Life Insurance in Retirement Program

Transcription

1 Life Insurance in Retirement Program Looking at options as unique as you are Prepared for d Client Prepared by MNL Producer February 9, 2011 This presentation uses Eclipse Indexed Life or ICC This hypothetical presentation is intended to show how assumptions affect the cash value and death benefit and it may not be used to project or predict dividend or interest credited results. Assumptions include a hypothetical interest rate, current mortality charges, and current expenses. The actual cash value and death benefit will vary based on a number of factors including the amount of dividend or interest credited. The vehicle used in this presentation is an indexed life insurance contract. Please keep in mind that the primary reason to purchase a life insurance product is the death benefit. Life insurance products contain fees, such as mortality and expense charges, and may contain restrictions, such as surrender charges. Policy holders could lose money in this product. This material may contain a general analysis of federal tax issues. It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. This information is provided to support the promotion or marketing of ideas that may benefit a taxpayer. Taxpayers should seek the advice of their own tax and legal advisors regarding any tax and legal issues applicable to their specific circumstances. Not valid without a compliance illustration of policy values A DOFU 11/2010

2 Life Insurance in Retirement Program Looking at options as unique as you are When most people think of retirement, they think of golf, gardening, walks along the beach, or visiting exotic places. Retirement can be a chance to do the things that you never had time for during your working years. But in order to afford to do those things, without sacrificing your Comfort today, you need proper planning. Accumulating for retirement is not as easy or simple as just saving money. Proper planning can make retirement savings go farther, with less sacrifice today. There are three basic levels of retirement funds that will help meet your goals; the Basics Layer, the Comfort Layer, and the Legacy Layer. Each of these layers has different characteristics and potential funding vehicles, as are outlined in the chart below. Not valid without a compliance illustration of policy values. Page 2 of 13

3 Life Insurance in Retirement Program Looking at options as unique as you are Basics Layer The Basics layer is the minimum amount of income you need to pay for things like food, clothing, shelter, etc. This layer is typically funded by very conservative vehicles. Some examples would be Social Security payments or Defined Pension payments. The Basics level does not provide for extras like trips, hobbies, or passing dollars onto heirs. You want to be sure that the funding vehicles in this level are not going to vary the payments to you erratically. Unlike the assets or vehicles used for the Comfort layer, you cannot typically skip the expenses in this layer. It is easy to skip a round of golf, for example, but not easy to skip meals. Comfort Layer The Comfort Layer is the layer that provides the quality of life for you and your loved ones that you have worked so hard for. This is the layer that funds all of the extras that can make your retirement rewarding and more relaxing. This layer is typically funded by more aggressive assets or vehicles than the Basics layer. Some of the vehicles available in this layer include; Traditional IRAs, Roth IRAs, Qualified Plan Assets (typically 401(k)s), Annuities, Life Insurance Cash s, or taxable savings amount. Not valid without a compliance illustration of policy values. Page 3 of 13

4 Life Insurance in Retirement Program Looking at options as unique as you are Taxes With the assets in the Basics Layer, you typically have less choice about how those assets will be taxed. Social Security can be partially taxed, and defined benefit pension plans are typically fully taxed at ordinary income tax rates. Quick Facts The average Social Security benefit for a retired couple in 2010 is $1,892 per month, or $22,704 a year. Source: Not valid without a compliance illustration of policy values. Page 4 of 13

5 Life Insurance in Retirement Program Looking at options as unique as you are Funding Vehicles have three points at which taxation needs to be looked at. Taxes at Contribution The first layer of taxation is at contribution. There are two types of contribution dollars: Taxable Tax Deductable Taxable: These are typically non-qualified vehicles like annuities, taxable investments or life insurance. The only qualified plan that fits in this category is a Roth IRA. Tax deductable dollars: With most qualified plans, with the exception of Roth IRAs, the contributions to the plan are deductable from your income taxes. Taxes During Growth The second layer of taxation is while the assets are growing in the vehicle. There are two types of growth: Taxable Growth Tax Deferred Growth Taxable Growth: The gains within the vehicle are taxed each year. Taxable investments are the most common types of vehicles that have this tax treatment. Tax Deferred Growth: The gains within the vehicle are not taxed each year. Qualified plans, Annuities, and Life Insurance have this feature. Not valid without a compliance illustration of policy values. Page 5 of 13

6 Life Insurance in Retirement Program Looking at options as unique as you are Taxes at Distribution The final layer is at distribution. There are three types of taxation that can occur at distribution: Ordinary Income Taxation Capital Gains Taxation Tax Preferred Ordinary income taxes are the taxes that you pay on income that is classified as "ordinary income". These taxes are progressive based on the amount of income you are reporting. This means that the higher your income, the higher the marginal tax rate. Capital gains taxes are the taxes that you pay on gains related to sales of capital assets. There are two types of capital gains; Long-term and short-term. Long-term capital gains rates are usually lower than your marginal ordinary tax rate. Short-term capital gains are taxed at your ordinary income rates. Tax Preferred can mean a couple of different things, depending on where the money is coming from. No Taxation: Some types of vehicles, like Roth IRAs have no taxation at distribution. Partially Taxable: Some vehicles, like Annuities, you may be only taxed at ordinary income tax rates on part of the distribution. Potentially No Taxation: Another option is life insurance, which can allow you to distribute dollars from the contract without taxation, as long as the distributions are structured properly and the contract has not been designated as a Modified Endowment Contract (MEC). This type of distribution is subject to restrictions. Not valid without a compliance illustration of policy values. Page 6 of 13

