRA or combination of the two cannot exceed the following limits which are adjusted periodically for inflation: 2012: $5, : $5,500 For individuals age 50 and older (includes catch-up contributions): 2012: $6, : $6,500 Contributions to a Roth IRA are not tax-deductible. However, qualified may be taken tax-advantaged and/or penalty-free if certain requirements are met. (See Tax-advantaged and Penalty-free below) Tax-filing deadline, not including extensions. (generally April 15) Distributions of your contribution can be taken tax and penalty free at any time and for any reason. Distributions of earnings are taxed as ordinary income unless they meet the requirements of a qualified distribution described below. (Penalties may apply for individuals under age 59½.) Distributions of taxable conversions taken within the first five years of conversion may be subject to a 10% penalty for individuals under age 59½. Distributions are taken first from contributions, followed by taxable conversions, nontaxable conversions and finally, earnings on any type of contribution or conversion. Distributions that represent earnings are considered qualified and are tax-free if the assets withdrawn have been held in a Roth IRA that has been established for at least five tax years, AND the account holder: is at least age 59½ makes a first-time home purchase (lifetime limit of $10,000 per taxpayer) is disabled or dies Distributions that represent contributions can always be withdrawn tax-free and penalty-free for any reason. Distributions of earnings taken prior to age 59½ are not subject to the 10% penalty if taken for the following reasons: disability death as 72(t) substantially equal periodic payments, for purposes of paying medical expenses in excess of 7.5% of AGI for certain unemployed individuals to pay medical insurance premiums for first-time home purchases (lifetime limit of $10,000 per taxpayer) for qualified higher education expenses due to an IRS levy a qualified military reservist distribution There are no required minimum for individuals over age 70½. Non-wage earning spouses who file a joint return can make a Roth IRA contribution up to the applicable contribution limit (see above under Contribution limits ) subject to the MAGI limits listed above. Roth IRA conversion: In 2010, the $100,000 MAGI ceiling was eliminated for conversions from a traditional IRA (and some employer retirement plans) to a Roth IRA. The amount converted is subject to income tax to the extent the assets converted to a Roth IRA are includable in income. 5

6 Important information about Advisory & Brokerage Services: As a firm providing wealth management services to clients, UBS is registered with the U.S. Securities and Exchange Commission (SEC) as an investment adviser and a broker-dealer, offering both investment advisory and brokerage services. Advisory services and brokerage services are separate and distinct, differ in material ways and are governed by different laws and separate contracts. It is important that you carefully read the agreements and disclosures UBS provides to you about the products or services offered. For more information, please visit our website at ubs.com/workingwithus. Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter. Neither UBS Financial Services Inc., nor any of its employees provide tax or legal advice. You must consult with your tax and legal advisors regarding your personal circumstances. UBS Financial Services Inc. ubs.com/fs Q012 UBS The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved. UBS Financial Services Inc. is a subsidiary of UBS AG. Member SIPC.