Annuities and Retirement

Traditional IRA Annuity

Who can contribute to a Traditional IRA?

If you receive compensation for personal services (wages, salary, commissions, tips, etc.), you may contribute to a Traditional IRA.

How much may I contribute?

The maximum contribution amount is the lesser of your compensation or $7,000 ($8,000 if you are age 50 or older). You can make contributions to your Traditional IRA anytime up to and including the due date of your federal tax return for the previous year, namely, April 15.

Is my contribution deductible?

Whether your contribution is deductible depends on certain factors:

• If neither you nor your spouse is an active participant in an employer-sponsored retirement plan, you can deduct 100% of your contribution, regardless of your income level.
• If only your spouse is an active participant in such a plan and you file jointly, your deduction is phased out if your modified adjusted gross income (MAGI) is more than $218,000. If your MAGI is $228,000 or more, your contribution is non-deductible.
• If you are an active participant in such a plan, your contribution may be fully or partially deductible, depending on your income level.

When can funds be withdrawn?

Withdrawals are permitted any time after age 59½ without an IRS tax penalty, but must begin by the year following the year in which you reach age 73. When you begin making withdrawals, you will be taxed only on the amount you withdraw each year on which taxes have not previously been paid. The remaining funds continue to accumulate tax-deferred. You will benefit at retirement, in all probability, by the fact that you will be in a lower tax bracket than at the time you make your contribution. Additional IRS penalty-free withdrawals of contributions and earnings prior to age 59½ include:

• Up to $10,000 (lifetime total) toward a qualified first-time home purchase for you, your spouse, your children or grandchildren;
• Qualified higher education expenses for you, your spouse, your children or grandchildren (may include tuition, fees, books, supplies and equipment; no fixed dollar amount);
• Payment of major medical expenses (exceeding 7.5% of your AGI);
• Payment of health insurance premiums by certain unemployed individuals;
• Death or disability of the IRA owner;
• Distribution by way of certain substantially equal periodic payments.
• There is an AJFL surrender charge of 5% for the first through third policy years, decreasing 1% per year through the seventh policy year. After seven years, 100% of the annuity value can be withdrawn without an AJFL surrender charge. In addition, after the first policy year, 10% of the annuity value may be withdrawn once per policy year without an AJFL surrender charge.

Am I required to take a distribution?

Yes. You must begin to withdrawal funds starting at age 73.

Note: All references in this brochure to tax deduction and taxation of benefits refer only to the federal income tax law. Check state law for the impact of IRA contributions on state income taxes. Contact your AJFL Representative for more information.

ROTH IRA

What is a Roth IRA?

The Taxpayer Relief Act of 1997 created an Individual Retirement Annuity (IRA) known as a Roth IRA, authorized by the federal government to help you accumulate funds for retirement. The Roth IRAs principal difference from most other tax advantaged retirement plans is that, rather than granting a tax break for money placed into the plan, the tax break is granted on the money withdrawn from the plan during retirement.

Who can contribute to a Roth IRA?

If you receive compensation for personal services (wages, salary, commissions, tips, etc.), you may contribute to a Roth IRA.

How much may I contribute?

The maximum contribution amount is the lesser of your compensation or $7,000 ($8,000 if you are age 50 or older); reduced by your Modified Adjusted Gross Income as shown below. If you are married and filing a joint tax return with your spouse, you may also make a contribution to a separate Roth IRA established for the exclusive benefit of your spouse, even if your spouse has received no compensation during the tax year. Limits for the non-working spouse are the same as for the working spouse. You can make contributions to your Roth IRA anytime up to and including the due date of your federal tax return for the previous year, namely, April 15.

When can funds be withdrawn?

Since Roth IRA contributions (principal) are made with after-tax dollars you may withdrawal these contributions tax-free and IRS penalty-free anytime. You may withdrawal earnings tax-free and IRS penalty-free as long as your IRA has been established for at least five years and you are over age 59½. You may also benefit from the following tax advantages:

Tax-Free and IRS Penalty-Free Withdrawals for First-Time Home Purchase.

As long as your Roth IRA has been established for at least five years, you can take tax-free and IRS penalty-free withdrawals ($10,000 lifetime limit) prior to age 59½ to apply toward buying a home for you, your spouse, your children or your grandchildren. The withdrawals must be used for qualified first-time home expenses.

IRS Penalty-Free Withdrawals Prior to Age 59½ include:

• Qualified higher education expenses for you, your spouse, your children or your grandchildren;
• Payment of major medical expenses (exceeding 7.5% of your AGI);
• Payment of health insurance premiums by certain unemployed individuals;
• Death or disability of the IRA owner;
• Distribution by way of certain substantially equal periodic payments.

Withdrawals in excess of contributions are, however, subject to income taxes. There is an AJFL surrender charge of 5% for the first through third policy years, decreasing 1% per year through the seventh policy year. After seven years, 100% of the annuity value can be withdrawn without an AJFL surrender charge. In addition, after the first policy year, 10% of the annuity value may be withdrawn once per policy year without an AJFL surrender charge.

Am I required to take a distribution?

The Roth IRA does not require minimum distributions beginning at age 73, giving you additional time to take advantage of tax-free earnings. In fact, you are never required to withdraw your money at any age, so you can pass your Roth IRA assets on to your beneficiaries if you wish. Note: All references to tax deduction and taxation of benefits refer only to the federal income tax law. Check state law for the applicability of state income taxes to IRA earnings distributions.