Slide 1 * Tax- Free Retirement Educational Seminar Good morning/evening. I m [Name], your co- host for today. It gives me great pleasure to introduce the (DBA name) from. (DBA name) has been assisting our clients for over years and at this point I would like to introduce the rest of our staff. First, greeting you as you came in was. The other associates from the office include:. I d like to introduce special guest and. The format today is: (1) let you know who we are and what we do; (2) give you some background on our retirement and financial services firm; and (3) give you various tax savings ideas on retirement planning. We have had the pleasure of assisting and advising people like you on retirement for (years. We have an office located at,,. Because of the large number present today I would appreciate if you hold all questions until the end of the seminar. We only have three requirements: * First, that you enjoy your meal! * Next, that you introduce yourself to one another * And third, don t make any changes as a result of attending this seminar. Your situation should be analyzed on an individual basis before any changes are made. We are seeking long- term relationships. I hope that myself and our other associates here in will have the privilege of helping your children and grandchildren down the road. This is the reason we are always seeking long- term relationships.
Slide 2 * $11,273,089,048,264.84 US Official National Debt as of 5/12/09 * $9,381,368,108,595.10 US Official National Debt as of 3/6/08 * 1.9 trillion increase in 14 months * The Real National Debt is $61,173,829,000.00 as of 5/12/09. * Why is it the Real Debt? In a May 19, 2008 USA Today article (http://www.usatoday.com/news/washington/2008-05- 18- Redink_N.htm) it explains that Accounting standards require corporations and state governments to count new financial obligations, even if the payments will be made later. The federal government doesn't follow that rule. Instead of counting lifetime benefits for programs such as Social Security, the government counts the cost of benefits for the current year. This is why there is such a discrepancy between the official debt and the real debt. * Your share of the real debt is: $200,000 * The national debt has increased an average of $3.71 billion per day since 9/28/2007 * Let me give you an example of how much money that is. If you took 1,000,000 in hundred dollar bills and stacked them on top of one another the pile would be 61/2 feet high. * If you took the same thing with a billion dollars the stack of $100 bills would be 6700 feet tall a bit over one mile. *However, for $1Trillion that stack of 100 bills would be 1,260 MILES tall. [insert an example from city to city] Let me give you another example. What year do you think it was one Trillion SECONDS ago? Not hours or days, but seconds. 30,000 BC. To put that in perspective. There are 86,400 seconds in a day. 31,536,000 in a year. Yet it takes 32,000 YEARS times thirty- one and a half MILLION seconds to equal 1 Trillion! Can you believe that? Source: US National Debt Clock: www.brilling.com/debt_clock
Slides 3 & 4 Where is all this debt coming from? A few examples: While all of us are very aware of all the recent Stimulus Packages due to the recent Recession, there are other items in play that are much bigger and longer term. Here is a quote from last years Social Security Statement, In 2017 we will begin paying more in benefits than we collect in taxes. Without changes, by 2041 the social security trust fund will be exhausted.* There will only be enough money to pay about 75 cents for each dollar of scheduled benefits. We need to resolve these issues soon to make sure social security continues to provide a foundation for protection for future generations. Slide 5 There are only two ways to combat this growing debt 1. Spend less, or 2. Tax More Slide 6 Do you think we are spending less as a government? [Solicit feedback] No we are spending more than we ever have in the history of our country.
Slide 7 So, if there are truly only two parts to that equation, and we are not spending less, then it doesn t take a PhD in Economics to figure out what HAS to happen - - Higher Taxes! It s already begun. The top marginal tax rate has recently gone from 35% to 39.6%. Just under 40%. And we are now entering a year in which the federal government s new deficit (the amount added to the existing debt) is the largest in the history of this country by a wide margin. Slide 8 Just to put things in perspective, let s look at the history of the federal income tax rate back to 1910. What most people don t realize is that during much of the 1940 s, 50 s, and 60 s, the top marginal income tax rates were above 90%! Did you realize that? Think about what that means. For many higher income earners during those decades, the federal government took 91 cents of every dollar they earned! Can you believe that? Workers got to keep 9 cents! The scary part is, there s nothing to say it can t happen again.
Slide 9 Let s take a look at some different sources of retirement income. When you retire, all of your money will be in one of two pots as I like to call them either Taxable or Tax- Free. If you could choose which pot you d like to have the most money it, which one would you prefer? Taxable or Tax- Free? (Let them actually answer this question very important.) We re going to look at the taxable side first. This pot can be divided into two different types of tax. The first kind is called Capital Gains Tax. Some of the things that fall into this category are: Stocks, Mutual Funds, Investment Real Estate, and the Sale of a Business. For those items, if you have owned them longer than 12 months, when you sell them, you currently only pay 15% on the profit. Now this rate can change and probably will, but for now, that s the tax rate. The other side of this pot is something you are VERY familiar with Income Tax. QUESTION TO ASK: Let me ask you, do you think tax rates are going to be higher or lower in the future? (Again, wait for an answer. Nearly 100% will say higher.) I agree. I think there are a lot of reasons for that to be the case, and we are already seeing the top tax rate going from 35% to just under 40%. However, no one knows what that will look like, so let s just assume a 40% rate for now. What things fall into that category? First, any income you continue to earn including 1099 interest. Second, even Social Security can now be subject to Income Tax. But most of the things that fall into that category are what I like to call the Alphabet Soup of Retirement: IRA, SEP, Simple, 401(k), 403(b), etc. Anything that is classed as a Tax- Qualified Retirement Plan. When the money went into these accounts you didn t pay tax on it; however, when it comes out all of it both contribution AND gain will be taxed at whatever the income tax rate is at that time.
