Error!

X

There was a problem contacting the server. Please try after sometime.

Sorry, we are unable to process your request.

Error!

X

We're sorry, but the Insights and Intelligence Tool is temporarily unavailable

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Error!

X

We're sorry, but the Literature Center checkout function is temporarily unavailable.

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Financial Professionals

Forgot password

Forgot Your LordAbbett.com password?

If you are a registered user, but have forgotten your LordAbbett.com password, please enter your email address.
Once your email address is verified, we will send you an email with instructions on how to reset your password.

EMAIL ADDRESS
e.g. joe@firm.com

Financial Professionals

Forgot Password

Thank you.

An email has been sent to with instructions on resetting your password.

Financial Professionals

Reset Password

NEW PASSWORD
Your password must be a minimum of characters.
CONFIRM NEW PASSWORD

Financial Professionals

Reset Password

Confirmation Message

Your LordAbbett.com password was successully updated. This page will be refreshed after 3 seconds.

OK

Financial Professional*

  • Gain access to exclusive LinkedIn Groups
  • Simplify your login
LOGIN WITH LinkedIn
LOGIN WITH LinkedIn

A verification Email Has Been Sent

Close

An email verification email has been sent to .
Follow the instructions to complete the email validation process.

I have not received my verification email

Check your SPAM mailbox and make sure that twelcome@lordabbett.com is allowed to send you mail.

I'm still having trouble

If you're still having trouble verifying your email address. feel free to contact us.

1-888-522-2388
clientservices@lordabbett.com


OK

We're sorry. We found no record of the email address you provided.

Close

Register For a LordAbbett.com Account
Using Your Email Address.

  • Registered Financial Advisors gain access to:
  • Our data mining tool, Insight & Intelligence
  • Best in-class practice management content
  • Educational events, videos and podcasts.
  • The Lord Abbett Review - Subscribe now!

Registered but Having Problems?

If you believe you are registered and are having problems verifying your email address, feel free to contact us.

1-888-522-2388 clientservices@lordabbett.com

Terms & Condition

X

These Terms of Use ("Terms of Use") are made between the undersigned user ("you") and Lord, Abbett & Co. ("we" or "us"). They become effective on the date that you electronically execute these Terms of Use ("Effective Date").

A. You are a successful financial consultant that markets securities, including the Lord Abbett Family of Funds;

B. We have developed the Lord Abbett Intelligence System (the "Intelligence System"), a state of the art information resource that we make available to a limited community of broker/dealers through the Internet at a secure Web site (the "LAIS Site"); and

C. We wish to provide access to the Intelligence System to you as an information tool responsive to the demands of your successful business pursuant to these Terms of Use. Accordingly, you and we, intending to be legally bound, hereby agree as follows:]

1. Overview. · Scope. These Terms of Use (which we may amend from time to time) govern your use of the Intelligence System. · Revisions; Changes. We may amend these Terms of Use at any time by posting amended Terms of Use ("Amended Terms of Use") on the LAIS Site. Any Amended Terms of Use will become effective immediately upon posting. Your use of the Intelligence System after any Amended Terms of Use become effective will be deemed to constitute your acceptance of those Amended Terms of Use.We may modify or discontinue the Intelligence System at any time, temporarily or permanently, with or without notice to you. Purpose of the Intelligence System. The Intelligence System is intended to be an information resource that you may use to contribute to your business research. The Intelligence System is for broker/dealer use only; it is not to be used with the public in oral, written or electronic form. The information on the Intelligence System and LAIS Site is for your information only and is neither the tax, legal or investment advice of Lord Abbett or its third-party sources nor their recommendation to purchase or sell any security.

2. Your Privileges. · Personal Use. Your use of the Intelligence System is a nontransferable privilege granted by us to you and that we may deny, suspend or revoke at any time, with or without cause or notice. · Access to and Use of the Intelligence System. The User ID and password (together, an "Access ID") issued by us to you (as subsequently changed by you from time to time) is for your exclusive access to and use of the Intelligence System. You will: (a) be responsible for the security and use of your Access ID, (b) not disclose your Access ID to anyone and (c) not permit anyone to use your Access ID. Any access or use of the Intelligence System through the use of your Access ID will be deemed to be your actions, for which you will be responsible. · Required Technology. You must provide, at your own cost and expense, the equipment and services necessary to access and use the Intelligence System. At any time, we may change the supporting technology and services necessary to use the Intelligence System. · Availability. We make no guarantee that you will be able to access the Intelligence System at any given time or that your access will be uninterrupted, error-free or free from unauthorized security breaches.

