Tax-Free Investment Planning

Transcription

1 Tax-Free Investment Planning Engage More Advisors with VUL

2 The Power of Tax-Free $100,000 Invested for 20 Years Tax Equivalent Yield (Federal) Tax Free Rate 24% Tax 32% Tax 35% Tax 5.00% 6.58% 7.35% 7.69% 6.00% 7.89% 8.82% 9.23% 7.00% 9.21% 10.29% 10.77% 8.00% 10.53% 11.76% 12.31% $400,000 $350,000 $300,000 $253,460 $295,139 $320,850 $386,968 Tax Equivalent Yield (Federal & State) Tax Free Rate 29% Tax 37% Tax 40% Tax 5.00% 7.04% 7.94% 8.33% 6.00% 8.45% 9.52% 10.00% 7.00% 9.86% 11.11% 11.67% 8.00% 11.27% 12.70% 13.33% $250,000 $200,000 $150,000 $100,000 $50,000 Tip: Use the supplementary IRR report pages in the illustration $- Fully Taxable Tax-Deferred LTCG Taxed Tax-Free Chart: 7% annual account growth. 32% federal tax rate and 15% LTCG rate assumed. Tax-deferred account is taxed as lump sum at end of year 20. Taxable account and LTCG account are taxed on gains annually at respective rates. For illustration purposes only. Tax-eq yield chart: Using estimated average state tax of 5%. Seven US states don't have state income tax: TX, FL, AK, SD, WY, WA, NV 2

3 The Power of Tax-Free Tax Diversification Stocks / Bonds Mutual Funds / SMAs Brokerage Accts. Taxable Accounts 401(k) Pension Annuities IRA Tax-Deferred Accounts Tax-Free Accounts Roth IRA Muni Bonds VUL 3

4 The Power of Tax-Free Comparison Characteristic Variable Annuity Roth IRA VUL Investment Accumulation Tax-Deferred Tax-Free Tax-Free Fees and Charges MA&E, Rider(s), Investment Account Charges, Investment Admin / Policy Charges, COI, Rider(s), Investment Client Income Taxable Tax-Free Tax-Free Death Benefit Taxable Bene Roth / Tax-Free Tax-Free Underwriting No No Yes Account Setup / Issue Fairly Immediate Fairly Immediate days For illustrative purposes only. Accelerated underwriting programs available from Lincoln, John Hancock, Principal Financial, AIG, Nationwide, and Pacific Life (as of 7/2018). 4

5 The Power of Tax-Free VA Comparison Illustration Inputs Jackson s Elite Access VA Sample VUL Policy Client Age Client Gender Male Male Account Type Non-Qualified Non-Qualified Premiums (20k per year for 5 years) $100,000 $100,000 Assumed Illustration Gross Rate 7% 7% Sub-Account Investment Costs 1.03% 1.03% Duration of Annual Income (age 65) For illustrative purposes only. Should not be reproduced. Preferred, non-tobacco. Sources: Jackson Elite Access VA Illustration Software & John Hancock VUL Illustration Software. 5

6 The Power of Tax-Free VA Comparison Illustration Outputs Jackson s Elite Access VA Sample VUL Policy Withdrawals (Start at age 65) $38,930 $33,096 Total Distribution over 10 Years $389,301 $330,960 Taxable Distribution Amount $289,301 $0 Net Surrender Value (Age 75) $0 $20,531 Net Death Benefit (Age 75) $0 $34,237 Total Distribution After Tax (35%) $288,046 $330,960 Total Distribution After Tax (24%) $319,869 $330,960 For illustrative purposes only. Should not be reproduced. Preferred, non-tobacco. Sources: Jackson Elite Access VA Illustration Software & John Hancock VUL Illustration Software. 6

7 The Power of Tax-Free Assume a Cost COT vs. COI Cost of Tax Cost of Insurance 7

8 The Power of Tax-Free The Design Prem CV + DB Insurance Premium Policy Cash Value Death Benefit 8

9 World Class Investments 9

10 World Class Investments Sample 80/20 Portfolio 20% 30% Annualized Returns QE 3/ Year 14.87% 20% 3 Year 8.30% 10% American Funds Growth Delaware Emerging Markets Delaware SMID Cap Core 20% American Funds International Franklin Templeton Global Bond 5 Year 9.04% 10 Year 7.13% Data from Lincoln Financial AssetEdge VUL Sub-Account Performance Quarter Ending 3/2018. For illustrative purposes only. Past performance is no guarantee of future results. 10

11 World Class Investments Leverage Outlier Holdings American Funds International: 3 of the 4 Managers for American Funds International Fund also manage the EuroPacific Growth retail fund: Sung Lee, Jesper Lyckeus Christopher Thomsen Retail Fund Assets: $163 Billion Male, Age 65, Standard NT GFOA MF Holding: $1,000,000 Liquidate Amount: $471,010 After Tax Amount: $400,356 American Funds Growth: 4 of the 6 Managers for American Funds Growth Fund also manage the Growth Fund of America retail fund: Mark L. Casey, Martin Romo Michael T. Kerr, Alan J. Wilson Retail Fund Assets: $190 Billion Single Premium MEC VUL Premium: $400,356 $1 Million Death Benefit Target: $38, th Year CV: $849,928 Lifetime No-Lapse Guarantee Templeton Global Bond: Same fund managers as the Templeton Global Bond retail fund: Michael Hasenstab Sonal Desai Retail Fund Assets: $40 Billion Taxable Tax-Free $528,990 in Growth Fund of America $1,000,000 Guaranteed DB + CV in American Funds Growth Lincoln Financial VUL ONE Illustration Example 7% Net. LTCG at 15%. 11

12 Find Henry and Louis Age Million HENRY High Earners Not Retired Yet Roth IRA Alternative / LIRP Variable Annuity (VA) Alternative College / Children Expense Funding Emergency Fund / Asset Protection LTC / Chronic Illness Reserve Age Million LOUIS Loved Ones with Unneeded Income Streams Annuity / IRA / SS / Pension Max Estate / Legacy Planning LTC / Chronic Illness Reserve Outlier / Concentrated Asset Transfer Philanthropy / Special Cause Broker World Article, May 2018: The $30 Trillion Transfer: Pre and Post Mortem 12

13 Offer a Packaged Solution In Theory: Buy term and invest difference. In Reality: Forget to convert the term to perm. Forget to invest the difference. 6 Points of Flexible Value 1 IF Death Benefit Concern: Family 3 Return of Investment Concern: You 5 6 Tax-Free Income WHEN Death Benefit Age 30 Age 55 Age 90+ Cash Value IF Chronic 2 Access Illness College Funding 4 Gifts / Expenses Emergencies / Debts 13

14 To Protect Your AUM Tom, Age 65 (Owns a CVLI Policy Since Age 40) $100,000 Annual Income Needed $20,000 from Social Security $10,000 from Pension $70,000 from Retirement Account 20 Year Time Period: (Age 65-85) Retirement Account Start Value: $1,000,000 Investments Held: S&P 500 Index Retirement Account Ending Value: Without the Strategy: Smooth Sailing Strategy: Use the cash value of the life insurance policy to withdrawal the needed funds in the year following a year with a market decline, in hopes of giving the investment account an opportunity to recover. S&P 500 Negative Years (5): 1973, 74, 77, 81, 90 With the Strategy: $444,791 $3,587,396 56% Decline 358% Increase Figures from AXA Smooth Sailing Strategy Sales Flyer, GE (9/16) (Exp. 9/18) Cat. #156457, G

15 Sales and Positioning Articles Top 5 Ways to Sell VUL Reference Guide The Single Premium Alternative to the VA The Investments The Untold Story of VUL Prudential VUL Protector Rise and Success Want to Make That a Combo Meal? Nationwide s Life and LTC Combo Nationwide s Single Premium LTC Solution The Future is Here with LincXpress and ExpressTrack Accelerated Underwriting Principal BOES Q&A with Dan Harty Business Opportunities Using CVLI for Income and Asset Protection A Simple Example Tyranny of the OR vs. Genus of the AND Distribution White Paper Prove it Pru What are Yours Strengths? Platinum or Bust An Experience with John Hancock s Vitality 15

16 Conclusion and Questions The key to any distribution model, especially as it pertains to disseminating a mass-market message, is three critical items. 1) Keep it simple. Really, really simple with the same message. 2) It must be relatable. Use the advisor s language. 3) It must be repeatable. You are there when the advisor can sell it to their clients without you. 16