Payroll Deduction Roth IRA

Transcription

1 Payroll Deduction Roth IRA Date: Oct. 30, 2006 Presented by: WENDELL KRISTOFAK, RETIREMENT PLANS SPECIALIST AC:

2 Agenda ICMA-RC Overview Payroll Deduction Roth IRA Investments Summary 2

3 Corporate Overview

4 ICMA-RC Corporate Overview Offers a one-stop solution to building retirement security Created by and for public sector employees Recognized market leader 7,420 plans 692,000 participants Over $24 billion assets under administration* * As of December 31,

5 Payroll Deduction Roth IRA

6 Benefits of Payroll Deduction Additional tax-advantaged investing opportunity Convenience of payroll deduction Encourages disciplined saving small periodic contributions Facilitates dollar cost averaging 1 No annual IRA Fee* 2 No minimums Simplified financial records Consolidated statements and account information online * The No-Fee Vantagepoint IRA has a low initial minimum investment of $1,500, which is waived if funded through the convenience of an automatic investment program. 1, 2 See disclosures at the end of this presentation. 6

7 Benefits of a Roth IRA Tax-free growth potential No age limit for contributing No required minimum withdrawals at age 70½ Preserves more of your account for beneficiaries Tax free withdrawals at retirement 7

8 Benefits of a Roth IRA Penalty Free Early Withdrawals* Qualified higher education expenses Qualified first-time home purchase Major medical expenses Payment of health insurance premiums by certain unemployed individuals The death of the IRA owner Disability * More information can be found on these exceptions in IRS Publication 8

9 IRA/Plan Comparisons IRA Type Key Tax Advantage Eligibility Roth Tax-free growth No age limit, but limited by income Traditional Contributions may be pre-tax Anyone with earned income under age 70½ Earnings Taxed at Withdrawal No, if held 5 years or more and withdrawn for certain events (e.g. 1 st time home purchase, 59½,) Yes 457 Contributions are pre-tax Depends on plan Yes 9

10 Roth vs. Traditional IRA Roth IRA Traditional IRA Key tax advantage Tax-free growth potential Contributions may be tax deductible Maximum annual contribution (2006) Eligibility $4,000 or earned income ($8,000 for some couples) No age requirement; any individual with Modified Adjusted Gross Income within the allowable guidelines: Elig. Married Single 3 Full <$150,000 <$95,000 Partial $150,001- $95,001 $160,000 $110,000 None >$160,000 >$110,000 $4,000 or earned income ($8,000 for some couples) Anyone with earned income from wages or salary under the age of 70½ (on December 31 of the year). Earnings grow tax-deferred Yes Yes Earnings taxed upon withdrawal No, if held five years, and you are 59½ or older, or if other rules are met Yes Contributions taxed upon withdrawal No Yes, if deductible Contributions deductible from income tax No Maybe Penalty-free withdrawals Yes, if you are 59½ or older, or other rules are met. Yes, if you are 59½ or older, or other rules are met. Subject to minimum withdrawal requirement after age 70½ No Yes Contributions allowed after age 70 1/2 Yes No 3 See disclosures at the end of this presentation. 10

11 Investments

12 Funds Available to Vantagepoint IRAs 4-5 Vantagepoint Funds Available Short-Term Bond Fund 6 U.S. Government Securities Fund Money Market Fund 7 Asset Allocation Fund Equity Income Fund Growth & Income Fund Growth Fund Aggressive Opportunities Fund 8 International Fund9, 10 Core Bond Index Fund Stock Index Fund Broad Market Index Fund Mid/Small Company Index Fund 8 Overseas Equity Index Fund9, 10 Milestone Retirement Income Fund Milestone 2010 Fund Milestone 2015 Fund Milestone 2020 Fund Milestone 2025 Fund Milestone 2030 Fund Milestone 2035 Fund Milestone 2040 Fund Model Portfolio All-Equity Growth Fund 11 Model Portfolio Long Term Growth Fund 11 Model Portfolio Traditional Growth Fund 11 Model Portfolio Conservative Growth Fund 11 Model Portfolio Savings Oriented Fund11, See disclosures at the end of this presentation. 12

13 Funds Available to Vantagepoint IRAs 4-5 Outside Funds Available Bond Funds 6 PIMCO Total Return Fund (Adm) PIMCO Real Return Fund (Adm) PIMCO High Yield Fund (Adm) US Stock Funds American Century Equity Income Fund (Inv) American Century Value Fund (Inv) Davis NY Venture Fund (A) Legg Mason Value Trust (FI) Janus Adviser Forty Fund (S) American Century Ultra Fund (Inv) Janus Adviser Large Cap Growth Fund (S) T. Rowe Price Growth Stock Fund Advisor T. Rowe Price Blue Chip Growth Fund (Adv) Legg Mason Growth Trust (FI) Fidelity Advisor Value (A) Third Avenue Value Fund 8 Legg Mason Special Investment (FI) 8 US Stock Funds (contd) Fidelity Advisor Leverage Company Stock Fund (A) 8 Janus Adviser Mid Cap Growth Fund (S) 8 American Century Heritage Fund (Inv) 8 American Century Vista Fund (Inv) 8 Royce Premier FI (Fin) 8 ABN AMRO/TAMRO Small Cap (N) 8 Heritage Small Cap Stock Fund A (A) 8 Specialty Funds 13 American Century Real Estate Fund (Inv) Fidelity Advisor Technology Fund (T) World Stock 9 Oppenheimer Global Fund (A) Fidelity Advisor Diversified International (A) American Century International Growth Fund (Inv) Oppenheimer Developing Markets Fund (A) 4-6, 8-9, 14 See disclosures at the end of this presentation. 13