3. Rights in Data. Our use of information collected from you will be in accordance with our Privacy Policy posted on the LAIS Site. Our compliance with our Privacy Policy will survive any termination of these Terms of Use or of your use of the Intelligence System.

4. Your Conduct in the Use of the Intelligence System. You may access, search, view and store a personal copy of the information contained on the LAIS Site for your use as a broker/dealer. Any other use by you of the Intelligence System and the information contained on the LAIS Site these Terms of Use is strictly prohibited. Without limiting the preceding sentence, you will not: · Engage in or permit any reproduction, copying, translation, modification, adaptation, creation of derivative works from, distribution, transmission, transfer, republication, compilation or decompilation, reverse engineering, display, removal or deletion of the Intelligence System, any portion thereof, or any data, content or information provided by us or any of our third-party sources in any form, media or technology now existing or hereafter developed, that is not specifically authorized under these Terms of Use.

· Remove, obscure or alter any notice, disclaimer or other disclosure affixed to or contained within the Intelligence System, including any copyright notice, trademark and other proprietary rights notices and any legal notices regarding the data, content or information provided through the Intelligence System.

· Create a hyperlink to, frame or use framing techniques to enclose any information found anywhere on the LAIS Site without our express prior written consent.

· Impersonate any person, or falsely state or otherwise misrepresent his or her affiliation with any person in connection with any use of the Intelligence System.

· Breach or attempt to breach the security of the Intelligence System or any network, servers, data, or computers or other hardware relating to or used in connection with the Intelligence System; nor (b) use or distribute through the Intelligence System software or other tools or devices designed to interfere with or compromise the privacy, security or use of the Intelligence System by others or the operations or assets of any person.

· Violate any applicable law, including, without limitation, any state federal securities laws. 5. Your Representations and Warranties. You hereby represent and warrant to us, for our benefit, as of the time of these Terms of Use and for so long as you continue to use the Intelligence System, that (a) you are, and will continue to be, in compliance with these Terms of Use and any applicable laws and (b) you are authorized to provide to us the information we collect, as described in our Privacy Policy.

6. Disclaimer of Warranties.

· General Disclaimers.

THE INTELLIGENCE SYSTEM, THE LAIS SITE AND ALL DATA, INFORMATION AND CONTENT ON THE LAIS SITE ARE PROVIDED "AS IS" AND “AS AVAILABLE” AND WITHOUT ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND. WITHOUT LIMITING THE PRECEDING SENTENCE, LORD ABBETT, ITS AFFILIATES, AGENTS, THIRD-PARTY SUPPLIERS AND LICENSORS, AND THEIR RESPECTIVE EMPLOYEES, CONTRACTORS, DIRECTORS, OFFICERS AND SHAREHOLDERS (COLLECTIVELY, THE “LORD ABBETT GROUP”) EXPRESSLY DISCLAIM ALL WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, AND NONINFRINGEMENT. YOU EXPRESSLY AGREE THAT YOUR USE OF THE LAIS SITE, THE INTELLIGENCE SYSTEM, AND THE DATA, INFORMATION AND CONTENT PRESENTED THERE ARE AT YOUR SOLE RISK AND THAT THE LORD ABBETT GROUP WILL NOT BE RESPONSIBLE FOR ANY (A) ERRORS OR INACCURACIES IN THE DATA, CONTENT AND INFORMATION ON THE LAIS SITE AND THE INTELLIGENCE SYSTEM OR (B) ANY TERMINATION, SUSPENSION, INTERRUPTION OF SERVICES, OR DELAYS IN THE OPERATION OF THE LAIS SITE OR THE INTELLIGENCE SYSTEM.

· Disclaimer Regarding Investment Research.

THE INTELLIGENCE SYSTEM INCORPORATES DATA, CONTENT AND INFORMATION FROM VARIOUS SOURCES THAT WE BELIEVE TO BE ACCURATE AND RELIABLE. HOWEVER, THE LORD ABBETT GROUP MAKES NO CLAIMS, REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY, TIMELINESS, COMPLETENESS OR TRUTHFULNESS OF SUCH DATA, CONTENT AND INFORMATION. YOU EXPRESSLY AGREE THAT YOU ARE RESPONSIBLE FOR INDEPENDENTLY VERIFYING YOUR INVESTMENT RESEARCH PRIOR TO FORMING YOUR INVESTMENT DECISIONS OR RENDERING INVESTMENT ADVICE. THE LORD ABBETT GROUP WILL NOT BE LIABLE FOR ANY INVESTMENT DECISION MADE BY YOU OR ANY OTHER PERSON BASED UPON THE DATA, CONTENT AND INFORMATION PROVIDED THROUGH THE INTELLIGENCE SYSTEM OR ON THE LAIS SITE.

· Survival.

THIS SECTION 6 SHALL SURVIVE ANY TERMINATION OF THESE TERMS OF USE OR YOUR USE OF THE INTELLIGENCE SYSTEM..

7. Limitations on Liability.

NONE OF THE MEMBERS OF THE LORD ABBETT GROUP WILL BE LIABLE TO YOU OR ANY OTHER PERSON FOR ANY DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, SPECIAL OR EXEMPLARY DAMAGES (INCLUDING LOSS OF PROFITS, LOSS OF USE, TRANSACTION LOSSES, OPPORTUNITY COSTS, LOSS OF DATA, OR INTERRUPTION OF BUSINESS) RESULTING FROM, ARISING OUT OF OR IN ANY WAY RELATING TO THE INTELLIGENCE SYSTEM, THE LAIS SITE OR YOUR USE THEREOF, EVEN IF THE LORD ABBETT GROUP HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS SECTION 7 WILL SURVIVE ANY TERMINATION OF THESE TERMS OF USE OR YOUR USE OF THE INTELLIGENCE SYSTEM.

8. Miscellaneous Provisions.

· Governing Law. This Agreement will governed by and construed in accordance with the laws of the State of New York, without giving effect to applicable conflicts of law principles.

THE UNIFORM COMPUTER INFORMATION TRANSACTIONS ACT OR ANY VERSION THEREOF, ADOPTED BY ANY STATE, IN ANY FORM ("UCITA") WILL NOT APPLY TO THESE TERMS OF USE. TO THE EXTENT THAT UCITA IS APPLICABLE, THE PARTIES HEREBY AGREE TO OPT OUT OF THE APPLICABILITY OF UCITA PURSUANT TO THE OPT-OUT PROVISION(S) CONTAINED THEREIN.

The Intelligence System is not intended to be used by consumers, nor are the consumer protection laws of any jurisdiction intended to apply to the Intelligence System. You agree to initiate and maintain any action, suit or proceeding relating to these Terms of Use or arising out of the use of the Intelligence System exclusively in the courts, state and federal, located in or having jurisdiction over New York County, New York.

YOU HEREBY CONSENT TO THE PERSONAL JURISDICTION AND VENUE OF THE COURTS, STATE AND FEDERAL, LOCATED IN OR HAVING JURISDICTION OVER NEW YORK COUNTY, NEW YORK. YOU AGREE THAT YOU WILL NOT OBJECT TO A PROCEEDING BROUGHT IN YOUR LOCAL JURISDICTION TO ENFORCE AN ORDER OR JUDGMENT OBTAINED IN NEW YORK.

· Relationship of Parties. The parties to these Terms of Use are independent contractors and nothing in these Terms of Use will be construed as creating an employment relationship, joint venture, partnership, agency or fiduciary relationship between the parties.

· Notice. All notices provided under these Terms of Use will be in writing and will be deemed effective: (a) when delivered personally, (b) when received by electronic delivery, (c) one business day after deposit with a commercial overnight carrier specifying next day delivery, with written verification of receipt, or (d) three business days after having been sent by registered or certified mail, return receipt requested. We will only accept notices from you in English and by conventional mail addressed to: General Counsel Lord, Abbett & Co. 90 Hudson Street Jersey City, N.J. 07302-3973 We may give you notice by conventional mail or electronic mail addressed to the last mail or electronic mail address transmitted by you to us.

· Third-Party Beneficiaries. The members of the Lord Abbett Group are third-party beneficiaries of the rights and benefits provided to us under these Terms of Use. You understand and agree that any right or benefit available to us or any member of the Lord Abbett Group hereunder will also be deemed to accrue to the benefit of, and may be exercised directly by, any member of the Lord Abbett Group to the extent applicable.

