Art of Retirement LIRP_prime iul_final

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Art of Retirement LIRP_prime iul_final

  1. 1. Pacific Life Insurance Company Is Your Client’s Portfolio an Unfinished Work of Art? Color It with a Life Insurance Retirement Plan4/12MKT12-6 For Life Insurance Producer Use Only. Not for Use with the Public.
  2. 2. Will There Be Enough?2/3 of investors between age 21 and 50 doubt they will have ENOUGH MONEY FOR RETIREMENT*64% of Gen X and Gen Y investors expect that retirement income will come FROM NON-RETIREMENT ACCOUNTS*1/3 of small-business owners do not have a PERSONAL OR BUSINESS-SPONSORED RETIREMENT ***“Gen X and Y Investors Worry Retirement Savings Won’t Be Enough,” Michael S. Fischer, AdvisorOne, March 9, 2012.**”Many Small-Business owners aren’t prepared for Retirement,” Laura Petrecca, USA Today, March 1, 2012. 2 of 21 For Life Insurance Producer Use Only. Not for Use with the Public.
  3. 3. Aspiring to Financial Independence Client Portrait Business Owner Joe Mitchell Good Saver Contributes yearly maximum to 401(k) plan & non-deductible IRA Goals: Save more for retirement and Balanced Approach protect family while saving for retirement. 3 of 21 For Life Insurance Producer Use Only. Not for Use with the Public.
  4. 4. 3 Financial ChallengesFinancial VulnerabilityOutliving Retirement AssetsRising Taxes 4 of 21 For Life Insurance Producer Use Only. Not for Use with the Public.
  5. 5. Is Your Client Using the Right Mix? ASSETS HELD INSIDE ASSETS HELD OUTSIDE THE OVERLOOKED RETIREMENT PLANS RETIREMENT PLANS ASSETS • Life Insurance Retirement Plan (LIRP) • 401(K) • Stocks Death Benefit* • Pension Plan • Mutual Funds • Roth IRA Distributions • Traditional IRA • Real Estate • Municipal Bond Interest Why failing to diversify tax liabilities at retirement could potentially hurt your client’s retirement income…*For federal income tax purposes, life insurance death benefits generally pay income tax-free to beneficiaries pursuant to IRC Sec. 101(a)(1). In certain situations, however, life insurance death benefits may bepartially 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. thetransfer-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). 5 of 21 For Life Insurance Producer Use Only. Not for Use with the Public.
  6. 6. Failing To Use Tax Diversification ASSETS HELD INSIDE RETIREMENT PLANS What happens if Income Tax Rates go up? $100,000 35% Tax Rate* 50% Tax Rate* Withdrawal: $100,000 $100,000 • 401(K) • Pension Plan Less Taxes: -35,000 -50,000 • Traditional IRA Net After Tax 65,000 50,000 Withdrawal: Loss from Taxes: $15,000*Based on the Top Current Federal Income Tax Rate. 6 of 21 For Life Insurance Producer Use Only. Not for Use with the Public.
  7. 7. Failing To Use Tax Diversification ASSETS HELD OUTSIDE RETIREMENT PLANS What happens if Capital Gains Tax Rates go up? $100,000 15% Tax Rate* 50% Tax Rate* Taxable $100,000 $100,000 Amount: • Stocks • Mutual Funds Less Taxes: -15,000 -50,000 • Real Estate Net After Tax 85,000 50,000 Withdrawal: Loss from Taxes: $35,000*Based on the Top Current Federal Income Tax Rate. 7 of 21 For Life Insurance Producer Use Only. Not for Use with the Public.
  8. 8. Failing To Use Tax Diversification THE OVERLOOKED ASSETS What happens if Income Tax Rates go up? $100,000 35% Tax Rate** 50% Tax Rate** • Life Insurance Retirement Plan (LIRP) Withdrawal: $100,000 $100,000 Death Benefit* • Roth IRA Distributions Less Taxes: -0 -0 • Municipal Bond Interest Net After Tax 100,000 100,000 Withdrawal:Has your client Loss from Taxes:Overlooked this bucket? $0* For federal income tax purposes, life insurance death benefits generally pay income tax-free to beneficiaries pursuant to IRC Sec. 101(a)(1). In certain situations, however, life insurance deathbenefits 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 underIRC 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 policyqualifies for an exception under IRC Sec. 101(j). 8 of 21**Based on the Top Current Federal Income Tax Rate. For Life Insurance Producer Use Only. Not for Use with the Public.
