levirobinson life insurance retirement plan · diversify your taxes during retirement the...

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Life Insurance Retirement PlanLife Insurance Retirement Plan

Presented by…

Levi Robinson, CFP®, ChFC, CLU, RICP, FLMI

Vice President Product Training

FOR FINANCIAL PROFESSIONAL USE ONLY-NOT FOR PUBLIC DISTRIBUTION

Vice President Product Training

AIG Global Consumer Insurance

Policies issued by American General Life Insurance Company ("AGL“)

IUL Target Market

DoctorsClients Seeking Tax

Diversificatione s ca o

DentistsSuccessful

Business Owners

Attorneys CPAs

High-IncomeBusiness Chiropractors


Executives

Veterinarians High Wage Earners

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A life insurance strategy that helps diversify your taxes during retirement

The conversation: “Pay them now, or pay them later!”


Today’s Focus

Today we’ll learn about income-tax diversification ffor your retirement savings

By discussing retirement plan taxation during contribution, accumulation and distribution

So that you can offer your high-income-earning f


clients and prospects a powerful supplemental retirement solution

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History of Top Marginal Tax Rates


What has been the secret to success?

P T /T D d tiblPre-Tax/Tax-Deductible

Tax-Deferral

401(k) 403(b) 457 Traditional IRA


401(k), 403(b), 457, Traditional IRA

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What makes pre-tax/tax-deductibletax-deferral work?

Contribution DistributionContribution Distribution

High Tax Rate Low Tax Rate


Big Tax Deduction/ Reduction

Lowest Possible Taxes

It worked before. . .

Tax rates were high in the 1940’s – 1970’s

Tax rates dropped dramatically in the 1980’s

Lower retirement income meant lowerretirement tax rate

With pensions and Social Security, retireesdidn’t own the assets and therefore didn’t

Contribution

Di t ib ti


didn t own the assets and, therefore, didn tpass them on to their children

Distribution

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Will it work now?

401(k) contributors had much lower taxrates from 1980’s through today

Pressure for tax rates to increase

Increasing levels of wealth for financiallysuccessful retirees

Because of personal savings in 40(k)s, IRAs, etc.,retirees now own significant assets that will be


gpassed to their children

Children’s tax rates are rising, creating significantincome tax implications

Contribution, Accumulation, Distribution

Every dollar put towards retirement goes through three phases:

The bad news is:– You must pay taxes on at least one of these three phases

The good news is:

Contribution Accumulation Distribution


The good news is:– You get to decide which one– It depends on the investments you choose

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Successful InvestingIn a successful retirement investment strategy,consistent long-term investment growth means:

– Your assets continue to grow throughout each phase


Assumptions: $10,000 annual contribution for 25 years. $42,800 distributions for the next 25 years. 6.00% growth rate

If the choice was yours,which would you pay taxes on?

Successful Investing



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Ask yourself: “Which phaseAsk yourself: Which phase would I rather pay taxes on?”

It’s likely your answer will be:“The lowest dollar figure!”


g

Where are the bulk of your retirement assets currently invested?– 401(k), IRA

Which phase will you pay taxes on with those plans?

Successful Investing



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What makes pre-tax/tax-deductibletax-deferral work?

Contribution Accumulation Distribution

Traditional Qualified Plan/

IRA Tax Treatment

Non-Taxable / Deductible

Tax-Deferred Taxable


Your Desired Tax Treatment

Taxable / Non-Deductible

Tax-Deferred Tax-Free

W ld ’t it k t itiWouldn’t it make sense to position

a portion of your retirement assets

to add tax diversification to your portfolio?


p

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Option 1: Roth-IRA

Pros Cons

• Accumulates tax deferred • Limited amount you can contribute per• Accumulates tax deferred

• No tax on qualified distributions

• No RMDs for Roth-IRA owners

• Income-tax-free inheritance to beneficiaries

• Limited amount you can contribute per year

• Cannot make-up missed contributions

• If your income is too high you cannot contribute

• Tax penalty may apply to withdrawals prior to age 59½


• RMDs for Roth-IRA beneficiaries

• No death benefit for “self-completing”

Is there another way?

MaximumMaximum

Funded

Life

Insurance


Insurance

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Income-tax-free death benefit for beneficiaries*

No defined IRS limitation on premiums*

No limit on gross income affecting your ability to

Life Insurance The list of benefits is long and powerful!

No limit on gross income affecting your ability tocontribute premiums

Missed premiums may be “made up” at a later time*

Tax-deferred accumulation*

Distributions using withdrawals and loans areincome-tax-free when structured properly*

Access to your values prior to age 59½

Take distributions as needed*


* Policy must comply with IRS requirements to qualify as a life insurance contract. Total premiums in the policy cannot exceed funding limitations under IRC 7702. Withdrawals during the first 15 years of the contract may be treated as income first and includible in policyholder’s income. If the policy is classified as a modified endowment contract (see IRC 7702A), withdrawals or loans are subject to regular income tax and an additional 10% tax penalty may apply if taken prior to age 59 ½. Distributions will reduce policy values and may reduce benefits. Availability of policy loans and withdrawals depend on multiple factors including but not limited to policy terms and conditions, performance, and fees or expenses.

a e d st but o s as eeded

No required minimum distributions (RMDs) for owners

Self-completing upon death– Death benefit exceeds account value

Case Study: Darren Johnson

Age: 40, good health

Occupation: Chiropractor Occupation: Chiropractor

Annual W-2 Income: $400,000

Targeted Retirement Age: 67 (full Social Security benefits)

Targeted Annual Retirement Savings:– 10% of W-2 income = $40,000


Current annual contributions to 401(k): $17,000

Additional annual amount targeted to contribute: $23,000

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Life Insurance Policy Assumptions (Elite Index II IUL):

Minimum death benefit (Initially $600,000)


Underwriting Class: Preferred

Option B increasing death benefit during contribution phase

Option A level death benefit during distribution phase

Assumed average annual growth rate (gross): 7.00%

Pay premiums to age 66


Withdrawals and loans for 20 years beginning at age 67

Policy endows at age 100 on a “current assumption” basis

Life Insurance Policy Non-Guaranteed Values:


Premiums: $23,000 per year for 26 years = $598,000

Illustrated Accumulated Value: At age 67 = $1,419,199

Distributions: $130,000 per year for 20 years = $2,600,000


st but o s $ 30,000 pe yea o 0 yea s $ ,600,000

*$4,481

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Will Darren be glad he paid taxMaximum Funded Life Insurance may be


Will Darren be glad he paid taxon the $598k and not the

$2.6M?

Maximum Funded Life Insurance may bethe only way to achieve these results!


Assumptions: $23,000 annual contribution for 26 years. $130,000 distributions for next 20 years. 7.00% growth rate

Now, let’s tell the story…..

Contribution – Accumulation – Distribution

“The Napkin Sale”


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$5

Additional Benefits:

1. Self-Completing at owner’s death

2. No set limit on contributions1

$10$20

The Bad Ne s Yo m st pa ta on one of these threeWh th b lk f ti t t tl i t d?If o had access to a retirement strateg that pro ided o ith the ta

3. Pre age 59 ½ access– No income tax or penalty tax2

4. Catch-up on missed contributions

5. No RMDs for owners

6. No RMDs for beneficiaries


The Bad News: You must pay tax on one of these threeThe Good News: You get to chooseWhere are the bulk of your retirement assets currently invested?Which of the numbers above is going to get taxed?Wouldn’t it make sense to diversify a portion of your portfolio?

If you had access to a retirement strategy that provided you with the taxtreatment you want, and you could put in as much money as you want,how much would you put into a plan like that every year?1. Policy must comply with IRS requirements to qualify as a life insurance contract. Total premiums in the policy cannot exceed

funding limitations under IRC 7702. 2. Assumes the policy is not a Modified Endowment Contract Withdrawals during the first 15 years of the contract may be treated

as income first and includible in policyholder’s income.

Questions?

For additional information, please contact your American General Life Companies representative or visit our producer web site at

http://eStation.americangeneral.com

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National Sales Desk can be reached at 1-800-677-3311

Or visit RetireStronger.com

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Important Information

Policies issued by: American General Life Insurance Company (AGL), Policy Form Number 13460,ICC13-13460 Rider Form Number 13972 13600 ICC13-13600 Issuing company AGL isICC13-13460, Rider Form Number 13972, 13600, ICC13-13600. Issuing company AGL isresponsible for financial obligations of insurance products and is a member of AmericanInternational Group, Inc. (AIG). AGL does not solicit business in the state of New York. Policiesand riders not available in all states. These product specifications are not intended to be all-inclusive of product information. State variations may apply. Please refer to the policy for completedetails. There may be a charge for each rider selected. See the rider for details regarding thebenefit descriptions, limitations and exclusions.

Guarantees are backed by the claims-paying ability of the issuing insurance company.

AGLC107915

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