· Survival. This Section 8 will survive any termination of these Terms of Use or your use of the Intelligence System. The undersigned hereby signs these Terms of Use. By electronically signing and clicking "Accept" below, these Terms of Use will be legally binding on me. To sign these Terms of Use, confirm your full name and enter your User ID and Password (as your electronic signature) in the fields indicated below and click the “I Accept” button.

 

Retirement Products

SIMPLE IRA

A SIMPLE IRA enables small businesses to have an easy and cost effective retirement savings program while obtaining a federal tax deduction on all contributions.

This material is intended as general information only and is not intended as legal or tax advice. Some of this information may be quite complex and we strongly suggest you consult with your advisor or tax professional based on your individual situation.

What is a SIMPLE IRA?

A Savings Incentive Match Plan for Employees is commonly referred to as a SIMPLE IRA plan. It is an IRA-based plan that gives small-business employers a simplified program to make contributions toward their employees’ retirement as well as their own. Under a SIMPLE IRA plan, employees may choose to make salary reduction contributions and the employer makes matching or non-elective contributions.1 All contributions are made directly to an individual retirement account (IRA) set up for each employee (i.e., a SIMPLE IRA). SIMPLE-IRA plans are maintained on a calendar-year basis. 

How does it work?

An employer establishes a SIMPLE IRA by completing an adoption agreement or a form (5304-SIMPLE) available in the related content section. The employees are notified in writing as to whether the employer will make a matching contribution between 1–3% of pay or will make a 2% of contribution for everyone. The employees then choose how much they wish to save ($12,000 maximum, $14,500 if age 50 or older) through salary deferral. The employer receives a tax deduction for contributions made to the plan.

TIP: The employer may not sponsor any other qualified plan for a calendar year in which a SIMPLE IRA is maintained.

 Who should consider a SIMPLE IRA?

  • A small−business owner who wants to reduce current taxes while saving for retirment.
  • Business owners looking for an easy and affordable retirement plan to help their employees save for retirement.
  • Business owners who want to do something for their employees but do not want the administrative responsibilities of a qualified plan (e.g., annual filings and fiduciary duties).
1 A SIMPLE IRA non-elective contribution is an employer contribution to all eligible employees equal to 2% of pay up on the first $255,000 of earnings whether or not the employee makes any payroll investments.

This material is intended as general information only and is not intended as legal or tax advice. Some of this information may be quite complex and we strongly suggest you consult with your advisor or tax professional based on your individual situation.

Who is eligible to establish a SIMPLE-IRA?

A SIMPLE-IRA may be established by any business with 100 or fewer employees, each who received at least $5,000 in compensation from the employer during the preceding calendar year.

A SIMPLE-IRA may be set up by the following:

  • Self-employed individuals (incorporated sole proprietors or corporations)
  • Partnerships
  • LLCs
  • Nonprofit organizations

Who is an eligible employee?

An employee cannot be excluded from participating if that employee meets the following requirements:

  • Received at least $5,000 in compensation from the employer during any two prior years and is reasonably expected to receive at least $5,000 in compensation during the current year and
  • Is any age, unlike other plans, such as SEP-IRA (see "SEP-IRA") or a 401(k), which can require employees attain age 21 before participating.

A SIMPLE IRA may also optionally cover the following employees:

  • Employees who are nonresident aliens with U.S. income (from the employer) and
  • Employees covered by a collective bargaining agreement.

This material is intended as general information only and is not intended as legal or tax advice. Some of this information may be quite complex and we strongly suggest you consult with your advisor or tax professional based on your individual situation.

How much can be contributed to a SIMPLE-IRA?

Employee contributions: An employee may contribute, via payroll savings, a portion of compensation on a pretax basis, up to the deferral limit in effect for that calendar year ($12,000 in 2014). In addition, catch-up contributions in the amount of $2,500 (2014) are available for employees age 50 or older.

Employer contributions: The employer must also make a contribution to the SIMPLE-IRA annually. The employer can elect to make either a $1.00 for $1.00 matching contribution equal to 3% of pay or a non-elective contribution of 2% of compensation for all eligible employees.

TIP: The employer can elect to reduce the matching contribution to as little as 1% of compensation in two out of any five years.

TIP: No contributions other than the employee pretax contributions, employer matching, or non-elective may be made to the SIMPLE-IRA.

When can contributions be made to a SIMPLE-IRA?

Employee contributions must be made to the employee's SIMPLE IRA account within 30 days after the end of the month in which the amounts would otherwise have been payable to the employee.

Employer matching contributions and non-elective contributions must be made no later than the employer’s tax filing plus extensions.

Who must receive SIMPLE-IRA contributions?

Employer match: All eligible employees ( see “Eligibility Rules”) must receive a contribution as long as an employee made a salary deferral contribution.  Employees are eligible for the match even if separated from service at the time the matching contribution is made. 

TIP: The $260,000 compensation cap does not apply if a sponsor is providing a match. Also, annual compensation is used, regardless of when participation started.

Employer non-elective: All eligible employees (see “Eligibility Rules”) receive 2% of their compensation even if they separated from service at the time the contribution is made.

Employee notice: The employer must notify each employee (annually) immediately before the 60-day period preceding the start of a plan year or the employee’s opportunity to make a salary deferral election to participate in the plan.

Can an individual contribute to both a SIMPLE and a Traditional or Roth IRA?

SIMPLE-IRA contributions (employee and employer) made to an employee’s SIMPLE IRA by an employer are independent of the traditional and Roth IRA limits.  Therefore, assuming that an individual qualifies for a Roth IRA (see ""Roth IRA Eligibility""), the individual has one combined IRA contribution limit (in addition to the amount allocated to their SIMPLE IRA) of $5,500 if under age 50, and $6,500 if over age 50 between a Roth IRA and a traditional IRA. Contributions may or may not be tax deductible when made to a traditional IRA.  (See “Traditional IRA Eligibility Rules.”)

What happens to the employees and business owner if excess contributions are made?

Employees that contribute more than the maximum to their SIMPLE account have an excess contribution and may be subject to the 6% excise tax.  The excess contribution, if considered insignificant, can be withdrawn as part of a self-correction procedure established by the Employees Plans Compliance Resolution Program established by the IRS.  The participant would receive a 1099-R from the SIMPLE IRA custodian regarding taxation.  Sponsors should consult with their tax advisors if this situation occurs. Employer excess contributions may be returned to the employer.

Are SIMPLE-IRA contributions deductible to the employee and employer?

Pretax salary deferrals made to a SIMPLE plan are deductible to the employee.  Employer matching and non-elective contributions are deductible to the employer.  Non-calendar year employers should consult with their tax advisors as to which fiscal year an employer’s deduction of SIMPLE IRA contributions should be allocated.

This material is intended as general information only and is not intended as legal or tax advice. Some of this information may be quite complex and we strongly suggest you consult with your advisor or tax professional based on your individual situation.

What types of distributions can be taken from a SIMPLE IRA?

  • Normal

  • Premature without an exception

  • Premature with an exception

  • Required

  • Distributions due to the death of an account owner

  • 60-day withdrawal and subsequent rollover

What is a normal distribution from a SIMPLE-IRA?

A normal distribution from a SIMPLE-IRA occurs after the actual date, not simply the calendar year, the account owner attains age 59½. For example, William was born or February 15, 1954. He will be 59½ on August 15, 2013. A distribution before that date would be called premature (see below). All distributions are taxable, but there is no 10% (25% in the first two years of participation) penalty tax.

What is a premature SIMPLE-IRA distribution without an exception?

A premature SIMPLE-IRA distribution, without an exception, occurs when the account owner removes funds before age 59½ and none of the statutory exceptions apply (see next Q&A), so that a 10% (25% in the first two years of participation) penalty is assessed against any taxable amounts withdrawn in addition to any taxes due.

What is a premature SIMPLE-IRA distribution with an exception?

A premature SIMPLE- IRA distribution with an exception occurs under any of the following circumstances:

  1. Substantially equal periodic payments are taken based on the life expectancy of the recipient. (Many advisors call this option 72(t) distribution because of the section of the Internal Revenue Code where the penalty and exception reside.) Payments must be made for the greater of five years or the attainment of age 59½ or the 10% penalty reattaches (retroactively) to all distributions made before age 59½.

  2. The recipient is disabled.

  3. The recipient is the beneficiary of a deceased IRA owner.

  4. Distributions are used to pay for qualified higher education expenses (e.g., tuition, fees, books, supplies) for him/herself or a family member, such as a son or daughter.

  5. The individual is paying health insurance premiums, and he/she has received unemployment compensation for more than 12 weeks.