14 Vantagepoint Milestone Funds 4 Series of target-date ( Life Cycle ) funds with target dates (e.g., 2010, 2015, 2020) Each fund designed for investors who expect to retire and/or begin withdrawals near that fund s target date Provides diversification among funds and asset classes which can help reduce risk 4 See disclosures at the end of this presentation. 14

15 Vantagepoint Milestone Funds 4 Representative Aging of Milestone 2040 Fund Fixed Income (%)/Equity Mix (%): 10/90 10/90 15/85 20/80 28/72 35/65 50/50 70/30 100% 0% Year Year Equity Fixed Income 4 See disclosures at the end of this presentation. 15

16 Establishing a Payroll Roth IRA

17 Payroll Roth IRA Employer Administration Letter Agreement Addendum This letter agreement will serve to amend the existing Agreement between the employer and ICMA-RC Vantagepoint Payroll Roth IRA Implementation Data Form Provides necessary information to establish your Payroll Roth IRA Program EZLink Access Electronic processing via the Internet, in order to implement a Payroll Deduction Roth IRA plan. Additional slot required 17

18 Payroll Roth IRA Employer Administration IRA Contribution limits ICMA-RC will monitor the IRA contribution limit including catch-up on a best effort basis If we determine a participant is over the limit, we will contact you to stop payroll deductions It will be up to you or the participant to restart them for the next tax year 18

19 Payroll Roth IRA Employee Account Set-Up Vantagepoint Payroll Deduction Roth Application Complete and return to ICMA-RC Vantagepoint Payroll Deduction Roth IRA Authorization Form Complete and return to employer It s That Easy! 19

20 Summary

21 Summary Convenience of payroll deduction Access to money Contributions may be withdrawn at any time without penalty or taxation No mandatory annual distribution requirements Simplified financial records No annual IRA fee* A corporation you can trust * The No-Fee Vantagepoint IRA has a low initial minimum investment of $1,500, which is waived if funded through the convenience of an automatic investment program. 21

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23 Disclosures 1. Dollar Cost Averaging Plans do not assure profit or protect against loss in a declining market. Since Plans involve continuous investment, regardless of fluctuating prices, investor must consider financial ability to continue to invest during low price levels. 2. No annual IRA maintenance fee. Mutual fund expenses still apply. Please see prospectus for details 3. Includes taxpayers that are married filing separate returns if the spouses did not live together at any time during the year. Otherwise, the AGI limit is zero and contributions are not allowed. 4. Please consult the current Vantagepoint Funds prospectus carefully for a complete summary of all fees, expenses, charges, financial highlights, investment objectives, risks and performance information. Investors should consider the Fund s investment objectives, risks, charges and expenses before investing or sending money. The prospectus contains this and other information about the investment company. Please read the prospectus carefully before investing. Vantagepoint securities are distributed by ICMA-RC Services LLC, a broker dealer affiliate of ICMA-RC, member NASD/SIPC. For a current prospectus, contact ICMA-RC Services LLC, 777 North Capitol Street NE, Washington, DC A redemption fee may be assessed when participants sell shares within proposed funds. Please refer to the fund prospectuses for guidance on redemption fee and market timing terms. 6. A rise/fall in the interest rates can have a significant impact on bond prices and the NAV (net asset value) of the fund. Funds that invest in bonds can lose their value as interest rates rise and an investor can lose principal. 7. Investments in the Vantagepoint Money Market Fund are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. Vantagepoint securities are distributed by ICMA-RC Services, LLC, a broker-dealer affiliate of ICMA-RC, member NASD/SIPC Small/Mid Cap: Funds that invest in small and/or mid-sized company stocks typically involve greater risks, particular in the short-term than those investing in large, more established companies. 9. International: Foreign investments are subject to more risks not associated with domestic investments (I.e. currency, economy and political risks.) 10. Investors who transfer assets out of these Funds must wait at least 91 days before transferring assets back into the same Funds. The policy affects transfers only. It does not affect regular contributions or disbursements. 23

24 Disclosures 11. The asset allocation of the Model Portfolios was rebalanced when the Income Preservation Fund was replaced by the Short-Term Bond Fund on November 9, Because of its high allocation to fixed income, the Fund may be appropriate for investors with a low risk tolerance and shorter investment horizon. However, because the Fund invests one quarter of its assets in stocks, the Fund may offer higher growth potential and inflation protection than an all-bond portfolio. 13. Sector Funds: Funds that concentrate investments in one industry may involve greater risks than more diversified funds, including greater potential for volatility. 24