Indexed Universal Life vs. Term Insurance and a Tax Deductible Retirement Plan (TDRP)

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1 Indexed Universal Life vs. Term Insurance and a Tax Deductible Retirement Plan () For Harvey Pierce, MD Presented By: [Licensed user's name appears here]

2 Indexed Universal Life vs. Term Insurance and a Tax Deductible Retirement Plan () Preface A decision to acquire additional life insurance can represent one of several significant phases in your overall financial planning. An important part of this decision will involve your selection of the appropriate life insurance policy. There are several important factors to consider which include: 1. The time frame for the insurance need; 2. Your available cash flow; 3. Your alternative uses for the cash flow; 4. The income tax considerations. An integrated analysis of these points creates useful information that helps guide your purchasing evaluation. The precision of the conclusions, however, is contingent upon the accuracy of the data utilized. You should be positive that all premises and conditions accurately reflect your goals and expectations. The accompanying analysis contrasts a cash value policy to a term insurance alternative. Any difference in premiums between the two choices has been evaluated regarding time/use of money. The study produces information which should form a basis from which you and your advisors can draw informed conclusions. Based upon the results of the analysis, we recommend funding your life insurance requirement with the cash value policy illustrated rather than a term life insurance policy. Cumulative Payments Cumulative Cash Flow Term and Term and $3,362,136 $474,34 Yrs $1,596,63 Yrs Term Insurance Cash Value $ Yrs Yrs $1,287,28 $787,28 This graphic assumes the non-guaranteed values shown continue in all years. This is not likely, and actual results may be more or less favorable. Page 1

3 Indexed Universal Life vs. Term Insurance and a Tax Deductible Retirement Plan () Summary Yield 7.5% Tax Rate 4.% Interest Rate 7.5% Initial 5, Payment 5, Term Insurance Along with a Tax Deductible Retirement Plan Yr Male Age (1) Cost of the Proposed Premium (2) Cost of Term and * (3) Cash Flow from (4) Value of if Distributed (5) of (6) Term (7) Combined (8) Policy Loan Proceeds (9) Accum Value** (1) Cash Value** (11) ,717 23,717 2,52 24,62 5, 524,62 21,414 6, , ,717 23,717 42,321 5,785 5, 55,785 44,344 31, , ,717 23,717 65,542 78,65 5, 578,65 68,921 57, , ,717 23,717 9,255 18,36 5, 68,36 95,283 85,18 595, ,717 23, , ,867 5, 639, , , , ,717 23, , ,455 5, 673, ,34 146, , ,717 23, ,335 29,22 5, 79,22 186, ,12 686, ,717 23,717 26,38 247,246 5, 747, , ,38 722, ,717 23, , ,733 5, 787,733 26,72 257,797 76, ,717 23, ,685 33,822 5, 83,822 32,81 3,631 82, ,717 23, ,9 376,679 5, 876, , , , ,717 23, ,57 425,483 5, 925, , , , ,717 23, , ,423 5, 977, ,8 451,8 951, ,717 23, , ,7 5, 1,32,7 58,76 58,76 1,8, ,717 23, ,94 591,528 5, 1,91, , ,312 1,69, ,717 23, , ,136 5, 1,154, , ,981 1,134, ,717 23,717 72,767 72,767 5, 1,22,767 75,42 75,42 1,25, ,717 23, , ,678 5, 1,291,678 78,98 78,98 1,28, ,717 23, , ,145 5, 1,367, , ,854 1,361, ,717 23, , ,461 5, 1,447, ,62 948,62 1,448, , , , ,312 64, , ,353 1,434, ,73 927,61 927,61 927,61 67,73 92,323 92,323 1,42, , ,37 912,37 912,37 7,634 96,655 96,655 1,46, , ,25 892,25 892,25 73, , ,479 1,393, , , , ,883 76,763 88,946 88,946 1,38, , ,54 838,54 838,54 79, , ,212 1,369, ,265 83,81 83,81 83,81 83, , ,567 1,358, , , , ,214 86, , ,236 1,349, , , , ,294 9, , ,463 1,341, , , , ,524 93, , ,516 1,335, ,34 474,34 787, ,435 *See column (6) on Term and Detail Page. withdrawal has been grossed up to account for the income tax required to produce the after tax number shown in Columns (2) and (3). **This is an InsMark supplemental illustration for indexed universal life. In an actual presentation, this footnote refers to an accompanying basic illustration from a specific life insurance company with important details, caveats, and guarantees. 3 Year Summary Term/ Payments 474,34 474,34 Cash Flow 787, ,435 Living Values 835, ,524 1,335,516 Page 2