  6. The individual has significant, unreimbursed medical expenses (greater than 10% of adjusted gross income [AGI] 1 for that year). Individuals 65 and over can use the lower 7.5% threshold through 2016. 

  7. The distribution is used to buy, build, or rebuild a first home. (There is a lifetime limit of $10,000 for distributions for first-time homebuyers, so if the account owner wanted to assist his/her two children equally to buy a home, each child could receive $5,000. If the account owner's spouse also had an IRA, he/she could also do the same for each child in this example.)

  8. The distribution is due to an IRS levy to pay overdue taxes.

1 Adjusted gross income includes wages, interest, capital gains, income from retirement accounts, and alimony paid to the taxpayer adjusted downward by specific deductions (including contributions to deductible retirement accounts and alimony paid by the taxpayer); but not including standard and itemized deductions.

What is a required minimum distribution from a SIMPLE-IRA?

Individuals must begin receiving required minimum distributions (RMDs) by April 1 of the calendar year following the calendar year the individual attains age 70½ and continue to receive the RMD before each subsequent December 31. Two distributions will be required in the first year if the individual waits until the calendar year following 70½ to commence RMDs. To avoid taking two RMDs in the same year, the individual would take the first RMD by December 31 of the year he/she turns 70½.

RMDs that represent deductible (pretax) contributions and all earnings are taxed as ordinary income. The portion of RMDs based on non-deductible contributions is tax-free. All distributions must include both taxable and nontaxable funds (if any) based on a pro-rata formula provided by the IRS. Shareholders who are affected by this issue use IRS Form 8606 to report the split. Earnings are always taxable.

If the full RMD is not taken in a given year, a 50% excise tax is assessed on the amount not taken.  For example, if a participant were required to take $10,000, but only took $6,000, a 50% excise tax could be assessed against the $4,000 shortfall in addition to income taxes due.

What are the death benefits from a SIMPLE-IRA?

When an IRA account owner dies, generally an inherited IRA (also called a "decedent IRA" or "beneficial IRA") is created. However, the treatment of the inherited IRA account varies depending on who is the beneficiary. IRAs that are inherited from a spouse may be treated differently than IRAs that are inherited from someone other than a spouse.

Inherited from spouse:

  1. Treat IRA as his/her own by designating oneself as the account owner.

  2. Treat IRA as his/her own by transferring it to one's own Traditional IRA.

  3. Transfer IRA, minus the cost basis in the account, to a qualified plan in which the spouse beneficiary participates. (Cost basis is the total amount of aftertax dollars contributed by the IRA owner.)

  4. Withdraw funds as needed without penalty, but taxed as ordinary income. No RMDs are triggered until the deceased spouse would have attained age 70½. This option is advantageous when the inheriting spouse is under age 59½ and may be in need of income as the 10% excise tax penalty reattaches to the account if the spouse is under age 59½ and utilizes options 1–3 above.

Inherited from a non-spouse:

If the IRA is inherited from someone other than a spouse, the options are more limited. The beneficiary may leave the account where it is or make a trustee-to-trustee transfer (to change investment vehicle from one IRA trustee directly to another) as long as the IRA (called a "decedent IRA" or "inherited IRA") is established in the name of the deceased owner for the benefit of the beneficiary. For example, the account might be titled as follows: "Joe Doe, deceased, F/B/O Jane Doe, beneficiary."

The non-spouse beneficiary has the option to:

  1. Take a one-time distribution; or

  2. Take payments equaling the full distribution by the end of the fifth calendar year that includes the anniversary of death; or

  3. S-T-R-E-T-C-H the payments over the beneficiary's life expectancy, which is determined by tables, found in IRS regulations. After the original beneficiary dies, the IRA can be passed on to successor beneficiaries, but the original beneficiary's life expectancy continues to be utilized to calculate the minimum payout. (See "Stretch IRA" below.)

What is a Stretch IRA?

A Stretch IRA is for investors who will not need their IRA money during their own retirement. While the law does not restrict which tax payers can select the Stretch IRA option, the stretch strategy is appropriate only for those individuals who simply need, and plan to receive, the RMDs, taken at the latest time the law allows, without penalty, at age 70½.

A Stretch IRA can be described as a distribution strategy for an individual IRA's beneficiary. The objective upon the account owner's death is to S-T-R-E-T-C-H the beneficiary's payments over a lengthy period of time in order to obtain favorable economic and tax results. Payment projections over 30 years or more are not uncommon. The beneficiary is usually a child or a grandchild of the account owner, but may be anyone the owner chooses. There can be no guarantee, however, that the second- and third-generation beneficiaries will continue the stretch strategy and instead may elect to liquidate the account at any time.