7 Life Insurance in Retirement Program Looking at options as unique as you are The following chart summarizes the contribution limits and taxation of different retirement funding vehicles: Contributions Growth Distributions** Contribution Limits? 401 (k) Traditional IRA Tax Deductable Tax Deferred Ordinary Income Tax Deductable Tax Deferred Ordinary Income Roth IRA Annuity Taxable Investment Life Insurance Taxable Taxable Taxable Taxable* Tax Deferred Tax Preferred Tax Deferred Partially Taxable Taxable Capital Gains Tax Deferred^ Tax Preferred Yes Yes Yes No No No Quick Facts Most people, if asked, would state that medical expenses are the biggest expenses that they will have in retirement. The actual largest expense in retirement is taxes. Top 3 1. Personal Income Tax 2. Vacations or Leisure Travel 3. Food Source: Financial challenges and Life Experiences of the year old Millionaire Investor Follow-up Study. Securian Financial Group, * Some of the contributions are allocated to the cost of insurance. ** Note that many of the vehicles listed have penalties associated with premature distribution of assets. These penalties may arise from either/or IRS or contract restrictions. Withdrawals and loans from a life insurance contract are subject to special tax rules if the policy is a Modified Endowment Contract (MEC). ^Aside from contribution limits or tax treatment; there are other factors that consumers should consider before purchasing any of these products. These factors include investment objectives, costs and expenses, liquidity, safety, fluctuation of principal or return, crediting rates/caps, rider availability, surrender periods or other product/investment characteristics. Note that there may be little to no cash value available for loans in a life insurance policy's early years. Not valid without a compliance illustration of policy values. Page 7 of 13

8 Life Insurance in Retirement Program Looking at options as unique as you are Diversifying Taxes Tax rates can move around a lot, so how are we able to decide which taxation method is right for us? There is no way to predict where tax rates will go in the future, so when we are designing a portfolio for retirement, it makes sense to diversify our taxation methods. This is no different than diversifying our investment choices. We never know which investments are going to do well and which are going to do poorly, so we buy a little of lots of different types. We can do the same thing with the taxation we choose. We can use three buckets to diversify our taxation. We can use an ordinary taxation bucket, a capital gains tax bucket, and a tax preferred bucket. Not valid without a compliance illustration of policy values. Page 8 of 13

9 Life Insurance in Retirement Program Looking at options as unique as you are Why is Eclipse Indexed Life insurance a viable option to potentially accumulate wealth and supplement your other retirement programs? 1. Tax-Deferral: As with your qualified retirement plans, with tax-deferral you potentially accumulate more dollars. With more dollars working for you, the power of compounding over many years gives you the potential to produce a much larger sum at retirement. 2. Cash Available¹: With life insurance, you can take dollars out of your policy on a Tax-Favored* basis. Eclipse Indexed Life 3. Self-Completing: With life insurance, you can still achieve your financial goal even if you become disabled, if the waiver of premium option is elected. There is a cost attached to selecting the waiver of premium rider on your contract. Plus, you leave a legacy at your death for family or organizations special to you. There are many factors that must be taken into account when choosing where to place your investment dollars. These include your objective(s) and time-frame, acquisition and liquidation costs, growth potential, guarantees, annual expenses, and risk and liquidity factors. Often overlooked is the tax treatment of contributions, accumulation of earnings, and distributions. While focusing on the death benefit, people often overlook the potential for efficiently accumulating cash value inside their life insurance policies. While the natural inclination is to pay as little as possible for protection, additional premium dollars have the potential to efficiently accumulate more cash value because a policy's cash value grows tax deferred*. Eclipse Indexed Life is designed to provide life insurance protection. While the interest crediting options available with the product are attractive for cash value accumulation, your fundamental objective in buying this product should be the peace of mind that the life insurance protection provides to you and your family or business. ¹ charges may apply. See illustration for specific charges. * Distributions from a modified endowment contract (MEC) may be taxable and if the taxpayer is under the age of 59 ½ may also be subject to an additional 10% penalty tax. Check the attached illustration to determine if the policy illustrated is a MEC. Not valid without a compliance illustration of policy values. Page 9 of 13

