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Terms & Condition

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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.

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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.

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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.

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

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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

Traditional IRA

Lord Abbett makes it easy to open a traditional IRA. As long as you, including your spouse, are under age 70½, you can take advantage of the option regardless of your income or whether you already participate in a qualified retirement plan.

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 Traditional IRA?

A traditional IRA is a tax-deferred 1 savings plan available if you are under age 70½, and your spouse is also under age 70½. It is set up for your exclusive benefit, although your designated beneficiary(ies) may ultimately receive the proceeds.

How does it work?

You may contribute up to $5,500 per year. If you are age 50 or older, you can make an additional $1,000 catch-up contribution. Contributions must be made by the tax-filing deadline. This is usually April 15 following the year for which the contribution is designated.

With a traditional IRA, you may be able to deduct the contribution from taxable income, reducing current income taxes, or, if your income qualifies, a tax credit (called a "saver's credit") is available. Taxes on any investment appreciation are deferred until the money is withdrawn. Withdrawals are taxed as additional ordinary income when received. Nondeductible contributions, if any, are withdrawn tax-free. Taxable withdrawals before age 59½ may be assessed a 10% penalty, in addition to the taxes payable, unless an exception applies.

Who should consider a Lord Abbett Traditional IRA?
  • If you are not covered by a qualified plan and need tax-deferred1 retirement saving.

  • If you have fully funded a tax-deferred savings plan at work such as a 401(k) or 403(b) and want additional tax deferral on your savings.

  • If you need to supplement your workplace retirement savings.

  • If you are a non-working spouse and have little retirement savings of your own.

  • If you wish to seed your account with non-deductible dollars to take advantage of the Roth conversion opportunity.

How does traditional IRA benefit you?

A traditional IRA offers several tax benefits, including:

  • Earnings are federal income tax-deferreduntil withdrawn, and no withdrawals are required until you reach age 70½.

  • Beneficiary designations can be structured to create a Stretch IRA, allowing payouts to extend over many years.

  • A traditional IRA may be converted to a Roth IRA, regardless of the taxpayer's adjusted gross income (AGI).2

  • Traditional IRA assets can also be used tax-efficiently to pay non-retirement expenses, such as post-secondary education tuition or a down payment on a home. 

  • Tax-efficient distributions can be generated prior to age 59½ that can be used to supplement income or generate early retirement income. 

  • Traditional IRAs are protected from bankruptcy up to the first $1,000,000.

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 open a Traditional IRA? 

You are eligible to establish a Lord Abbett IRA if:

  • Either you and/or your spouse, if you are married, have earned income.
  • You are under 70½ years old. This rule is different regarding Roth IRAs. (Please see Roth IRA Eligibility.)

  • You have a distribution from a qualified retirement plan regardless of age or potentially employment status. Some employed individuals can attain retirement eligibility under the terms of their plan at work and then may be able to take their funds for retirement an open a traditional IRA.
  • You are transferring from another traditional IRA, SEP1 or SIMPLE IRA.2 A SIMPLE IRA needs to have been in existence for two years from the date of the first contribution, unless the individual is over age 59½, to transfer the account.

Regardless of income or plan participation, everyone can have an IRA.

Many individuals believe being covered by a qualified retirement plan or earning above a certain income makes them ineligible to accumulate funds for retirement via an IRA contribution. Yet, that's not true. The fact is, as long as you have earned income and are under age 70½, you can contribute to an IRA.3Whether or not these traditional IRA contributions can be deducted on your federal income tax return is a function first of retirement plan participation followed by marital status and income.

Provided you and your spouse, if married, are under age 70½ and are not covered by a retirement plan, each of you may make a federal income tax-deductible4 IRA contribution up to $5,500 per year as long as there is earned income equal or greater than the contributions. The investment amount jumps to $6,500 if the individual receiving the contribution is age 50 or older at any time during the calendar year to which the IRA contribution is attributed.

If you are single individual and covered by an employer sponsored plan, you can fully deduct your Lord Abbett IRA contribution if your income is below $59,000 in 2013 ($60,000 in 2014). A partial deduction is available in 2013 if your income is above $59,000, but does not exceed $69,000 ($60,000 to $70,000 in 2014). These income limits generally increase annually .

Once qualified plan participation extends to either you or your spouse, the eligibility rules change. For 2013 contributions, couples filing jointly, where only one spouse is covered by an employer sponsored retirement plan, the spouse not covered may deduct the full Lord Abbett IRA contribution if the couples' joint income is less than $178,000. Once joint income exceeds $178,000, but does not exceed $188,000 a partial deduction is allowed. Once joint income exceeds $188,000, no deduction is allowed. These income limits increase to $181,000 and $191,000, respectively, regarding any contribution made for calendar year 2014.