  9. 9. Characteristics of a LIRP PLUS: Premium Flexibility & Potential Creditor More Tax Financial Protection*** Retirement Advantages Security Tax-Free Assets Tax-Free Distributions* Death Benefit** Tax-Deferred Accumulation*Tax-free income assumes, among other things: (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 notoccur 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 willreduce policy values and may reduce benefits.** For federal income tax purposes, life insurance death benefits generally pay 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 aninsurable interest based on state law; and an employer-owned policy unless the policy qualifies for an exception under IRC Sec. 101(j).***State law may provide life insurance and annuities with certain asset protection benefits. As a general rule, a debtor may not transfer property with the intent to avoid debt due to his creditors. The lawsgoverning asset protection, however, are complex and the consequences of poor planning may be both civil and criminal penalties. Anyone contemplating an asset protection plan should not undertake such without the 9 of 21advice of legal counsel. For Life Insurance Producer Use Only. Not for Use with the Public.
  10. 10. Framing the Details of LIRP*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawalstaken 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. SeeIRC Secs. 7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits. 10 of 21 For Life Insurance Producer Use Only. Not for Use with the Public.
  11. 11. Personalize the Proposal NEW Navigator Presentation Format 11 of 21 For Life Insurance Producer Use Only. Not for Use with the Public.
  12. 12. Coordinate the Timing of Policy Distributions with Other Retirement Sources Qualified Plans & IRAs Life Insurance Retirement Plan Maximum Age to Defer 70 1/2 None Distributions Subject Minimum Yes No Distribution Requirements Death Benefit Proceeds Generally subject to Income tax-free* income taxes* Life insurance may be a more attractive asset to die with than a Qualified Plan or IRA.*For federal income tax purposes, life insurance death benefits generally pay income tax-free to beneficiaries pursuant to IRC Sec. 101(a)(1). In certain situations, however, life insurance death benefits maybe 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). 12 of 21 For Life Insurance Producer Use Only. Not for Use with the Public.
  13. 13. LEVEL PREMIUM: $42,896 Annual Premium to Age 65 Total Premiums Paid: $986,618 What Joe’s Beneficiaries Potentially What Joe Potentially Could Receive Could Receive Illustrated Net Illustrated Hypothetical Death Benefit* Distributions Assumes Insured’s Assumes Insured’s Age 65 Death At Retirement At Age 42 $1,037,273 Distribution Amount: $163,860 Age 65 $2,873,264 Years Payable: 25 Age 85 $816,477 Total Distributions: $4,096,500Assumptions: Male, age 42, Super Preferred Nonsmoker. Pacific Life Insurance Company’s indexed universal life insurance product Pacific Prime IUL, Policy Form #P11P1I or ICC11 P11P1I - Formnumber based on state in which policy is issued, current policy charges, assumed indexed crediting rate 7.0%. Initial Face Amount: $1,000,000). Increasing death benefit option policy years 1 – 23 and levelthereafter. Initial Face Amount: $1,000,000. Increasing death benefit option policy years 1 – 23 and level thereafter.*Net Death Benefit is the death benefit payable to the designated beneficiary after withdrawals and any outstanding policy loans are paid off.Riders will likely incur additional charges and are subject to availability, restrictions and limitations. Clients should be shown policy illustrations with and without riders to helpshow the rider’s impact on the policy’s values. 13 of 21 For Life Insurance Producer Use Only. Not for Use with the Public.
  14. 14. BENEFITS OF WAITING 3 OPTIONS for the Life Insurance Retirement Plan Pacific Prime IUL Illustrated Distributions* at A Insured’s B Insured’s C Insured’s Age 70 with Age 65 Age 70 2% Annual Increase Annual Distributions $163,860 $228,653 Initially: $190,760 Amounts: Age 75: 210,614 Age 80: 232,535 40% increase in total amount Age 85: 256,738 from age 65 Years Payable: 25 25 25 Total Distributions: $4,096,500 $5,716,325 $6,110,088Assumptions: Male, age 42, Super Preferred Nonsmoker. Pacific Life Insurance Company’s indexed universal life insurance product Pacific Prime IUL, current policy charges, indexed interest crediting rate 7.0%.Initial Face Amount: $1,000,000. Increasing death benefit option policy years 1 – 23 and level thereafter.*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken during thefirst 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 Sections 7702(f)(7)(B),7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits. 14 of 21 For Life Insurance Producer Use Only. Not for Use with the Public.
  15. 15. “By failing to prepare, you are preparing to fail.” --Benjamin Franklin 15 of 21 For Life Insurance Producer Use Only. Not for Use with the Public.
  16. 16. Looking ahead… 16 of 21For Life Insurance Producer Use Only. Not for Use with the Public.
  17. 17. Start NOW…More Flexibility In the Future START ASSESS ACCESS LEAVE Ages: 35 - 48 LTC Need Ages: 50-55 In Retirement A Legacy Life Insurance Use LIRP to Death Benefit (less Death Benefit supplement withdrawals/policy PROTECTION + income for loans) PAID INCOME Tax-deferred INFLATION, TAX-FREE3 to the GROWTH of Cash LONGEVITY, or beneficiary DEFEND Value RETIREMENT BOTH with Asset-based INCOME TAX- Policy Asset- Withdrawal or Long-Term Care FREE2 Distributions based Loan1 (LTC) Insurance LTC Insurance Life Insurance Life Insurance Retirement Plan Retirement Plan1Distributions from a life insurance to purchase another life insurance policy is considered a replacement of the current life insurance policy under state insurance laws. Any policy withdrawals, loans and loan interest will reduce policy values and mayreduce benefits. There are circumstances in which replacing your client’s existing life insurance or annuity can benefit your client. As a general rule, however, replacement is not in your client’s best interest. You should make a careful comparison of thecosts and benefits of your client’s existing policy and the proposed policy to analyze how a replacement may affect your client’s plan of insurance. You should provide this detailed information to your client and discuss whether replacement is in yourclient’s best interest.2Tax-free income assumes, among other things: (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 thetime 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 andmay reduce benefits.3For federal income tax purposes, life insurance death benefits generally pay 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. Situationsinclude, 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 insurableinterest based on state law; and an employer-owned policy unless the policy qualifies for an exception under IRC Sec. 101(j). Additionally, a portion of the Pacific PremierCare’s Death Proceeds may be income taxable if thepolicy was issued as part of an IRC Sec. 1035 income tax-free exchange. Clients should consult their independent tax advisor. 17 of 21Pacific PremierCare is a flexible premium adjustable life insurance policy with long term care insurance payable through reimbursements. For Life Insurance Producer Use Only. Not for Use with the Public.
  18. 18. Visualize the BIG Picture … … By Helping Your Clients Complete Their Retirement Picture 18 of 21 For Life Insurance Producer Use Only. Not for Use with the Public.
  19. 19. The Art of Retirement Workbook  Portraits to help you identify the right clients  Benefits of adding life insurance as an asset to your clients’ portfolios  Step-by-step guide to the Life Insurance Retirement Plan 19 of 21 For Life Insurance Producer Use Only. Not for Use with the Public.
  20. 20. Where Do I Start? Request the “Art of Retirement” Kit Visit www.paintingretirement.com to order 20 of 21 For Life Insurance Producer Use Only. Not for Use with the Public.
  21. 21. This material is not intended to be used, nor can it be used by anytaxpayer, for the purpose of avoiding U.S. federal, state or localtax penalties. This material is written to support the promotion ormarketing of the transaction(s) or matter(s) addressed by thismaterial. Pacific Life Insurance Company, its distributors and theirrespective representatives do not provide tax, accounting or legaladvice. Any taxpayer should seek advice based on the taxpayersparticular circumstances from an independent tax advisor.Pacific Life Insurance Company is licensed to issue insurance products in all states except New York. Product availability and features may vary by state.Insurance products and their guarantees, including optional benefits and any fixed subaccount crediting rates, are backed by the financial strength andclaims-paying ability of the issuing insurance company. Look to the strength of the life insurance company with regard to such guarantees as theseguarantees are not backed by the broker-dealer, insurance agency or their affiliates from which this product is purchased. Neither these entities nor theirrepresentatives make any representation or assurance regarding the claims-paying ability of the life insurance company.Pacific Life Insurance Company’s individual life insurance products are marketed exclusively through independent third-party life insurance producers,which may include bank affiliated entities.Non-guaranteed elements are not guaranteed by definition. As such, Pacific Life Insurance Company reserves the right to change or modify any non-guaranteed element. This right to change non-guaranteed elements is not limited to a specific time or reason.Some independent third-party life insurance producers, which may include bank affiliated entities, may limit availability of some optional riders based ontheir client’s age and other factors. Investment and Insurance Products: Not a Deposit – Not FDIC Insured – Not Insured by any Federal Government Agency – No Bank Guarantee – May Lose Value Pacific Life Insurance Company Newport Beach, CA (800) 800-7681 * www.PacificLife.com 21 of 21MKT12-6 For Life Insurance Producer Use Only. Not for Use with the Public.

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