Tax Diversifiying Your Retirement Income Ppt 14400 0409 F
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Tax Diversifiying Your Retirement Income Ppt 14400 0409 F

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Learn how to diversify your retirement nest egg with life insurance.

Learn how to diversify your retirement nest egg with life insurance.

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  • 1. Tax Diversifying Your Retirement Income 00386186CV Exp. 12/2010 This presentation includes a discussion of one or more tax-related topics. This tax-related discussion was prepared to assist in the promotion or marketing of the transactions or matters addressed in this material. It is not intended (and cannot be used by any taxpayer) for the purpose of avoiding any IRA penalties that may be imposed upon the taxpayer. Taxpayers should always seek and rely on the advice of their own independent tax professionals. Please understand that New York Life Insurance Company, its affiliates and subsidiaries, and agents and employees of any thereof, may not provide legal or tax advice to you.
  • 2. Retirement Isn’t What It Used to Be Personal Social Pension & Security Qualified Personal Social Pension & Assets Plans Assets Security Qualified Plans Once: Now: Retirement typically lasted Retirement can last longer about 10 years Many key sources of Social Security, defined income have been reduced SMRU 00386186CV (Exp. 12/10) benefit pensions and some personal savings Increased reliance on covered basic expenses personal assets
  • 3. Social Security Is Shaky Social Security was never intended to be the only source of income for retirement The maximum Social Security Benefit in 2008 for a worker retiring at full retirement age was $2,185 per month1 There are limits on how “ Without changes, by 2041 the Social Security SMRU 00386186CV (Exp. 12/10) much you can earn Trust Fund will be exhausted* and there will before your Social be enough money to pay only about 75 cents Security benefits are reduced and/or taxed for each dollar of scheduled benefits. ” * These estimates are based on the intermediate assumptions from the Social Security Trustees’ Annual Report to the Congress. Fast Facts & Figures about Social Security, 2008, SSA Publication No. 13-11785, 1 Released: August 2008; page 2
  • 4. Fewer Pensions, Limits on Qualified Plans Only 22% of today’s workforce has access to a defined benefit pension plan1 Fewer employer contributions to pension plans; limits on company matching of 401(k) plans1 More reliance on employee contributions Limitations on contributions Pensions & SMRU 00386186CV (Exp. 12/10) Qualified Plans 1 Trends in Retirement Plan Coverage Over the Last Decade,” Monthly Labor Review, Stephanie Costo, February 2006. ‘
  • 5. Personal Assets Are Critical Most people have more questions than answers when it comes to planning for retirement – How much will I need? – How much will I have? – How much do I need to save to cover the shortfall? For personal savings, the questions are: – Where should I put my money? – How will I be affected by taxes? SMRU 00386186CV (Exp. 12/10) Personal Assets
  • 6. Tax-Perfect Retirement Planning The “tax-perfect” retirement plan would include: – Contributions that are tax deductible – Accumulation that is tax deferred – Distributions that are tax free Such a plan does not exist, but you can have any two of these tax benefits SMRU 00386186CV (Exp. 12/10)
  • 7. Where Do You Think Taxes Are Going? Tax rates are currently at historically low levels, suggesting they may be higher when you retire Tax-diversifying your retirement savings might be sensible SMRU 00386186CV (Exp. 12/10) The graph above illustrates the high and low marginal tax rates over history. Exemptions, deductions and state and local taxes are not taken into account when illustrating these marginal tax rates. Your actual tax rates may vary from those show on the graph. Remember that historical rates are not a guarantee of future rates. Source: U.S. Department of Treasury, Internal Revenue Service, Statistics of Income, Historical income Tax Returns (2008)
  • 8. Is Tax Deferral the Best Strategy? 30 years ago, tax rates were so 1979-1980 2009 high and there were so many tax brackets, deferring income generally reduced the tax burden In the new tax reality, the tax leverage benefits of deferring may not exist Lower tax rates and fewer tax brackets today call for a SMRU 00386186CV (Exp. 12/10) smarter strategy
  • 9. Your Retirement Savings Tax Options Tax Treatment Contributions Tax deductible After tax Accumulation Tax deferred Tax deferred Distributions Taxable Tax free Financial Traditional IRA Roth IRA Vehicles 401(k) Tax-free municipal Pension plans bonds SMRU 00386186CV (Exp. 12/10) Profit-sharing Cash value life plans insurance Keogh
  • 10. A Non-Traditional Solution In addition to protecting your family, cash value life insurance can provide an ideal way to tax-diversify your retirement savings – Premiums are paid with after-tax dollars – Generates cash value that generally accumulates on a tax-deferred basis – Allows you access to policy values – before or during retirement – generally on a tax-free basis1 Upon your death, when many other investments are taxed, your beneficiaries also receive the SMRU 00386186CV (Exp. 12/10) death benefit income tax free Life Insurance 1 The cash value in a life insurance policy is accessed through policy loans, which accrue interest at the current rate, and cash withdrawals. Loans and withdrawals will decrease the total death benefit and total cash value.
  • 11. A “Self- Completing” Plan! If you live… – You enjoy all the “living benefits” of life insurance, including the potential for supplemental tax-free retirement income If you become disabled… – With the purchase of the Disability Waiver of Premium Rider, your premiums are waived, and all the benefits of your policy stay in force1 If you die… SMRU 00386186CV (Exp. 12/10) – Your family receives the full value of the policy, less any unpaid loans Personal and loan interest, income tax free Social Pension & Assets Security Qualified Plans 1 Available on whole life policies
  • 12. The Benefits of Tax Diversification Retirement Income of $90,000 Without Tax Tax Diversification Strategy Diversification $90,000 $90,000 $45,000 $45,000 401(k)/Qualified Plans 401(k)/Qualified Plans . Cash Value Life Ins. 100% taxable 100% taxable tax free2 $90,000 taxed at $45,000 taxed at $45,000 taxed at 25%1 15%1 0%2 = $6,750 tax = $0 tax SMRU 00386186CV (Exp. 12/10) = $22,500 tax $67,500 to spend $83,250 to spend after taxes after taxes 1 Marginal federal income tax bracket under current rates. 2 If structured properly.