If filing status is... And modified Adjusted Gross (AGI) 5 Income is... Then the investor may take...
Single or head of household $59,000 or less ($60,000 in 2014) A full deduction
More than $59,000 but less than $69,000 ($60,000 to $70,000 in 2014) A partial deduction
$69,000 or more ($70,000 in 2014) No deduction
Married filing jointly or qualifying widow(er) and both covered by a plan $95,000 or less ($96,000 in 2014) A full deduction
More than $95,000, but less than $115,000 ($96,000 to $116,000 in 2014) A partial deduction
$115,000 or more ($116,000 in 2014) No deduction
Married filing jointly and one covered by a plan Less than $178,000 ($181,000 in 2014) A full deduction for spouse not covered
More than $178,000, but less than $188,000 ($181,000 to $191,000 in 2014) Partial deduction for spouse not covered
More than $188,000 ($191,000 in 2014) No deduction

 

If an individual is married and both spouses are covered by an employer-sponsored plan during 2013, fully deductible traditional IRA contributions are permitted if joint income is less than $95,000. A partial deduction is available if the couples' joint income is above $95,000, but does not exceed $115,000 and no deduction if income exceeds $115,000. (These limits increase to $96,000 and $116,000 for 2014.)

The deduction limits are summarized in the following table:

Consider a Lord Abbett IRA if any of the following apply:

  • You are under the age of 70½ and have earned income.
  • You wish to transfer assets residing in a previous employer's retirement plan into a non-affiliated account.
  • You anticipate being in a lower tax bracket during your retirement years.
  • You and your adviser wish to invest in Lord Abbett mutual funds.

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 open a Traditional IRA? 

How much can I contribute to a Traditional IRA? 

If you are under age 50, you may contribute up to $5,500 per year to a Lord Abbett IRA.

Are catch-up contributions available?

 If you are age 50 or older at any time during the calendar year, you will be allowed to invest an additional $1,000; but all contributions must stop once you reach age 70½. No contribution is permitted during the year an individual turns 70½.

Can I contribute to both a Roth IRA and a Traditional IRA? 

 Yes, assuming that you qualify for a Roth IRA. (See "Roth IRA Eligibility.") You do, however, have one combined IRA contribution limit of $5,500 if you are under age 50 and $6,500 if you are over age 50. Contributions may or may not be tax deductible when made to a traditional IRA. (See our table under "IRA Eligibility," which outlines IRA contribution tax-deduction parameters.)

When can I contribute to my Lord Abbett IRA?

As soon as your Lord Abbett IRA is established (click here to connect with Lord Abbett's writeable IRA application). Contributions may be made at any time during the calendar year by the tax filing due date for that year, not including extensions. For most people, this means contributions must be made by April 15.

What if I exceed my traditional IRA contribution limits? 

If you exceed your IRA contribution limits, any amount over the maximum must be withdrawn by your tax-filing due date (April 15), or a 6% excise tax may apply to contributions in excess of the permitted amount.

If you file for an extension by the due date of your federal tax return, you receive a six month extension to correct an excess contribution.

Why would I contribute to an IRA if the contribution is not deductible? 

IRA contribution earnings, whether tax-deductible or not, growtax-deferred1 until withdrawn. It may be to your advantage, then, to accumulate tax-sheltered2 funds, allowing the full amount invested plus potential earnings to compound on a tax-deferred1 basis.

Many taxpayers earn income above federally imposed thresholds and cannot make contributory Roth IRA contributions.  (See our table on the "Roth IRA Eligibility" page.)  Therefore, the only way that a Roth IRA is possible for these folks is by converting a traditional IRA.  Accumulating assets in an IRA positions you to potentially convert your Lord Abbett IRA account to a Roth IRA. (See Roth Conversion Resource Center.") This means exchanging the traditional IRA for a Roth IRA and paying taxes on all pretax dollars converted. 

However, please understand that the rules do not allow you to convert nondeductible dollars only. What's taxable and what's not is based on a formula (unless it's a full conversion) that multiplies the dollars converted by the non-deductible dollars over the value of all IRAs, including the amount converted, at the end of the year in which the conversion occurs.

Here's an example:

Aftertax dollars in all non-Roth IRA accounts, including rollovers, SEPs3, and SIMPLE IRAs4, is $10,000, and the amount of a Roth IRA conversion equals $10,000.The value, including the converted amount, of all IRAs at the end of the year in which the Roth conversion occurs equals $100,000.

$10,000 (the amount converted) multiplied by ($10,000, aftertax dollars, ÷$100,000, the value of the traditional IRA at year-end, including converted amount) = $1,000. This is the nontaxable portion, and $9,000 is subject to taxation without penalty.

You now would have a Roth IRA account equaling $10,000, which, when withdrawn after age 59½ and five years of existence, will render all dollars, including earnings, income tax-free in that Roth account.

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 open a Traditional IRA? 

What types of traditional IRA distributions are available?

There are basically seven types of traditional IRA distributions an individual can take from their account:

  • Normal

  • Premature without an exception

  • Premature with an exception

  • Required

  • Distributions due to death of account owner

  • The 60-day withdrawal and subsequent rollover (return)

  • Conversion to a Roth IRA

What is a normal traditional IRA distribution? 

A normal distribution from a traditional IRA occurs after the actual date, not simply the calendar year, you attain age 59½. For example, William was born on 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, unless aftertax contributions were made, but there is no 10% penalty tax. If aftertax contributions were made to any IRA you owned, a pro-rata formula would apply to each distribution, allocating tax-free return of contributions and taxable gains and/or contributions regardless of whether the distribution comes from any one IRA or several.

What is a premature traditional IRA distribution without an exception?

A premature traditional IRA distribution without an exception occurs when you remove individual retirement funds before age 59½ and none of the statutory exceptions apply (see next Q&A), so that a 10% penalty is assessed against any taxable amounts withdrawn, in addition to any taxes due.

What is a premature traditional IRA distribution with an exception? 

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

  • Substantially equal periodic payments are taken based on your life expectancy. (This is frequently called a 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 you attaining age 59½, or the 10% penalty reattaches (retroactively) to all distributions made before age 59½.

  • You are disabled.

  • You are the beneficiary of a deceased IRA owner.

  • You are using distributions to pay qualified higher education expenses (tuition, fees, books, supplies, etc.) for yourself or a family member such as a son or daughter.

  • You are paying health insurance premiums after you have received unemployment compensation for more than 12 weeks.

  • You have 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.

  • Your 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 you wanted to assist two children equally to buy a home, each child could receive $5,000. If your spouse also had an IRA, he/she could also do the same for each child in this example.)

  • Your 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 traditional IRA? 

You must begin receiving required minimum distributions (RMDs) by April 1 of the calendar year following the calendar year you attain age 70½, and then continue to receive the RMD before each subsequent December 31. Two distributions will be required in the first year if you wait until the calendar year following 70½ to commence RMDs. To avoid taking two RMDs in the same year, you would need to take the first RMD by December 31 of the year you turn 70½.

RMDs that represent deductible (pretax) contributions and all earnings are taxed as ordinary income. The portion of RMDs based on nondeductible 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. If you are affected by this issue, IRS Form 8606 is used to report the split. Earnings are always taxable.

If the full RMD is not taken in a given year, a 50% excess tax is assessed on the amount not taken. For example, if you 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 death benefits from a traditional 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:
  • Treat IRA as your own by designating oneself as the account owner.

  • Treat IRA as your own by transferring it to your traditional IRA.

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

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

If the IRA is inherited from someone other than a spouse, the options are more limited. If this is the case, you 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 (you). For example, the account might be titled as follows: "Joe Doe, deceased, F/B/O Jane Doe, beneficiary."

A non-spouse beneficiary has the option to:
  • Take a one-time distribution; or

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

  • S-T-R-E-T-C-H the payments over your life expectancy, which is determined by tables, found in IRS regulations. After you die, the IRA can be passed on to another beneficiary.

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 taxpayers can select the Stretch IRA option, the stretch strategy is appropriate only for those individuals who simply need, and plan to receive, the required minimum withdrawals, 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 your 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/or tax results. Payment projections over 30 years or more are not uncommon. The beneficiary typically is your child or a grandchild, but may be anyone you choose. There can be no guarantee, however, that the second- and third-generation beneficiaries will continue the stretch strategy and could 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-deferred1. The beneficiary effectively inherits a tax-deferred1 savings account. By spreading the payments over a significant number of years, tax-deferred1 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 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 (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 may have passed to her estate with accelerated distributions being required. Some custodial account agreements may establish a beneficiary ordering rule, such as spouse, children, parents, etc., that could determine the actual beneficiary in the event the account owner did not have a named beneficiary upon death. A Lord Abbett IRA has the estate as a default beneficiary if a beneficiary is not named.

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.

1 Income whose taxes can be postponed until a later date; examples include IRAs and 401(k) plan earnings.

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 in the future, an investors 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, measured from the date you first access your IRA funds, you may withdraw an amount from each of your IRAs and use it for whatever reason and return it within 60 days as though the withdrawal never occurred.

Important Tip 

You 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, 2013. If she returns the $30,000, or a lesser amount, by April 30, 2013, 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, 2014.

If Barbara had another IRA (or several, including SEPs3 and SIMPLE IRAs4), she could make this 60-day withdrawal from each of them, at different times, use the funds as she wishes, and return them within the 60-day period.

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.

1 A Simplified Employee Pension Plan, commonly known as a SEP-IRA, is a retirement plan specifically designed for self-employed people and small business owners. When establishing a SEP-IRA plan for your business, you and any eligible employees establish your own separate SEP-IRA; employer contributions are then made into each eligible employees SEP-IRA.

2 A SIMPLE IRA plan is an IRA-based plan that gives small business employers a simplified method to make contributions toward their employees retirement and their own retirement. Under a SIMPLE IRA plan, employees may choose to make salary reduction contributions and the employer makes matching or non-elective contributions. All contributions are made directly to an Individual Retirement Account (IRA) set up for each employee (a SIMPLE IRA). SIMPLE IRA plans are maintained on a calendar-year basis.

OPEN AN IRA

  1. Complete the writable IRA Application

  2. Print and send to Lord Abbett by mail, fax, email or use our Free FedEx shipping option

  3. You’ll receive a confirmation once your IRA is established

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