Someone may want to S-T-R-E-T-C-H their distributions because money in an IRA grows tax-deferred. The beneficiary effectively inherits a tax-deferred savings account. By spreading the payments over a significant number of years, tax-deferred compounding continues, and taxes on the payments may be minimized or at least disbursed over many years.

The regulations prohibit death distributions to extend beyond the period of the initial non-spouse beneficiary's life expectancy, not recalculated as they age.

Example: Martha dies, and her daughter Angela is the beneficiary of her IRA. Angela is 50 years old, and her life expectancy is 34 more years. In other words, Angela would need to withdraw 1/34, 1/33, 1/32, etc., of the account beginning on or before December 31 of the year following Martha's death.

If Angela dies five years later, at age 55, and Angela's beneficiary is her son Bob, Bob can continue taking distributions based on Angela's reduced life expectancy (i.e., 34-5 = 29). If Bob were to pass away before the 29 years were over, he could pass on the IRA to his beneficiary until the original life expectancy of Angela goes down to one, when the remaining balance would be fully distributed.

Unless restricted by the terms of the beneficiary designation, Angela and, subsequently, Bob, in this example, could accelerate their payments (take more than the minimum), which could lower the ultimate amount and length of the distributions.

If Martha did not name a beneficiary, the IRA assets would have passed on to her estate with accelerated distributions being required. Some custodial account agreements may establish a beneficiary ordering rule, such as spouse, children, parents, that could determine the actual beneficiary in the event the account owner did not have a named beneficiary upon death.

It is also important to note that IRAs cannot be transferred via an account owner's will unless the will had been named, prior to death, as the beneficiary or contingent beneficiary of the account and accepted by the custodian.

Risks Involving the Stretch IRA Strategy:
Withdrawals by the account holder or beneficiaries in excess of the required minimum distribution (RMD) will exhaust the account at a faster pace, reducing or eliminating the effectiveness of the stretch strategy. Distributions greater than the RMD could subject the payment to higher federal and, possibly, state income taxes. When investing assets, which will be used to stretch IRA payments, the investor must be cognizant of any front-end or back-end sales charges that can reduce the assets available. During an extended period of declining investment returns, investors will experience income fluctuations that may cause additional withdrawals to be made that will exhaust the account at a more rapid rate. There can be no guarantee that a Stretch IRA strategy will be advantageous to your specific situation, and many of its benefits are based on current tax laws, which are subject to change. If these laws change, an investor's ability to maintain estimated distributions may be affected. Lengthy distribution periods, much like those involved in a Stretch IRA, expose an investor to significant market risk.

What is the 60-day withdrawal and rollover rule?

Once in a 12-month period, an individual may withdraw an amount from any of his IRAs and use it for any reason and return it within 60 days as though the withdrawal never occurred. The 1-year period is measured from the date of the initial distribution not on a calendar year basis.

Practice Tip

Individuals must recognize there can be significant taxes and penalties if the funds are not repaid and larger withdrawals may be more difficult to repay.

A rollover cannot be repaid to a SIMPLE IRA unless the funds were withdrawn from a SIMPLE IRA, but SIMPLE IRA assets, if the SIMPLE IRA were at least two years old, could be returned to any IRA.

Example: Barbara withdraws $30,000 from her IRA on March 1, 2014.  If she returns the $30,000, or a lesser amount, by April 30, 2014, she has had use of the money, and avoided any taxes or penalties on the amount returned. She cannot make another withdrawal, with the ability to return it, until March 2, 2015. 

Recent IRS guidance made is clear that one-IRA-Rollover-per-year now  applies on a per taxpayer basis not per IRA.  In other words the new IRS position is clear - an individual can elect a single 60-day withdrawal and rollover in a 365-period regardless of the number of IRAs they may have.

What is a conversion to a Roth IRA?

Withdrawing funds from one IRA and repaying it to another IRA connects the second IRA to the first IRA for purposes of the 60-day rule. If Barbara had two IRAs and withdrew from one but repaid the other on a timely basis, she would lose the ability to make a separate 60-day withdrawal/return from the second IRA until March 2, 2014, in this example.

Please note: An IRA rollover may involve the application of fees and charges to the investor.