Creating a Supplemental Future Income Stream With Life Insurance

Transcription

1 Creating a Supplemental Future Income Stream With Life Insurance A Supplemental Illustration Prepared for Valued Client Presented by Premier Producer Premier Brokerage 1 Sales Drive Anytown, USA Life insurance is issued by Symetra Life Insurance Company, th Ave NE, Suite 1200, Bellevue, WA Products are not available in all U.S. states or any U.S. territory. Symetra Life Insurance Company th Avenue NE, Suite 1200 Bellevue, WA is a flexible-premium adjustable life insurance policy with index-linked interest options. Symetra is a registered service mark of Symetra Life Insurance Company. LIM-1397 Please refer to the basic illustration for guaranteed elements and other important information. 5/17

2 Important Information About This Supplemental Illustration A complete understanding of the Supplemental Income Plan illustration shown here requires an understanding of the variables involved and the risks associated with each. This understanding will allow you to evaluate the strategy of using life insurance to create a supplemental future income stream. Unless specifically marked as guaranteed, there is no guarantee that the owner or the designated beneficiaries will receive the amount of money illustrated. This supplemental illustration is not intended as investment, accounting, legal or tax advice and Symetra Life Insurance Company does not give investment, accounting, legal or tax advice. This illustration does not attempt to provide more than general U.S. tax information associated with life insurance policies. This information is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. This information is written to support the promotion or marketing of life insurance issued by Symetra Life Insurance Company. You should seek advice based on your particular circumstances from an independent tax advisor. The use of cash value life insurance to potentially provide a source of supplemental income assumes there is a need for death benefit protection. The use of life insurance to provide a supplemental income may reduce the death benefit available to the beneficiaries. Policy distributions in the form of loans and withdrawals will reduce the policy's cash value and death benefit and may result in a taxable event. This Supplemental Income Plan illustration demonstrates an alternative planning technique based upon the assumptions and data provided by you, the client. The accuracy of this data will enhance the value of this analysis. Please refer to the basic illustration for guaranteed elements and other important information. Page 2 of 7

3 Most families understand the importance of life insurance. In the event of your death, the death benefit paid to your loved ones can help them maintain their current lifestyle, pay off a mortgage, fund a college education and pay potential estate, capital gains and income taxes. Life insurance is also tax-efficient, as proceeds are generally received income-tax-free, the policy's potential policy value grows tax-deferred and may be accessed using tax-free loans and withdrawals. While its main purpose is death benefit protection, a life insurance policy can also supplement other sources of future income you may already have, such as 401(k) plans, individual retirement accounts (IRAs), Roth IRAs, annuities and Social Security. Should you die before retirement, the death benefit can provide cash for both the immediate needs of your family and to compensate for the loss of planned contributions to your retirement fund. After retirement, you can access the policy's potential policy value using tax-free loans and withdrawals to supplement your other sources of retirement income. 1 The Supplemental Income Solution With assistance from your insurance professional, you'll purchase a policy that provides both a death benefit and potential cash accumulation. As the policyowner and insured, you'll make regularly scheduled premium payments to cover the policy's associated costs, and the remaining or excess premiums will go into an account that build policy value. Anytime before or during retirement, you can access the cash surrender value through loans and withdrawals which are typically free of federal income tax for additional or supplemental income when you need it. It's important to understand that taking a loan or withdrawal from the policy will reduce the policy value and death benefit. Upon your death, any remaining death benefit will be paid to your beneficiaries. Interest payment Loan repayment Payment of premiums Death benefit proceeds 1 Life insurance can be one way to supplement existing retirement goals. As cash values have the ability to accumulate tax deferred, they subsequently have the potential to grow faster than investments in a taxable account. Loans and withdrawals are only available prior to the death of the insured and will reduce the policy death benefit and cash surrender value. This may cause the policy to lapse and may be taxable. If the policy were to terminate prior to the insured's death, the full amount borrowed would be considered distributed at that time, and if cost basis has been exhausted through withdrawals, would be fully taxable. Withdrawals or loans on modified endowment contracts (MECs) may be subject to federal income tax and a 10% IRS penalty on amounts taken prior to age 59½. Withdrawals from non MECs are sheltered from tax only to the extent of cost basis. 2 Refer to footnote 1. Please refer to the basic illustration for guaranteed elements and other important information. Page 3 of 7