4 Indexed Universal Life vs. Term Insurance and a Tax Deductible Retirement Plan () Summary Yield 7.5% Tax Rate 4.% Interest Rate 7.5% Initial 5, Payment 5, Term Insurance Along with a Tax Deductible Retirement Plan Yr Male Age (1) Cost of the Proposed Premium (2) Cost of Term and * (3) Cash Flow from (4) Value of if Distributed (5) of (6) Term (7) Combined (8) Policy Loan Proceeds (9) Accum Value** (1) Cash Value** (11) ,482 61,345 61,345 61,345 97, , ,686 1,331, ,36 532, , ,167 11,36 83,267 83,267 1,33, , , , ,351 15, , ,593 1,331, ,33 367, , ,217 19,33 836,22 836,22 1,336, ,482 27,37 27,37 27,37 113, ,94 843,94 1,343, , ,32 162,32 162,32 117, , ,763 1,355, ,221 42,368 42,368 42, , , ,121 1,372, , , , ,553 1,393, ,491 92,644 92,644 1,42, , , ,993 1,453, , , ,938 1,429, ,326 97,917 97,917 1,47, , , ,878 1,387, , , ,739 1,369, , , ,371 1,353, , , ,531 1,338, , , ,855 1,324, , ,99 811,99 1,311, , , ,568 1,299, , ,28 787,28 1,287,28 474,34 474,34 1,596,63 3,362,136 *See column (6) on Term and Detail Page. withdrawal has been grossed up to account for the income tax required to produce the after tax number shown in Columns (2) and (3). **This is an InsMark supplemental illustration for indexed universal life. In an actual presentation, this footnote refers to an accompanying basic illustration from a specific life insurance company with important details, caveats, and guarantees. 5 Year Summary Term/ Payments 474,34 474,34 Cash Flow 1,596,63 1,596,63 Living Values 787,28 1,287,28 Page 3

5 Indexed Universal Life vs. Term Insurance and a Tax Deductible Retirement Plan () Term and Detail Yield 7.5% Tax Rate 4.% Term Insurance and Cost Analysis Term Insurance and Value Analysis Year Male Age (1) Cost of the Proposed Premium (2) Alternative Term Premium (3) Retirement (4) Amount Remaining = For (5) Gross up of Col (5) Available For (6) Cost of Term and (2)+(3)+(4) (7) Value of Account (8) Value of if Distributed (9) of (1) of Term Insurance , ,117 38,528 23,717 41,4 2,52 24,62 5, , ,117 38,528 23,717 84,642 42,321 5,785 5, , ,117 38,528 23, ,84 65,542 78,65 5, , ,117 38,528 23,717 18,51 9,255 18,36 5, , ,117 38,528 23, , , ,867 5, , ,117 38,528 23, ,92 144, ,455 5, , ,117 38,528 23, ,67 174,335 29,22 5, , ,117 38,528 23, ,76 26,38 247,246 5, , ,117 38,528 23, , , ,733 5, , ,117 38,528 23, ,37 275,685 33,822 5, , ,117 38,528 23, , ,9 376,679 5, , ,117 38,528 23,717 79, ,57 425,483 5, , ,117 38,528 23, ,75 397, ,423 5, , ,117 38,528 23, , , ,7 5, , ,117 38,528 23, ,88 492,94 591,528 5, , ,117 38,528 23,717 1,9, , ,136 5, , ,117 38,528 23,717 1,21,278 72,767 72,767 5, , ,117 38,528 23,717 1,319, , ,678 5, , ,117 38,528 23,717 1,445, , ,145 5, , ,117 38,528 23,717 1,579,12 947, ,461 5, ,857-64,857-18,95 1,565,52 939, , ,73-67,73-112,838 1,546,17 927,61 927, ,634-7, ,723 1,52,62 912,37 912, ,653-73, ,755 1,487,84 892,25 892, ,763-76, ,938 1,446, , , ,966-79, ,277 1,397, ,54 838, ,265-83, ,775 1,339,669 83,81 83, ,663-86, ,438 1,272,24 763, , ,163-9,163-15,272 1,193, , , ,768-93, ,28 1,14,26 662, , ,34 12, 787, ,95-541, ,34 Note: Tax Deductible Retirement Plan values do not reflect market rate adjustments, if any. Tax Deductible Retirement Plan is assessed: Tax on withdrawals. Entries in Column (4) are after tax incl. add'l tax before age 59½: 1.% Management fees reflected in column (7): 1.% Page 4

6 Indexed Universal Life vs. Term Insurance and a Tax Deductible Retirement Plan () Term and Detail Yield 7.5% Tax Rate 4.% Term Insurance and Cost Analysis Term Insurance and Value Analysis Year Male Age (1) Cost of the Proposed Premium (2) Alternative Term Premium (3) Retirement (4) Amount Remaining = For (5) Gross up of Col (5) Available For (6) Cost of Term and (2)+(3)+(4) (7) Value of Account (8) Value of if Distributed (9) of (1) of Term Insurance ,482-97, ,47 1,2,242 61,345 61, ,36-11,36-168, , , , ,246-15, ,41 757, , , ,33-19,33-182, ,28 367, , , , ,137 45,62 27,37 27, , , ,312 27,53 162,32 162, , ,221-23,72 7,614 42,368 42, ,368-42,368-7, ,34 12, 1,596,63-1,134,29-1,89,49 474,34 Note: Tax Deductible Retirement Plan values do not reflect market rate adjustments, if any. Tax Deductible Retirement Plan is assessed: Tax on withdrawals. Entries in Column (4) are after tax incl. add'l tax before age 59½: 1.% Management fees reflected in column (7): 1.% Page 5

7 Indexed Universal Life vs. Term Insurance and a Tax Deductible Retirement Plan () Summary Yield 7.5% Tax Rate 4.% Interest Rate 7.5% Initial 5, Gross Interest Rate Required on a Tax Deductible Retirement Plan to Match Indexed Universal Life Policy Values over 5 Years After Applying the Term Payment Illustrated Gross Interest Rate Required To match Accumulation Value of: $787, % To match Cash Value of: $787, % To Match Accumulation Value $787, % Required To Match Cash Value $787, % Required Tax Considerations 1. Tax Deductible Retirement Plan: Interest is tax deferred. 2. Indexed Universal Life: a. including available cash value component is income tax free. b. Loans are income tax free as long as the policy is kept in force. c. Withdrawals and other non-loan policy cash flow up to cost basis (not in violation of IRC Section 772) are income tax free as a return of premium. d. Cash values shown assume most favorable combination of b and/or c. This is an InsMark supplemental illustration for indexed universal life. In an actual presentation, this footnote refers to an accompanying basic illustration from a specific life insurance company with important details, caveats, and guarantees. Page 6

8 Indexed Universal Life vs. Term Insurance and a Tax Deductible Retirement Plan () A Look at Year 5 Term Insurance and a Indexed Universal Life 3,362,136 1,596,63 Cum. Net 474,34 474,34 Payments Cumulative Cash Flow 1 787,28 1,287,28 Living Values (1) For Retirement Page 7

9 Indexed Universal Life vs. Term Insurance and a Tax Deductible Retirement Plan () 5 Year Analysis Cumulative Payments Cumulative Cash Flow Term and Term and $3,362,136 $1,596,63 Yrs $474,34 Yrs Term Insurance Cash Value $1,287,28 $787,28 $ Yrs Yrs Page 8

10 Indexed Universal Life vs. Term Insurance and a Tax Deductible Retirement Plan () Cash Flow Comparison of Years 21-5 $3,6, $3,362,136 $2,7, $1,8, $1,596,63 $9, $ Years (21-5) At Year 5 Cumulative Cash Flow - $1,596,63 Cumulative Policy Cash Flow - $3,362,136 Page 9

11 Indexed Universal Life vs. Term Insurance and a Tax Deductible Retirement Plan () 5 Year Analysis $1,, $75, $787,28 $5, $474,34 $25, $ $ Years At Year 5 Net Payments (Cumulative) $474,34 Distributed Values $ Cash Values $787,28 Page 1

12 Indexed Universal Life vs. Term Insurance and a Tax Deductible Retirement Plan () 5 Year Analysis $1,6, $1,287,28 $1,2, $8, $4, $474,34 $ $ Years At Year 5 Net Payments (Cumulative) $474,34 Term Plus $ Policy $1,287,28 Page 11

Indexed Universal Life vs. A Tax Deductible Retirement Plan (TDRP) For Joe Tanner. Presented By: [Licensed user's name appears here]

Indexed Universal Life vs. A Tax Deductible Retirement Plan () For Joe Tanner Presented By: [Licensed user's name appears here] Indexed Universal Life vs. A Tax Deductible Retirement Plan () Preface A