10 Life Insurance in Retirement Program Looking at options as unique as you are s Summary Date: February 9, 2011 Prepared For: d Client Prepared By: MNL Producer Assumed Fixed Rate: 4.50% Allocation: 0.00% Assumed Indexed Rate: 8.81% Allocation: % Male Age 45 Preferred Non-Tobacco Accumulation Phase (ages 45-65): at Age 65 Total Premiums Paid Net Gain During Accumulation $501,052 $210,000 $291,052 Distribution Phase (ages 66-86): Average Annual Tax Favored * Number of Years of s Total s $68, $1,442,553 Life Insurance s: At Issue - Age 45 End of Accumulation Phase - Age 65 End of Distribution Phase - Age 86 Post Distribution - Age 100 $214,456 $715,508 $379,119 $3,685,269 Assuming Occurs at Age Total and Retirement s Available** $214,456 $715,508 $1,821,672 $5,127,822 Total Premiums Paid $10,000 $210,000 $210,000 $210,000 and/or Retirement s Net of Premium Payments $204,456 $505,508 $1,611,672 $4,917,822 Administrative and insurance charges are deducted every month regardless of whether premium outlays are made. Depending upon actual policy experience, the Owner may need to increase premium payments. These values assume that the currently illustrated non-guaranteed elements will continue unchanged for all years shown. This is not likely to occur and actual results may be more or less favorable than those shown. * Distributions from a modified endowment contract (MEC) may be taxable and if the taxpayer is under the age of 59 ½ may also be subject to an additional 10% penalty tax. Check the attached illustration to determine if the policy illustrated is a MEC. ** Total and Retirement s include total plus any distributions received. Not valid without a compliance illustration of policy values. Page 10 of 13

11 Life Insurance in Retirement Program Looking at options as unique as you are s Summary Date: February 9, 2011 Prepared For: d Client Prepared By: MNL Producer Assumed Fixed Rate: 4.50% Allocation: 0.00% Assumed Indexed Rate: 8.81% Allocation: % Male Age 45 Preferred Non-Tobacco Policy Year Age Net ,000 2, , ,000 12, , ,000 23, , ,000 34, , ,000 47, , ,000 61, , ,000 77, , ,000 95, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,213 Totals at age 74 -$408,237 $264,608 $338,213 Administrative and insurance charges are deducted every month regardless of whether premium outlays are made. Depending upon actual policy experience, the Owner may need to increase premium payments. Distributions from a modified endowment contract (MEC) may be taxable and if the taxpayer is under the age of 59 ½ may also be subject to an additional 10% penalty tax. Check the attached illustration to determine if the policy illustrated is a MEC. Net includes premiums minus any distributions from policy loans and/or partial surrenders (withdrawals). Not valid without a compliance illustration of policy values. Page 11 of 13

12 Life Insurance in Retirement Program Looking at options as unique as you are s Summary Date: February 9, 2011 Prepared For: d Client Prepared By: MNL Producer Assumed Fixed Rate: 4.50% Allocation: 0.00% Assumed Indexed Rate: 8.81% Allocation: % Male Age 45 Preferred Non-Tobacco Policy Year Age Net , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,305 1,052, ,066,074 1,203, ,274,842 1,374, ,513,889 1,568, ,786,292 1,786, ,089,997 2,089, ,428,145 2,428, ,804,172 2,804, ,221,842 3,221, ,685,269 3,685, ,198,956 4,198, ,767,825 4,767, ,397,259 5,397, ,093,144 6,093,144 Totals at age 104 -$1,232,553 $6,093,144 $6,093,144 Administrative and insurance charges are deducted every month regardless of whether premium outlays are made. Depending upon actual policy experience, the Owner may need to increase premium payments. Distributions from a modified endowment contract (MEC) may be taxable and if the taxpayer is under the age of 59 ½ may also be subject to an additional 10% penalty tax. Check the attached illustration to determine if the policy illustrated is a MEC. Net includes premiums minus any distributions from policy loans and/or partial surrenders (withdrawals). Not valid without a compliance illustration of policy values. Page 12 of 13

13 Life Insurance in Retirement Program Looking at options as unique as you are s Summary Date: February 9, 2011 Prepared For: d Client Prepared By: MNL Producer Assumed Fixed Rate: 4.50% Allocation: 0.00% Assumed Indexed Rate: 8.81% Allocation: % Male Age 45 Preferred Non-Tobacco Policy Year Age Net ,861,909 6,861, ,710,583 7,710, ,646,847 8,646, ,679,089 9,679, ,816,475 10,816, ,069,011 12,069, ,447,629 13,447, ,964,262 14,964, ,631,939 16,631, ,464,880 18,464, ,478,610 20,478, ,690,069 22,690, ,117,744 25,117, ,781,806 27,781, ,704,262 30,704, ,909,122 33,909,122 Totals at age 120 -$1,232,553 $33,909,122 $33,909,122 Administrative and insurance charges are deducted every month regardless of whether premium outlays are made. Depending upon actual policy experience, the Owner may need to increase premium payments. Distributions from a modified endowment contract (MEC) may be taxable and if the taxpayer is under the age of 59 ½ may also be subject to an additional 10% penalty tax. Check the attached illustration to determine if the policy illustrated is a MEC. Net includes premiums minus any distributions from policy loans and/or partial surrenders (withdrawals). Not valid without a compliance illustration of policy values. Page 13 of 13

14 Life Insurance Policy Illustration Eclipse Indexed Life Prepared For d Client Presented By MNL Producer February 09, 2011 Minnesota Life, founded in 1880, is highly rated by the major independent rating agencies that analyze financial soundness and claims-paying ability of insurance companies. For more information about the rating agencies and to see where Minnesota Life's ratings rank relative to other ratings, please see our website at Eclipse Indexed Life is designed to provide life insurance protection. While the Interest crediting options available with the product are attractive for cash value accumulation, your fundamental objective in buying this product should be the peace of mind that the life insurance protection provides to you and your family or business.

15 Proposed Insured: d Client Male / Issue Age 45 Preferred, Non-Tobacco Initial : $214,456 Initial Option: Increasing Initial Annual Premium : $10, Illustrated Premium Frequency: Annual Supplemental Illustration The premium outlays shown are allocated 0% to the Fixed Account and 100% to the Indexed Accounts. For guaranteed values, please see the Basic Illustration. NON-GUARANTEED VALUES Fixed Account Interest 4.50% Indexed Accounts Interest 8.81% and Current Charges Year Age Premium Partial Policy Loan Loan Interest Net Accumulation , ,000 9,023 2, , , ,000 18,816 12, , , ,000 29,446 23, , , ,000 40,999 34, , , ,000 53,553 47, , , ,000 67,190 61, , , ,000 81,999 77, , , ,000 98,072 95, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,508 # ,331 1,638-68, , , , ,023 5,330-68, , , , ,909 9,216-68, , , , ,000 13,306-68, , , , ,304 17,611-68, , , , ,835 22,142-68, , , ,905 This illustration assumes that the currently illustrated non-guaranteed elements will continue unchanged for all years shown. However, non-guaranteed elements will likely change from time to time. This means that actual results will be more or less favorable than those shown. Administrative and insurance charges are deducted every month regardless of whether premium outlays are made. Depending upon actual policy experience, the Owner may need to increase premium payments. Any policy loans and partial surrenders will affect policy values and may require additional premiums to avoid policy termination. # Denotes a change to the Option. This Supplemental Illustration is valid only when accompanied by a complete Basic Illustration. Prepared on: A DOFU: 05/2009 Page 1 of 3

16 Proposed Insured: d Client Male / Issue Age 45 Preferred, Non-Tobacco Initial : $214,456 Initial Option: Increasing Initial Annual Premium : $10, Illustrated Premium Frequency: Annual Supplemental Illustration The premium outlays shown are allocated 0% to the Fixed Account and 100% to the Indexed Accounts. For guaranteed values, please see the Basic Illustration. NON-GUARANTEED VALUES Fixed Account Interest 4.50% Indexed Accounts Interest 8.81% and Current Charges Year Age Premium Partial Policy Loan Loan Interest Net Accumulation ,604 26,911-68, , , , ,624 31,931-68, , , , ,906 37,213-68,693 1,051, , , ,466 42,773-68,693 1,142, , , ,318 48,625-68,693 1,242, , , ,478 54,785-68,693 1,350, , , ,960 61,267-68,693 1,467, , , ,783 68,090-68,693 1,594, , , ,964 75,271-68,693 1,731, , , ,522 82,829-68,693 1,880, , , ,477 90,784-68,693 2,042, , , ,850 99,157-68,693 2,217, , , , ,969-68,693 2,406, , , , ,244-68,693 2,610, , , , ,005-68,693 2,832, , , , , ,071, , , , , ,329, , , , , ,607, , , , , ,906, , , , , ,234, ,305 1,052, , , ,593,180 1,066,074 1,203, , , ,987,121 1,274,842 1,374, , , ,421,062 1,513,889 1,568, , , ,898,593 1,786,292 1,786, , , ,418,194 2,089,997 2,089, , , ,983,571 2,428,145 2,428,145 This illustration assumes that the currently illustrated non-guaranteed elements will continue unchanged for all years shown. However, non-guaranteed elements will likely change from time to time. This means that actual results will be more or less favorable than those shown. Administrative and insurance charges are deducted every month regardless of whether premium outlays are made. Depending upon actual policy experience, the Owner may need to increase premium payments. Any policy loans and partial surrenders will affect policy values and may require additional premiums to avoid policy termination. # Denotes a change to the Option. This Supplemental Illustration is valid only when accompanied by a complete Basic Illustration. Prepared on: A DOFU: 05/2009 Page 2 of 3

17 Proposed Insured: d Client Male / Issue Age 45 Preferred, Non-Tobacco Initial : $214,456 Initial Option: Increasing Initial Annual Premium : $10, Illustrated Premium Frequency: Annual Supplemental Illustration The premium outlays shown are allocated 0% to the Fixed Account and 100% to the Indexed Accounts. For guaranteed values, please see the Basic Illustration. NON-GUARANTEED VALUES Fixed Account Interest 4.50% Indexed Accounts Interest 8.81% and Current Charges Year Age Premium Partial Policy Loan Loan Interest Net Accumulation , , ,598,758 2,804,172 2,804, , , ,268,144 3,221,842 3,221, , , ,996,502 3,685,269 3,685, , , ,789,028 4,198,956 4,198, , , ,651,377 4,767,825 4,767, , , ,589,698 5,397,259 5,397, , , ,610,685 6,093,144 6,093, , , ,721,621 6,861,909 6,861, , , ,930,430 7,710,583 7,710, , , ,245,736 8,646,847 8,646, , , ,676,920 9,679,089 9,679, , , ,234,191 10,816,475 10,816, , , ,928,658 12,069,011 12,069, , , ,772,408 13,447,629 13,447, , , ,778,591 14,964,262 14,964, , , ,961,520 16,631,939 16,631, , , ,336,765 18,464,880 18,464, , , ,921,268 20,478,610 20,478, , , ,733,467 22,690,069 22,690, , , ,793,420 25,117,744 25,117, , , ,122,955 27,781,806 27,781, , , ,745,822 30,704,262 30,704, , , ,687,864 33,909,122 33,909,122 Total: 210, ,715,859 13,273,305-1,232,554 This illustration assumes that the currently illustrated non-guaranteed elements will continue unchanged for all years shown. However, non-guaranteed elements will likely change from time to time. This means that actual results will be more or less favorable than those shown. Administrative and insurance charges are deducted every month regardless of whether premium outlays are made. Depending upon actual policy experience, the Owner may need to increase premium payments. Any policy loans and partial surrenders will affect policy values and may require additional premiums to avoid policy termination. # Denotes a change to the Option. This Supplemental Illustration is valid only when accompanied by a complete Basic Illustration. Prepared on: A DOFU: 05/2009 Page 3 of 3

18 Eclipse Indexed Life is a flexible premium indexed universal life insurance policy. You select the amount of insurance and the death benefit option when we issue the policy. Your policy will provide a if the insured's death occurs while the policy is inforce. The amount payable in the event of death is reduced by any policy loans and accrued interest. Eclipse Indexed Life provides premium payment flexibility, allowing you to vary the amount and timing of your premium payments. However, it is important that you make sufficient premium payments to maintain the policy's valuable insurance protection. When we receive your premium payments, we deduct a premium charge and place the remaining amount into your policy's Accumulation. You may allocate your policy's Accumulation to a Fixed Account and/or any of three Indexed Accounts for interest crediting purposes. Your policy's Accumulation will increase when interest is credited to the policy. Additional information regarding the Fixed Account and the Indexed Accounts can be found on the next page. Administration and insurance charges will be deducted from your policy's Accumulation each month. In addition, transaction charges may apply if you request changes be made to your policy. Your policy will remain active as long as the Accumulation less any policy loans and accrued interest remains greater than zero. Additional protection against policy termination can be obtained when the Guarantee Agreement is added to your policy. Important Information about your Life Insurance Illustration Proposed Insured: d Client Male, Issue Age 45 Preferred, Non-Tobacco Initial Base : $214,456 Initial Option: Increasing Initial Annual Premium : $10, Annual Planned Premium Amount: $10, Illustrated Premium Frequency: Annual ($10,000.00) Minimum Initial Premium: $ Qualification Test: GPT MEC Status: This contract is not a MEC at issue. Illustrated Allocations: Fixed Account 0% Index A: S&P % Participation 100% Index B: S&P % Participation 0% Index C: DJ World-Ex. U.S. 100% Participation 0% Optional Agreements: Overloan Protection Agreement This is a life insurance illustration and not a contract. This illustration is intended to demonstrate the impact of premium payments and policy charges on the Accumulation and under a set of assumptions. This illustration is not intended to predict or project actual performance. This illustration reflects certain assumptions about the amount and timing of your premium payments and how you may utilize the policy's options. Your actual use of the policy is likely to vary from these assumptions and this will cause the actual policy performance to differ from this illustration. The non-guaranteed values in this illustration assume that all premium outlays, net of premium charges, are allocated 0% into the Fixed Account and 100% into the Indexed Accounts. This illustration also assumes that the non-guaranteed elements will continue unchanged for all years. However, non-guaranteed elements are likely to change from time to time. This means that actual results will be more or less favorable than those shown. Please review your policy for a complete description of all policy features and benefits. This is your Basic Illustration and is valid only if all pages are included. TP Prepared on: A DOFU: 01/2010 Page 1 of 12

19 Lifetime Interest Rate Guarantee In the event of death, policy termination or surrender, your policy guarantees that the total interest credited will not be less than a 3.00% effective annual interest rate. The guaranteed values in this illustration are calculated using a 3.00% interest rate. How Interest is Credited to the Fixed Account The portion of the Accumulation in the Fixed Account is credited interest on a daily basis. The interest rate credited will be changed from time to time but will never be lower than 3.00% annually. The current annual interest rate being credited to the Fixed Account is 4.50%. How Interest is Credited to the Indexed Accounts You may allocate all or a portion of your policy's Accumulation to any of three Indexed Accounts: Indexed Account A: S&P 500 with 100% Participation Rate Indexed Account B: S&P 500 with 140% Participation Rate Indexed Account C: Dow Jones World-Ex. U.S. with 100% Participation Rate Your policy will create an indexed account segment whenever a transfer into one of the Indexed Accounts occurs. Each indexed account segment will have a term of approximately one year (may be up to seven days less or seven days more). The value of an indexed account segment can be reduced over that period as monthly administrative and insurance charges are deducted from your policy's Accumulation. The value of an indexed account segment at the end of the segment term is used as the basis for determining the amount of interest to be credited. Interest is credited at the end of the segment term based upon the performance of the underlying index over that period, subject to the growth cap. We can change the growth cap prior to the creation of any segment. However, once we establish the growth cap at the beginning of each segment term, the growth cap cannot change for that segment. Once a growth cap rate is determined for a segment, it is guaranteed only for the 'segment'. The growth cap may change for subsequent segments. A lower growth cap rate in the future means that amounts you have in the Indexed Account Option will have a lower maximum interest credit for future segments. Growth cap rates are subject to change by Minnesota Life for any reason. Historical Performance of an Index The historical performance of an Index or Indexed Account as reflected in the tables below should not be considered a representation of past or future performance for the Indexed Account available in the policy. In particular, the performance of an index over a similar period (or over a different period of time) could be substantially less than shown in the tables below. As a result, the actual interest credited by an Indexed Account may be less than the non-guaranteed assumed interest rates used in this illustration. Indexed Account A: S&P 500 Index with 100% Participation Below is a table which uses the historical performance of the S&P 500 Index for the periods shown to help illustrate how interest may be credited to your contract in this account. It assumes the following: a growth cap rate of 15.00% and a participation rate of 100%. This results in a maximum interest credit in any year of 15.00%. Using the assumptions described above, a compound interest rate of approximately 8.81% would have been produced over the time period covered by the table. S&P 500 Hypothetical Index Interest Date Growth Credited 12/17/ % 0.00% 12/16/ % 9.89% 12/15/ % 15.00% 12/20/ % 2.92% 12/19/ % 15.00% 12/18/ % 15.00% 12/17/ % 0.00% 12/15/ % 12.88% 12/14/ % 15.00% 12/20/ % 0.00% 12/19/ % 15.00% 12/17/ % 13.83% 12/16/ % 6.41% 12/15/ % 0.00% 12/14/ % 15.00% S&P 500 Hypothetical Index Interest Date Growth Credited 12/19/ % 15.00% 12/18/ % 15.00% 12/17/ % 15.00% 12/16/ % 15.00% 12/14/ % 0.00% 12/20/ % 0.00% 12/19/ % 0.00% 12/18/ % 15.00% 12/16/ % 10.47% 12/15/ % 5.63% 12/14/ % 12.16% 12/20/ % 2.43% 12/18/ % 0.00% 12/17/ % 15.00% 12/16/ % 13.39% COMPOUND AVERAGE 7.73% 8.81% This is your Basic Illustration and is valid only if all pages are included. TP Prepared on: A DOFU: 01/2010 Page 2 of 12

20 Indexed Account B: S&P 500 Index with 140% Participation Below is a table which uses the historical performance of the S&P 500 Index for the periods shown to help illustrate how interest may be credited to your contract in this account. It assumes the following: a growth cap rate of 9.50% and a participation rate of 140%. This results in a maximum interest credit in any year of 13.30%. Using the assumptions described above, a compound interest rate of approximately 8.63% would have been produced over the time period covered by the table. S&P 500 Hypothetical Index Interest Date Growth Credited 12/17/ % 0.00% 12/16/ % 13.30% 12/15/ % 13.30% 12/20/ % 4.09% 12/19/ % 13.30% 12/18/ % 13.30% 12/17/ % 0.00% 12/15/ % 13.30% 12/14/ % 13.30% 12/20/ % 0.00% 12/19/ % 13.30% 12/17/ % 13.30% 12/16/ % 8.97% 12/15/ % 0.00% 12/14/ % 13.30% S&P 500 Hypothetical Index Interest Date Growth Credited 12/19/ % 13.30% 12/18/ % 13.30% 12/17/ % 13.30% 12/16/ % 13.30% 12/14/ % 0.00% 12/20/ % 0.00% 12/19/ % 0.00% 12/18/ % 13.30% 12/16/ % 13.30% 12/15/ % 7.88% 12/14/ % 13.30% 12/20/ % 3.40% 12/18/ % 0.00% 12/17/ % 13.30% 12/16/ % 13.30% COMPOUND AVERAGE 7.73% 8.63% Indexed Account C: Dow Jones World-Ex. U.S. Index with 100% Participation Below is a table which uses the historical performance of the Dow Jones World-Ex U.S. Index for the periods shown to help illustrate how interest may be credited to your contract in this account. It assumes the following: a growth cap rate of 14.00% and a participation rate of 100%. This results in a maximum interest credit in any year of 14.00%. Using the assumptions described above, a compound interest rate of approximately 8.72% would have been produced over the time period covered by the table. Dow Jones Hypothetical World-Ex. U.S. Interest Date Growth Credited 12/20/ % 0.00% 12/19/ % 0.00% 12/18/ % 14.00% 12/16/ % 14.00% 12/15/ % 14.00% Dow Jones Hypothetical World-Ex. U.S. Interest Date Growth Credited 12/14/ % 14.00% 12/20/ % 8.81% 12/18/ % 0.00% 12/17/ % 14.00% 12/16/ % 10.10% COMPOUND AVGERAGE 3.21% 8.72% The Underlying Indices The underlying indices, the S&P 500 Index and the Dow Jones World-Ex. U.S. Index, only recognize the changes in stock prices and do not include any dividend returns. The policy and the Indexed Accounts do not actually participate in the stock market, the S&P 500 Index, or the Dow Jones World-Ex. U.S. Index. You may not invest directly in an Index. "Standard & Poor's," "S&P," "S&P 500," "Standard & Poor's 500" and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Minnesota Life. The Product is not sponsored, sold, or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of purchasing the Product. The S&P 500 Index is an index of 500 stocks that are generally representative of the performance of leading companies in leading industries within the U.S. "Dow Jones World-Ex. U.S. Index SM " is a service mark of Dow Jones & Company, Inc., and has been licensed for use by Minnesota Life. The Product is not sponsored, endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of purchasing the Product. The Dow Jones World-Ex. U.S. Index SM represents approximately 95% of European market capitalization at the regional level, 95% of all other developed markets at the country level, and 95% of emerging markets as a group. As of December 3, 2007, this index covers 45 countries. The Dow Jones World-Ex. U.S. Index SM provides a general representation of how select international investments may perform. You can not invest directly in the Dow Jones World-Ex. U.S. Index SM. The Dow Jones World-Ex. U.S. Index SM may fluctuate in response to international concerns such as currency fluctuations, political, social and economic instability, and differences in accounting standards. This is your Basic Illustration and is valid only if all pages are included. TP Prepared on: A DOFU: 01/2010 Page 3 of 12

21 Additional Information About the Growth Cap Minnesota Life can change the growth cap prior to the creation of any segment. We may change the growth cap for any reason, including changes in market conditions and the impact it may have on our profit margins. However, once we establish the growth cap at the beginning of a segment term, the growth cap cannot be changed for that segment. In the event the growth cap is reduced, the amount of interest credited to your policy will be lower for years in which the growth of the index exceeds the reduced growth cap. If the growth cap used were lower than shown, then the maximum hypothetical compound interest rate allowed in this illustration would be lower. Partial s and Policy Loans Partial s can be made at any time and reduce both the Accumulation and the. The minimum partial surrender is $500. Partial surrenders incur a transaction charge that is deducted from the Accumulation s. No surrender charges apply when a partial surrender is made. charges are only applicable upon full policy surrender. Your policy also provides you the option of taking a policy loan with a fixed interest rate or a variable interest rate. In the event of death, surrender or policy termination, the proceeds payable will be reduced by any policy loans and accrued interest. The and shown in this illustration reflect the automatic repayment of policy loans and accrued interest. One or more policy loans with a variable interest rate are presented in this illustration. The loan interest rate varies with market conditions and may be changed once per year. The loan interest rate will be the greater of the published monthly average of the Moody's Corporate Bond Yield or 4.00%. Loan interest in this illustration is charged at an initial illustrated annual rate of 5.25%, due at the end of the policy year. This illustration assumes that annual policy loan interest is borrowed and added to the loan balance. The cumulative loan balance is secured by a portion of the Accumulation that remains allocated to the Fixed Account and/or Indexed Accounts. Important Note: Policy loans with a variable interest rate present greater risk to the owner. The interest credited to the portion of the Accumulation securing the cumulative loan balance may be considerably lower or higher than the current loan interest rate. You should exercise caution when taking a policy loan with a variable interest rate. Example: Policy Loan with Variable Interest Rate $100,000 Accumulation (allocated 100% to the Indexed Accounts) $60,000 Loan Balance $40,000 One year later, the policy's can be quite different depending upon the amount of interest credited to the policy: Indexed Accounts Crediting Rate 0% Indexed Accounts Crediting Rate 10% Variable Interest Rate 7% Variable Interest Rate 7% $100,000 Accumulation $110,000 Accumulation $64,200 Loan Balance $64,200 Loan Balance $35,800 $45,800 Note: for purposes of simplicity, this example assumes that no monthly charges were deducted from the policy during the year. Taxation of Life Insurance Policies This information is a general discussion of the relevant federal tax laws. It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. This information is provided to support the promotion or marketing of ideas that may benefit a taxpayer. Taxpayers should seek the advice of their own tax and legal advisors regarding any tax and legal issues applicable to their specific circumstances. A policy will qualify as life insurance under Internal Revenue Code Section 7702 if it meets one of two alternative tests, the Guideline Premium Test or the Cash Accumulation Test. Failure to qualify as life insurance will have adverse tax consequences. This illustration uses the Guideline Premium Test, which requires that the sum of premiums less any non-taxable partial surrenders at any point in time does not exceed the Guideline Premium Limit. The Guideline Premium Limit is the greater of the Guideline Single Premium or the sum of the Guideline Annual Premiums at such time. The policy as shown in this illustration has an initial Guideline Single Premium equal to $46, and an initial Guideline Annual Premium equal to $10, Guideline premiums are calculated at policy issue but must be recalculated upon certain changes in the terms or benefits of the policy. The Guideline This is your Basic Illustration and is valid only if all pages are included. TP Prepared on: A DOFU: 01/2010 Page 4 of 12

22 Premium Test also requires that the death benefit payable under the policy at any time is at least equal to an applicable percentage of the Accumulation. The policy's Accumulation may grow to the point where we will increase the in order to ensure that the policy will continue to satisfy Section 7702 of the Internal Revenue Code. When this happens, Minnesota Life reserves the right to limit premium payments. The Technical and Miscellaneous Revenue Act (TAMRA) of 1988 classifies some policies as Modified Endowment Contracts (MECs). Distributions from Modified Endowment Contracts, excluding death benefit payments, are taxed differently and may be subject to a 10% IRS penalty tax. The annual premium to avoid Modified Endowment Contract status in the first seven years for the policy as shown in this illustration is $10, Based upon the assumptions used in this illustration, the policy would not be considered a Modified Endowment Contract (MEC) based upon our interpretation of the Internal Revenue Code. This is your Basic Illustration and is valid only if all pages are included. TP Prepared on: A DOFU: 01/2010 Page 5 of 12

23 Optional Agreement Descriptions Optional Agreements are available with your policy. Additional monthly charges may apply when these agreements are exercised or added to the policy. Guarantee Agreement (NOT ILLUSTRATED) - Provides additional protection against policy termination due to insufficient Accumulation. While this agreement is in effect, your policy cannot terminate even if the Accumulation less any policy loans and accrued interest falls to zero. Like your policy, the Guarantee Agreement is directly affected by the timing and amounts of premium paid. To ensure that you have the Guarantee Agreement in effect for the period of time that you desire, it is important that premium payments are paid when scheduled. Premium payments that are missed or received after they are scheduled will reduce the length of time that your Guarantee Agreement will remain in effect. Policy changes and transactions (e.g., partial surrenders) will also affect the length of time that your Guarantee Agreement will remain in effect. The Guarantee Agreement cannot be combined with the Term Insurance Agreement or the Interest Accumulation Agreement on the same policy. Early s Agreement (NOT ILLUSTRATED) - Eliminates the surrender charges associated with your policy. The result is higher cash surrender values in the early years of the policy versus policies with the same specifications without this agreement. The Accumulation is decreased as an additional monthly charge applies for this agreement. The Early s Agreement cannot be removed. Guaranteed Insurability Option Agreement (NOT ILLUSTRATED) - This agreement guarantees you the option to add an additional coverage layer on the insured's life without providing additional evidence of insurability. Interest Accumulation Agreement (NOT ILLUSTRATED) - Provides that the death benefit of the policy will provide for the face amount of the policy plus cumulative premiums with compounded interest. The Interest Accumulation Agreement cannot be combined with the Guarantee Agreement on the same policy. Long Term Care Agreement (NOT ILLUSTRATED) - This agreement may provide monthly, tax-qualified, long term care benefits to help cover expenses for care in a facility or in your home. The monthly amount reduces your death benefit. Based on current federal tax law, there is uncertainty as to whether some or all of benefit payments from life insurance long term care riders are taxed when received. We cannot assure you that long term care rider benefit payments will be treated as tax-free death benefits. Please consult a tax advisor before purchasing a long term care rider. Overloan Protection Agreement - Provides that your policy will not terminate even if the unloaned portion of the Accumulation is insufficient to cover policy charges. You may exercise this agreement only if your policy is not a Modified Endowment Contract (MEC) at the time the option is exercised and the other conditions described in the agreement are satisfied. Enhancement Agreement (NOT ILLUSTRATED) - Provides that the full surrender value of the policy, while this agreement is in force (up to three years), will be no less than the cumulative premium payments made on the policy. This agreement will terminate if a surrender or policy loan is taken from this policy during the benefit period. The Enhancement Agreement is only available when the Early s Agreement is included on the policy. Term Insurance Agreement (NOT ILLUSTRATED) - Provides additional insurance on the life of the insured to age 100. The Term Insurance Agreement is intended to supplement your policy's death benefit when you have an insurance need that may be temporary in nature. Although the initial cost of the total death benefit may be lower with this agreement, the long-term charges could be higher than with all base policy coverage. The Term Insurance Agreement cannot be combined with the Guarantee Agreement on the same policy. Waiver of Charges Agreement (NOT ILLUSTRATED) - Provides for waiver of the monthly insurance and administrative charges for as long as the insured is disabled, if the insured is disabled prior to age 60. The Waiver of Charges Agreement cannot be combined with the Waiver of Premium Agreement on the same policy. Waiver of Premium Agreement (NOT ILLUSTRATED) - Provides for a specified premium to be credited to the policy monthly for as long as the insured is disabled, if the insured is disabled prior to age 60. The Waiver of Premium Agreement cannot be combined with the Waiver of Charges Agreement on the same policy. This is your Basic Illustration and is valid only if all pages are included. TP Prepared on: A DOFU: 01/2010 Page 6 of 12