RETIRING IN THE 21ST CENTURY

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1 RETIRING IN THE 21ST CENTURY A CRITICAL NEED FOR PLANNING AND SAVING Today s and tomorrow s retirees are unlike any who came before: They re living longer, can t rely on pensions and understand they ll fund more of the cost of their retirement than previous generations. While it can seem daunting to save while juggling current expenses, it doesn t have to be that way. With the help of this guide and your Advisor, you can get started on understanding the plans and strategies that may help you pursue the retirement you want.

2 GUIDANCE GUIDANCE FROM YOUR ADVISOR CAN HELP YOU MAKE THE RIGHT MOVES Starting to save early and committing to investing 15% or more of your annual income every year is one of the most important things you can do Understanding your current and expected future tax situation can help you take full advantage of your employer s retirement plan and supplement it with one or more of the solutions below The account and strategy that s right for you will depend on your individual needs and circumstances: For individuals Roth IRA DECISION TREE Offers the potential for compounded, tax-deferred growth Taxed upon withdrawal May be tax deductible for some investors Offers the potential for compounded growth Qualified withdrawals are tax free Qualified distributions of earnings if withdrawals made at least five years after the account was opened AND the account owner is age 59½ or older Qualified distributions of contributions are tax free except converted assets must be held five years if the owner is not 59½ A rollover IRA allows you to move money from an employer plan when leaving a job to preserve its tax-advantaged growth potential. If you are leaving an employer plan, such as a 401(k), consult with an Advisor and evaluate the benefits, trade-offs and costs of all your available options, which may include staying in your current plan, moving your account to a new employer plan or rolling it into an IRA. Whether you re establishing a new Traditional or Roth IRA, answering the questions in the decision tree below may help guide you in deciding which solution may be right for you. START HERE HOW MUCH CAN I CONTRIBUTE EACH YEAR TO AN IRA? $5,500 $6,500 AGE 50 AGE 50 Contribution limits for 2014 and 2015 tax years Do you qualify for a Roth IRA 1 and plan to invest at least five years? Do you qualify for Do you expect your Y a tax-deductible Y tax bracket to be? 2 the same or higher Y during retirement? N N N Consider a Consider a Roth IRA or a non-deductible Consider a Consider a Roth IRA income limits to contribute to Roth IRA: For single filers, up to $116,000 for full contribution and $131,000 for partial; for joint filers, up to $183,000 for full contribution and $193,000 for partial income limits to contribute to : For single filers, up to $61,000 for full deduction and $71,000 for partial; for joint filers, up to $98,000 for full deduction and $118,000 for partial. Assumes participation in an employer s retirement plan. No income limits apply when investors and spouses are not covered by a retirement plan at work.

3 For small business owners SEP IRA Funded with tax-deductible employer contributions; tax-deferred growth HOW MUCH CAN I CONTRIBUTE EACH YEAR TO A SMALL BUSINESS PLAN? SIMPLE IRA Solo K Funded primarily with pre-tax employee deferrals and tax-deductible employer contributions; tax-deferred growth A 401(k) for a small business owner and spouse; maximum taxdeductible contributions; tax-deferred growth SEP: up to $53,000 in 2015, depending on compensation SIMPLE: up to $15,500 in 2015, depending on age and compensation Solo K: up to $59,000 in 2015, depending on age and compensation MAKING A CHOICE If you re a small business owner, the way your company is organized, the number of workers you employ and how you want to handle contributions are factors that the chart below can help you sort out. SIMPLE IRA SEP IRA Solo K Consider if sole proprietor or only employ spouse Small business with non-spouse employees (100 or fewer employees for SIMPLE) Less complexity/paperwork No mandatory contributions Higher contribution limits than SIMPLE for higher-income individuals Higher contribution limits Employee contributions permitted Roth option for employee contributions Limited loans Typically more limited investment menu

4 THE POWER OF TAX-DEFERRED COMPOUNDING If you contributed $5,500 each year for 30 years in a, assuming 7% returns, your account would have grown to $555,902. Assuming you paid taxes on earnings at withdrawal, you would have $458,176 or $426,904 in after-tax dollars at the 25% and 33% tax rates, respectively. However, if you had contributed to a taxable account, you would only have ended up with $362,798. That s the power of taxadvantaged compounding. $555,902 KEY INSIGHT: Start investing early and contribute the full amount each year to maximize your IRA s tax-advantaged growth potential. $458,176 25% tax rate $426,904 33% tax rate $362,798 Account Value Account Value After Taxes Taxable Account TRADITIONAL IRA Source: J.P. Morgan Asset Management. Assumes $5,500 after-tax contributions at the beginning of each year and 7% annual investment return. IRA account balance is taken as lump sum and taxed at 25% and 33% federal tax rate, respectively, at time of withdrawal. Taxable account contributions are after-tax and assume 33% federal tax rate during accumulation. This hypothetical illustration is not indicative of any specific investment and does not reflect the impact of fees or expenses. The chart is shown for illustrative purposes only. Past performance is no guarantee of future results. OTHER STRATEGIES If applicable, you may also want to consider leveraging these strategies as part of your retirement plan: Stretch IRAs: a way to extend tax-deferred growth for three generations Net Unrealized Appreciation (NUA): a little known way to save taxes on highly appreciated employer stock in a retirement plan when leaving a job

5 Planning PLANNING FOR YOUR RETIREMENT IS THE FIRST STEP You ll probably live 20, 30, 40 or even more years in retirement, thanks to healthier lifestyles and medical advances. Do you know how you ll pay for that longevity bonus? Longer lifetimes also mean greater out-of-pocket health care costs. How will you fund them? Social Security and a pension if you re lucky enough to have one will cover some of your retirement expenses, but it s up to you to pay for the rest. Are you taking advantage of the saving and growth opportunities of your employer s or your own retirement plan? One of the most important financial decisions you ll make is picking a retirement date. Do you know how retiring at different ages will affect your long-term financial situation and Social Security benefits? Confidence CONFIDENCE COMES WITH TAKING CONTROL OF YOUR SAVINGS PLAN Take control of your retirement by maximizing your retirement savings in your employer s plan such as a 401(k), Roth 401(k), 403(b), Roth 403(b) or 457 plan or one of your own, like an IRA. Or, if you re a business owner, you might consider a SEP IRA, SIMPLE IRA or Solo K plan. Gain the confidence that you re on track to reach your goals Ensure that you have enough retirement income for the lifestyle you want

6 Start building your retirement plan today Planning and investing for retirement can be complicated. As you work with your Advisor to understand and prioritize your retirement goals, be sure to consider your day-to-day and long-term needs, including health care. Outlining a road map designed to help you reach your goals is an important first step. FOR MORE INFORMATION Consult your Advisor Visit jpmorganfunds.com Call us at NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. J.P. Morgan Asset Management is the marketing name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. JPMorgan Distribution Services, Inc., member FINRA/SIPC JPMorgan Chase & Co. All Rights Reserved BRO-IRA January 2015