Slide 10 Now, let s look at what falls into the Tax- Free Pot. There are 3 places that I m aware of that you can put money and access it tax- free. The first one is Municipal Bonds. The second one is the Roth IRA And the third is certain types of Life Insurance. I tend to cross off Municipal Bonds for everyone for two reasons. First, over time, Municipal Bonds have barely kept pace with inflation. And second, Muni Bonds by themselves are not very well diversified. IF CLIENT IS HIGH INCOME EARNER AND CAN T CONTRIBUTE TO A ROTH DUE TO INCOME, SAY: In your case (name) we have to cross off the Roth IRA, because the government, in their great wisdom, has decided that you make too much money and therefore, don t qualify. So, in your case, the only place that you are able to get money into the Tax- Free Pot is Life Insurance but it just so happens that s really good option. IF CLIENT CAN CONTRIBUTE TO A ROTH IRA, SAY: So in your case, you can contribute to both a Roth IRA and Life Insurance and they re both a really good options.
Slide 11 There s a book on the market called, Tax- Free Retirement. In it, the author has something he calls the Smart Investment Order. What that simply is, he says, is the smartest order to invest your money if you had money to invest. The first think on his list, which really isn t an investment at all, is Free Money. The second thing he says is Tax- Free Money The third is Tax- Deferred Money And the fourth is Taxable. Note to presenter: Before moving on, you MUST GET THEIR BUY- IN of agreement that this list makes sense. We ll skip free money for now, because that s not really an investment at all. But would you agree that If you could get a Tax- Free Return on your money that that would be better than just a Tax- Deferred return? And, a Tax- Deferred return is better than a taxable one, correct? So, you would agree with this list. Perfect, let s look at each of these in more detail Slide 12 Free Money. There are only two places I know that people can get Free Money. One, is a gift or an inheritance, and there aren t many people turning those down. Second is the matching contribution on a 401(k) plan. If you have a 401(k) that has a matching provision, then I m going to encourage you to take full advantage of that - - because it s free money.
Slide 13 However, if you contribute even $1 more than the matching amount, then you have skipped from #1 Free Money and gone to #3 Tax- Deferred Money skipping over #2 completely. So, if #2 is really better than #3 let s take a closer look at that. Slide 14 The bar graph on the left represents the Tax- Deferred Plan and the one on the right represents the Tax- Free Plan. As you can see, the money that goes into the Tax- Deferred plan the contribution has NOT been taxed. However, because the contribution hasn t been taxed going into the account, THE ENTIRE ACCOUNT GETS TAXED AT WITHDRAWAL EVERYTHING BOTH CONTRIBUTION AND GAIN! On the Tax- Free side the money going in HAS been taxed. However, because it has been taxed going in, All of the money every penny if done properly can be accessed completely income tax free. So, the only question you need to answer is Slide 15 Would you rather pay tax on this? (Point to the circled After- tax Deposits ) Slide 16 Or would you rather pay tax on this? Note to presenter: Pause for just a short moment to let this sink in. However, very often the client doesn t answer and that is expected then move to next slide. Slide 17 Simply read slide
Slide 18 The type of policy that we ve been describing here is specifically called Universal Life. You ve probably heard of it. There are a few different types of Universal Life Policies, but for this example we ll just keep it very general. So here you are putting money into a Universal Life Policy. Before the money even gets to the policy, a small portion comes out for fees and expenses, just like any other financial product. However, the rest of the money goes into the Universal Life Cash Value represented by the dark blue box with the dollar sign. Then systematically, the life insurance company pulls out the amount of money it needs to simply pay the death benefit cost just like term insurance. That small blue box represents the MINIMUM amount that my company says you have to put in to be able to simply purchase the policy. (NOTE TO PRODUCER: Minimum should usually be close to or at the target premium to make sure the policy is properly funded.) However, there is a bigger box this dotted box. And this box represents the MAXIMUM amount that the IRS says you re allowed to put into the policy. And generally, anytime the IRS limits what you can put into something, it s usually because it s really a good deal. A couple of important side notes to be aware of: One, if these limits are exceeded, the policy becomes what is called a Modified Endowment Contract, and all money taken from the cash value becomes taxable. So you need to be careful when designing the policy to avoid this. Two, the sizes of these boxes (the amount of money you either need to or are able to put in) are directly related to the amount of life insurance that is purchased. The more life insurance the bigger the boxes. So, there are really only two things that an individual needs to determine: Really, that s it. One: What is the proper amount of life insurance? Two: What amount between those two boxes does an individual want to put in?
Slide 19 So, what s best for you. For most of the people we talk to, the Roth IRA is a great tool. However, like we discussed earlier, there are some restrictions as to how much you can contribute and how much income you re allowed to have in order to qualify to use this type of IRA. Slide 20 This will depend on what your desires and objectives are both now and in the future. Slide 21 And some individuals might find they want to do both. Slide 22 So where do you go from here? Here what we d like to do. We d like to give you a copy of Patrick Kelly s national best- selling book, Tax- Free Retirement. This is a great book and will clearly explain (in much more detail) how this strategy works and how you can apply it to your specific situation. To get your copy of this book, all you need to do is complete the evaluation form in your packet. We ll trade you the evaluation form for your copy of the book as you head out the door tonight. A couple last thoughts before you fill out this form. First, it is very important to implement this strategy with someone who fully understands this concept from inception though out the life of the policy. Second, If you felt this workshop was worthwhile and you know somebody who would benefit from a presentation like this please add their names to the evaluation form and we will send them an invitation for our next workshop. Thanks so much for joining us this evening. We look forward to meeting with you in person.