6
5
4
• Roth IRA/401(k) • Life Insurance • Municipal Bonds & Bond Funds
• Roth IRA/401(k) 4 • Life Insurance 5 • Municipal Bonds & Bond Funds 6
2
3
• Traditional 401(k) • Traditional IRA/SEP/SIMPLE • Annuities • 403(b) • 457(b)
• Traditional 401(k) 2 • Traditional IRA/SEP/SIMPLE • Annuities 3 • 403(b) 2 • 457(b) 2
1
• Mutual Funds • CD/MMAs • Real Estate
• Mutual Funds • CD/MMAs 1 • Real Estate
Find out how tax diversified your retirement portfolio really is. Keep more of your hard-earned money by managing when and how your retirement assets are taxed.
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Invest with after-tax dollars; potential to enjoy capital gains rate on some investments.
Invest to enjoy tax-deferred growth
Invest with after-tax dollars to enjoy income tax-free growth potential
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1056086-00002-00 Ed. 02/2023 ISG_WE_ANN570_01
Certificate of Deposit/Money Market Accounts. Does not include amounts invested in Roth 401(k)/TSA/457(b). Nonqualified annuities purchased with after-tax dollars enjoy the same tax-deferred growth and ordinary income taxation as qualified annuities. Qualified distributions are income tax-free. Roth IRA distributions are qualified if the account has been open for 5 tax years, and the owner is age 59½, dies, is disabled, or is a first-time homebuyer ($10,000 lifetime limit). Roth 401(k) distributions are qualified if the plan participant has contributed to the account for 5 tax years, and is 59½, dies, or is disabled. Life insurance death benefits are generally income tax-free pursuant to U.S. IRC §101(a). Contract cash values can be accessed during the insured’s lifetime via loans and withdrawals. Loans are generally income tax-free as long as the policy remains in force. Withdrawals are tax-free to the extent of basis. Policies which are modified endowment contracts (MECs) receive less favorable tax treatment. May be subject to Alternative Minimum Tax (AMT) and may impact taxation of Social Security benefits. Only applies to Roth IRAs, does not apply to Roth 401(k)s. Investment and Insurance Products are: • Not FDIC insured • Not insured by any federal government agency • Not a deposit or other obligation of, or guaranteed by, the bank or any of its affiliates • Subject to investment risks, including possible loss of the principal amount invested Variable annuities are issued by Pruco Life Insurance Company (in New York, by Pruco Life Insurance Company of New Jersey), Newark, NJ (main office) and distributed by Prudential Annuities Distributors, Inc., Shelton, CT. Both are Prudential Financial companies and each is solely responsible for its own financial condition and contractual obligations. Prudential Retirement Strategies is a business of Prudential Financial, Inc. This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. If you would like information about your particular investment needs, please contact a financial professional. We do not provide tax, accounting, or legal advice. Clients should consult their own independent advisors as to any tax, accounting, or legal statements made herein. Annuity contracts contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your licensed financial professional can provide you with complete details. © 2023 Prudential Financial, Inc. and its related entities. Prudential, the Prudential logo, and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
1 Certificate of Deposit/Money Market Accounts. 2 Does not include amounts invested in Roth 401(k)/TSA/457(b). 3 Nonqualified annuities purchased with after-tax dollars enjoy the same tax-deferred growth and ordinary income taxation as qualified annuities. 4 Qualified distributions are income tax-free. Roth IRA distributions are qualified if the account has been open for 5 tax years, and the owner is age 59½, dies, is disabled, or is a first-time homebuyer ($10,000 lifetime limit). Roth 401(k) distributions are qualified if the plan participant has contributed to the account for 5 tax years, and is 59½, dies, or is disabled. 5 Life insurance death benefits are generally income tax-free pursuant to U.S. IRC §101(a). Contract cash values can be accessed during the insured’s lifetime via loans and withdrawals. Loans are generally income tax-free as long as the policy remains in force. Withdrawals are tax-free to the extent of basis. Policies which are modified endowment contracts (MECs) receive less favorable tax treatment. 6 May be subject to Alternative Minimum Tax (AMT) and may impact taxation of Social Security benefits. 7 Only applies to Roth IRAs, does not apply to Roth 401(k)s. Investment and Insurance Products are: • Not FDIC insured • Not insured by any federal government agency • Not a deposit or other obligation of, or guaranteed by, the bank or any of its affiliates • Subject to investment risks, including possible loss of the principal amount invested Variable annuities are issued by Pruco Life Insurance Company (in New York, by Pruco Life Insurance Company of New Jersey), Newark, NJ (main office) and distributed by Prudential Annuities Distributors, Inc., Shelton, CT. Both are Prudential Financial companies and each is solely responsible for its own financial condition and contractual obligations. Prudential Retirement Strategies is a business of Prudential Financial, Inc. This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. If you would like information about your particular investment needs, please contact a financial professional. We do not provide tax, accounting, or legal advice. Clients should consult their own independent advisors as to any tax, accounting, or legal statements made herein. Annuity contracts contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your licensed financial professional can provide you with complete details. © 2023 Prudential Financial, Inc. and its related entities. Prudential, the Prudential logo, and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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Text Alternative
Years it takes to double the investment
Taxable Account — 16 Years to Double (37% Annual Tax)
Taxable Account — 13 Years to Double (24% Annual Tax)
Tax-Deferred Account — 10 Years to Double
Growth Rate
7%
Text description of animated chart
It is important to note that the Years to Double example above does not guarantee investment results or function as a predictor of how your investment will perform. It is simply an approximation of the impact a targeted rate or return would have. Investments are subject to fluctuating returns and there can never be a guarantee that any investment will double in value.
Be aware that certain tax events can take a substantial bite out of the investment return within these assets.