4 Client Name: Valued Client Initial Death Benefit: $600,000 Benefits Using life insurance to fund supplemental future income has several potential advantages: Income tax free death benefit The death benefit is free from federal income taxes, which can help your beneficiaries remain financially secure and may provide estate liquidity. 3 If structured properly outside of the estate, the death benefit proceeds may also be free of estate taxes. Tax deferred growth The potential policy value accumulation grows tax deferred inside the life insurance policy. Tax advantaged income The owner of the policy may attain tax free supplemental income through a combination of policy loans and withdrawals. But remember that distributions from the policy will reduce the policy value and may reduce the death benefit payable to beneficiaries. 4 Flexibility and control s can be designed to meet your changing needs. You have the flexibility to change both the timing and amount of premiums, as long as the policy has sufficient policy value to support the policy charges. You also decide how and when money is paid into or out of the policy, and you name the beneficiary(ies). No IRS distribution requirements or penalties 5 Distributions from the policy are permitted before age 59½ with no IRS penalties, and there are no required minimum distributions (RMDs) at age 70½ or later. Key Considerations s are not deductible Life insurance premiums are funded with after tax dollars and are not tax deductible. Sufficient liquid assets Before implementing this strategy, you should have sufficient liquid assets to support your current and future standard of living. This strategy is only meant to be used with assets that will not be needed for living expenses during your expected lifetime. If you live longer than expected, additional assets may be needed to keep your policy in force. If your financial situation changes and you must use assets for any income needs or can no longer make policy premiums payments, your desired life insurance strategy may not be attained. Reduction in policy benefits Distributions in the form of policy loans and withdrawals will reduce the available cash value and death benefit, and may require additional premium. Work with your insurance professional to ensure your continuing life insurance needs are met. Modified endowment contract (MEC) Federal tax law limits the amount of premium that can be paid into a policy to retain certain tax advantages. If premiums exceed the limit, the policy will be classified as a "modified endowment contract" (MEC). Withdrawals or loans from a MEC may be subject to federal income tax and a 10% IRS penalty on amounts taken prior to age 59½. Interest rates 3 Death benefit proceeds are generally received federal income tax free. Refer to IRC Section 101(g). 4 Refer to footnote 1. 5 Only if the contract is not a MEC. Using life insurance for cash accumulation should be a supplement to your primary retirement savings vehicle. If your primary goal is retirement savings, other products may be more suitable for this purpose. Please refer to the basic illustration for guaranteed elements and other important information. Page 4 of 7

5 Year Age How a Supplemental Income Plan may work for you Below is a summary of values for a Supplemental Income Plan with life insurance. Based on the assumptions in the accompanying illustration. 6 Initial assumed rate of 5.79%. Net Surrender Value Net Distributions 7 Distributions Net Death Benefit ,000 18, , ,000 36,000 7, , ,000 54,000 25, , ,000 72,000 43, , ,000 90,000 63, , , ,000 88, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,420 60,086 60, , , ,631 60, , , , ,870 60, , , , ,051 60, , , , ,084 60, , , , ,877 60, , , , ,259 60, , , , ,113 60, , , , ,342 60, , , , ,849 60, , ,392 6 The information above is based on specific data and assumptions provided in the accompanying illustration. Policy charges will vary by issue age, gender, underwriting rate class and product selection. 7 Net Distributions from the life insurance policy are based on loans and withdrawals taken over the specified time period. Refer to footnote 1 for more details. Please refer to the basic illustration for guaranteed elements and other important information. Page 5 of 7

6 How a Supplemental Income Plan may work for you Below is a summary of values for a Supplemental Income Plan with life insurance. Based on the assumptions in the accompanying illustration. 8 Initial assumed rate of 5.79%. Year Age Net Surrender Value Net Distributions 9 Distributions Net Death Benefit , ,545 60, , , , ,062 60, , , , ,198 60, , , , ,734 60, , , , ,430 60, , , , ,019 60, , , , ,176 60,086 1,021, , , ,560 60,086 1,081, , , ,791 60,086 1,141, , , ,446 60,086 1,201, , , , ,201, , , , ,201, , , , ,201, , , , ,201, , , , ,201, , , , ,201, , , , ,201, , , , ,201, , , , ,201, , , , ,201, , , , ,201, , , , ,201, , , , ,201, , , , ,201, , , , ,201, , , , ,201, , , , ,201, ,961 #REF! #REF! 0 #REF! 283, ,201, ,550 #REF! #REF! 0 #REF! 288, ,201, ,467 8 The information above is based on specific data and assumptions provided in the accompanying illustration. Policy charges will vary by issue age, gender underwriting rate class and product selection. 9 Net Cash Value Distributions from the life insurance policy are based on loans and withdrawals taken over the specified time period. Refer to footnote 1 for more details. Please refer to the basic illustration for guaranteed elements and other important information. Page 6 of 7

7 Summary Below is a summary of values for a Supplemental Income Plan using life insurance. Based on the assumptions in the accompanying illustration. Assumed Retirement Age: 65 Age to Start Distributions: 65 Years for Distributions: 20 Initial Assumed Interest Rate: 6.92% Initial : $18,000 Number of Years to Pay s: 20 Payments at 20 Years: $360,000 Cash Value Distributions Net Surrender Value Available Beginning Age 65 $686,326 Net Distributions: $60,086 Distributions for 20 Years: $1,201,720 Net Surrender Value at Age 100: $264,102 Pre-Tax Equivalent Assuming a 33.00% Federal Income Tax Rate Pre-tax Equivalent of Distributions: 10 $89,681 Pre-tax Equivalent of Distributions: 11 $1,793,612 Death Benefit Initial Death Benefit: $600,000 Net Death Benefit Beginning Age 65: $837,318 Net Death Benefit Beginning Age 85: $221,548 Net Death Benefit Beginning Age 100: $280,277 Net Benefit Analysis 12 Distributions for 20 Years: $1,201,720 Payments at 20 Years: $360,000 Net Benefit Beginning Age 85: $841,720 IRR on Death Benefit Beginning Age 85: % 10 The Pre tax Equivalent of Distributions is equal to the Distributions before the federal income tax rate of 33% is applied. 11 The Pre tax Equivalent of Total Distributions is equal to the Total Distributions before the federal income tax rate of 33% is applied. 12 The Net Benefit Analysis demonstrates the Net Benefit to the insured by subtracting the Payments from the Policy Value Distributions. 13 The Internal Rate of Return (IRR) on the death benefit is the effective after tax annual rate at which an amount equal to the illustrated premium and policy value distributions must be accumulated in order to generate the net death benefit at the beginning of the specified age. Please refer to the basic illustration for guaranteed elements and other important information. Page 7 of 7