Tax-Efficient Retirement Withdrawal Strategies

Transcription

1 Tax-Efficient Retirement Withdrawal Strategies MODERATOR Joseph Votava, Seneca Financial Advisors PANELISTS Waldean Wall, Allianz Life David Kahal, AXA

2 What We ll Cover 1. Tax Rates/Brackets 2. Various Assets 3. How to Order Things

3 Taxation overview Marginal tax brackets

4 Graduated Tax Brackets

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6 Required minimum distributions (RMDs) will force withdrawals at some point. Leaving assets in traditional IRAs or qualified plans to defer taxes may move the client into higher tax brackets when RMDs begin.

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10 Example 1

11 2015 Married, filing jointly, age 65, standard deductions 1 2

12 2015 Married, filing jointly, age 65, standard deductions +$392, more years

13 * *Only appropriate if there is a death benefit need. Please be advised this chart is based on our general understanding of federal tax rules for U.S. Individuals and is not intended as legal or tax advice. Your clients should consult their own tax advisor. Also your clients should consult with their advisor regarding the individual characteristics of any product or investment purchase. All these products and investments have different characteristics and levels of risk. Neither AXA Equitable nor AXA Distributors does not provide tax and legal advice. Clients should consult with tax and legal professionals on these matters.

14 With proper planning, cash values taken from the life insurance policy as withdrawals and loans can be received income tax free In retirement when you may need less death benefit you can take withdrawals and loans as needed Dialing your tax bracket Take income from required sources Social Security, Pensions to fill lower tax brackets In years when you need more money use life insurance cash values but avoid triggering higher tax brackets

15 Without Life Insurance Planning With Life Insurance Planning Lower Tax Brackets Social Security, IRA, Pension Distributions and other Taxable Income First $18,150 40% Savings of $6,730 Higher Tax Bracket Taxable Income or Life Insurance Cash Values, Roth IRAs and Municipal Bond Interest Total Next $55,650 Next $26,200 $100,000 Tax Rate 10% 15% 25% Taxes Due $1,815 $8,348 $6,550 $16,713 Tax Rate 10% 15% 0% Taxes Due $1,815 $8,348 $0 $9,983 Based on a 45-year-old male, preferred underwriting status, an AXA Bright Life Grow Indexed Universal Life contract with a death benefit of $500,000 and an annual premium of $8,465 would generate 20 years of income of $26,200 starting at age 66. Assumes tax calculations made in 2014, filing jointly. The $26,200 of income from the policy is based on the BrightLife Grow at default of 6.64%

16 Tom is 65 and planning to retire Accumulated $1,000,000 toward his retirement goal Needs annual income of pre-tax $100,000 during retirement Little income from other sources: o Social Security - $20,000 o Pension - $10,000 Tom s savings needed to make up the other $70,000 How can YOU help Tom?

17 Toms 20 Year Outlook The results presented here are hypothetical and your results for your client will be different. These are based on the S & P returns from Past performance is not a guarantee of future results.

18 The results presented here are hypothetical and your results for your client will be different. These are based on the S & P returns from Past performance is not a guarantee of future results.

19 Retirement Account Life Insurance Hedging Your Losses in the Market This is a supplemental illustration authorized for distribution only when preceded or accompanied by a basic illustration from the issuer. The basic illustration contains values using the same underwriting assumptions as this supplemental at both guaranteed charges and guaranteed interest rates and contains other important information. The values represented here are for a $500,000 policy on a 45 year old male preferred nonsmoker. The values reflect the cost of 20 years of premiums. The values represented here are nonguaranteed and assume current charges and a an interest rate of 6.64%. If guaranteed rates and charges are used, the policy would fail in year 21.

20 Summary

21 1. Sequence of returns Importance of understanding order of returns in your client s income years 2. Using life insurance and/or annuities as part of your retirement planning to protect your clients assets 3. Questions?