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This chart shows how taxes can impact investment performance on non-qualified assets. Be aware that certain tax events can take a substantial bite out of the investment return within these assets. Taxes could increase the time needed to reach your goals. Looking at a 7% growth rate for these three different accounts: A tax-deferred account would take 10 years to double. A taxable account at a 24% annual tax rate would take 13 years to double. And a taxable account at a 37% annual tax rate would take 16 years to double. It is important to note that the Years to Double example does not guarantee investment results or function as a predictor of how your investment will perform. It is simply an approximation of the impact of a targeted rate of return would have. Investments are subject to fluctuating returns and there can never be a guarantee that any investment will double in value.
• Portfolio Turnover: A measure of a fund’s holdings that have been sold and replaced during the prior year. • Tax Drag: Can have a significant impact on investment performance over time since any annual taxes due on investments can lower returns. • Rebalancing a Portfolio: When this happens, it often results in selling the over-performing investments and buying the under-performing investments. This can create a significant tax liability.
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With no immediate taxes due, these assets can allow more of your money to stay invested to help compound growth.
This hypothetical example does not include fees, taxes or portfolio expenses, which would lower performance. It assumes no distributions are made during these periods. Withdrawals from a tax-deferred account are sub1ect to income tax which may reduce the amount of a distribution available for use. However, lower maximum tax rates on capital gains and dividends would make the investment return for the taxable investment more favorable. Changes in tax rates and tax treatment of investment earnings may impact the comparative results. Actual returns will vary.
Chart comparing performance of a 100,000-dollar investment with three different tax scenarios over a period of 20 years. Scenario one is tax-deferred, and grows to 386,968 dollars, which would be 318,096 dollars after 24 percent tax or 280,790 dollars after 37 percent tax. Scenario two is a taxable investment with a 24 percent annual tax rate, and grows to 281,979 dollars. Scenario three is a taxable investment with a 37 percent annual tax rate, and grows to 237,051 dollars over 20 years. This hypothetical example is for illustrative purposes only. It is not intended to represent an investment. The chart uses constant rates of return, unlike actual investments which will fluctuate in value, and is not guaranteed.
1. 2. 3.
Text description of tax deferral chart
Individuals may be in a lower tax bracket in retirement than they are in their working years. Most retirees are not going to take a lump-sum distribution from their tax-deferred assets. Rather, they may want them to provide an income stream in retirement. Annuities can be funded by both qualified and nonqualified assets. Qualified assets are taxed as ordinary income, while nonqualified annuities are taxed on the gains when taken.
1. Individuals may be in a lower tax bracket in retirement than they are in their working years. 2. Most retirees are not going to take a lump-sum distribution from their tax-deferred assets. Rather, they may want them to provide an income stream in retirement. 3. Annuities can be funded by both qualified and non-qualified assets. Qualified assets are taxed as ordinary income, while non-qualified annuities are taxed on the gains when taken.
The assumptions are: 7% annual growth for all hypothetical accounts. The taxable investments assume taxes are withdrawn at 24% and 37% at the end of every year. Tax-deferred accounts are subject to ordinary income tax at the time of withdrawals. The parenthetical results show the remaining values after the 24% and 37% taxes are withdrawn from all gains at the end of the 20-year period.
Taking advantage of tax-exempt vehicles, like Roth IRAs, can go a long way in helping you 7.
• Increase your tax-free savings • Provide a hedge against rising taxes • Have no minimum distributions (RMDs)
$100,000 withdrawal during a retirement year. 401(k) with a 32% Ordinary Income Tax, a Mutual Fund assumes no cost basis and 15% Capital Gains Tax. Actual results will depend on your personal financial situation. There are two main columns with a “less than” symbol between them. The one on the left shows Total Net Income of $68,000 and is that is less than the column on the right that shows Total Net Income of $84,490. If you expand the chart, the explanation of how these numbers are determined appears.
Text description of animated table
The expanded chart shows the columns now with four rows. The column on the left is the non-diversified investments. That column has a 401(k) withdrawal of $100,000 with an ordinary income tax of $32,000 taken out, leaving a Total Net Income of $68,000. The column on the right has three different investments to show a diversified portfolio. The first is a 401(k) with a $33,000 withdrawal with a capital gains tax of $10,560 taken out, leaving a Net Income of $22,440. The next is a Mutual fund with a $33,000 withdrawal with an ordinary income tax of $4,950 taken out, leaving a Net Income of $28,050. The last is a ROTH with a $34,000 withdrawal. There is no ordinary income tax because this ROTH is not subject to taxes. Net Income from the ROTH is $34,000. If you add up the total Net Income from the right-hand columns you are left with $84,490. This chart illustrates that a diversified portfolio can leave you with a higher total net income. A hypothetical scenario: $100,000 withdrawal during a retirement year. 401(k) with a 32% Ordinary Income Tax, a Mutual Fund assumes no cost basis and 15% Capital Gains Tax. Actual results will depend on your personal financial situation. There are two main columns with a “less than” symbol between them. The one on the left shows Total Net Income of $68,000 and is that is less than the column on the right that shows Total Net Income of $84,490. If you expand the chart, the explanation of how these numbers are determined appears.
Taking advantage of tax-exempt vehicles, like Roth IRAs, can go a long way in helping you.
By looking across the three categories of retirement assets, you can create a diversified strategy that can increase your income while lowering your tax bill.
Take action today and see how your current strategy stacks up with this simple worksheet.
• Control how you’re taxed in retirement. • Protect you from the uncertainties of what taxes will be in the future. • Keep more of the money you’ve worked hard to accumulate.
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By looking across the three categories of retirement assets, you can create a diversified strategy that can increase your income while lowering your tax bill. It helps:
