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Notes & Disclosures
- The maximum contribution for 2008 is $15,500. However, if you will attain age 50 before the close of the plan year, you will also be eligible to defer an additional $5,000 as a catch-up contribution. In order to take advantage of the catch-up contribution election, you must first defer and contribute the full $15,500 of your pay during the plan year. Chart does not reflect the use of the catch-up provision. The maximum annual contribution may differ for other types of qualified plans. The maximum contribution in 2009 is $16,500, and indexed for inflation.
- Benefits from the 401(k) assume: (1) An individual age 45; (2) Contributions made for 22 yrs.; (3) Annual contribution increases at a rate of 2%; (4) 401(k) assets accumulate at 8% and payout is based on a single life annuity purchased at age 67.
- Social Security benefits are based on the 2008 Quick Benefit Calculator at www.ssa.gov. Calculations assume: (1) An individual age 45 in 2008 will receive full Social Security benefits at age 67; (2) A worker’s past earnings are based on the national average wage indexing series with a relative growth factor of 2%; (3) Current earnings stay the same until age 67 and are limited to the 2008 taxable maximum of 102,000.
- Mutual funds may be subject to income tax and/or capital gains taxation. Consult your tax advisor for more information.
- Generally, interest paid on municipal bonds is tax-free, but not all municipal bonds are exempt from federal and/or state income tax. Some bonds may be subject to capital gains tax at sale. Consult your tax advisor for more information.
- Upon distribution, when a contract annuitizes a portion of principal is included in the annuity payout.
- There is not a specific limit on dollars allocated to purchase life insurance, however there are maximum premium limits determined by a specified policy face amount. A policy will qualify as life insurance if it meets the requirements of IRC Sec. 7702, which includes limits on the amount of premium that may be paid into a specific face amount and still qualify as life insurance.
- Tax-free income assumes: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC 7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
- For federal income tax purposes, life insurance death benefits generally are paid income tax-free to beneficiaries pursuant to IRC Sec. 101(a)(1). In certain situations, however, life insurance death benefits may be partially or wholly taxable. Situations include, but are not limited to: the transfer of a life insurance policy for valuable consideration unless the transfer qualifies for an exception under IRC Sec. 101(a)(2) (i.e. the “transfer-for-value rule”); arrangements that lack an insurable interest based on state law; and an employer-owned policy unless the policy qualifies for an exception under IRC Sec. 101(j).
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