Transcript Slide 1

Life Income Strategy™
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Life Income Strategy
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A selective program that is owned by the executive
No funding limitations unlike IRA’s, SEP’s and other qualified plans
The Corporation/Executive determines annual and flexible
contribution amounts
Contributions are fully deductible for a C-Corp
Funds accumulate on a tax-deferred basis and are structured for
tax-free distributions
Executive determines amount and timing of distributions
No age 59 1/2 restrictions
Plan can be terminated at anytime
No Deferred Compensation 409A regs
No setup costs, no annual administrative costs, no IRS forms
All account values are Creditor Protected in most states
Business cycle protection
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Six Important Questions
1. What if you could save for retirement without being subjected to the
volatility affecting the market today?
2. What if you could find an investment platform that provides a positive
minimum, guaranteed interest-credit rate?
3. What if you could put away unlimited amounts of money on a taxadvantaged basis? (Federal regulations limit annual contributions on tax-qualified
plans i.e. pensions, profit sharing, 401k, 403b and 457Plans).
4. What if your new plan provided unlimited matching contributions?
5. Would you be interested in a retirement savings plan that never goes
negative?
6. What if you could find a way to achieve an 87% probability of an 7% return
without active management – No More Dartboards.
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Case Study
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Male, Age 50 s n/s
Assume 35% tax bracket
Need for additional savings
Maxed out Qualified Plan
Has an additional $100,000 to save
Concerned About:
Tax Risk
 Investment Risk
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Options
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IRA, ROTH, Annuity, Managed Account…
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Life Income Strategy ™
Cash Flow Diagram Yrs 1-15
Premium Paid To Life Carrier
EXECUTIVE
EMPLOYER
1. ER' Pays Bonus To EE' By
Paying Premium Directly To
Life Carrier
INSURANCE POLICY
EXECUTIVE
Annual Premium Rec'd From ER’
Male-age 50
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Life Income Strategy ™
Cash Flow Diagram Yrs 1-15
Premium Paid To Life Carrier
Reported
As Income
EMPLOYER
1. ER' Pays Bonus To EE' By
Paying Premium Directly To
Life Carrier
INSURANCE POLICY
EXECUTIVE
Annual Premium Rec'd From ER’
2. EE' Reports Bonus As Income
Male-age 50
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Life Income Strategy ™
Cash Flow Diagram Yrs 1-15
Premium Paid To Life Carrier
Reported
As Income
EMPLOYER
1. ER' Pays Bonus To EE' By
Paying Premium Directly To
Life Carrier
INSURANCE POLICY
EXECUTIVE
Annual Premium Rec'd From ER
2. EE' Reports Bonus As Income
3. EE' Pays Tax To IRS
April 15, next year,
Tax Paid To IRS On
Bonus Received
Male-age 50
IRS
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Life Income Strategy ™
Cash Flow Diagram Yrs 1-15
Premium Paid To Life Carrier
Reported
As Income
Reimbursement
For Tax Paid
EMPLOYER
1. ER' Pays Bonus To EE' By
Paying Premium Directly To
Life Carrier
INSURANCE CARRIER
EXECUTIVE
Annual Premium Rec'd From ER’
2. EE' Reports Bonus As Income
3. EE' Pays Tax To IRS
April 15, next year, Tax
Paid To IRS On Bonus
Received
Male-age 50
IRS
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Life Income Strategy ™
Cash Flow Diagram Ages 65+
INSURANCE POLICY
EXECUTIVE
5. At Retirement, Tax- Free Income
Paid To EE'
5. Retirement Income @ Age 65
$174,922
Tax Free Income
For Life
7.50% ROR
BENEFICIARY
Initial Death Benefit
$
1,818,534
Male-age 50
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Participant Summary
C-Corporation:
Total Outlay (100,000 x 15 years)
1,500,000
Tax Savings @ 34%
(510,000)
Net Cost
990,000
Executive:
Total Bonuses Rec’d (100,000 x 15 years)
Taxes Due On Bonuses Received
Total Reimbursement Of Taxes
Net Cost
1,500,000
525,000
(525,000)
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Initial Death Benefit-7.50% crediting rate
1,818,534
Death Benefit @ Age 65
3,392,346
Cash Surrender Value @ Age 65
1,573,812
Ann Tax-Free Retirement Inc (Lifetime)
174,922
Cumulative Tax-Free Retirement Income Received by age 90
4,373,050
Remaining Death Benefit @ Age 90
1,485,612
Remaining Net Cash Surrender Value @ Age 90
Cost
Benefits
820,393
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Doing Nothing vs. Adopting LIS
Summary Of Taking Income – Paying Taxes, Investing Difference
Annual Income Received
100,000
Tax Due On Income Received
(35,000)
Net Annual Amount Available To Invest (15 years)
Cumulative Amount Invested
Accumulated Value At Age 65 @ 7.50% Gross (less 35% tax rate & 15% capital gains rate, .25 mngt. Fee)
Annual after-tax Income from Age 65 to 90
Cumulative Income Taken (Ages 65-90)
Remaining Account Balance At Age 90
65,000
975,000
1,468,754
102,289
2,557,225
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Summary of Life Income Strategy ™
Net Cash Surrender Value @ Age 65
Ann Tax-Free Retirement Inc for Lifetime
1,573,812
174,922
Cumulative Tax-Free Retirement Received by age 90
4,373,050
Remaining Net Death Benefit @ Age 90
1,485,612
Remaining Net Cash Surrender Value @ Age 90
Annual Income Advantage
Cumulative Income Advantage to Age 90
820,393
72,633
1,815,825
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Life Income Strategy with Life Insurance *
Qualified Plan
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*Must be accompanied by or preceded by a full basic illustration. The assumed benefits and values are not guaranteed and the assumptions on which they are based
are subject by change by the insurer. Actual; results may be more or less favorable.
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How Annual Point-to-Point Works
S&P 500
28%
20%
10%
-10%
-20%
28%
Total
Return
5.6%
Average
Return
1,000
The above chart is for illustration only and does not attempt to predict actual results.
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How Annual Point-to-Point Works
Penn Mutual’s Crediting Strategy
+13%
+1%
+10%
+1%
S&P 500
20%
+13%
Total
Return
7.6%
Average
Return
28%
10%
-10%
1,000
38%
28%
Total
Return
5.6%
Average
Return
-20%
The above chart is for illustration only and does not attempt to predict actual results.
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Sample Historical Performance
$100,000 invested 10 Years ago
(5/1/2004 to 5/1/2014)
This chart is for illustrative purposes only. Past performance does not guarantee future results, and your own results will vary.
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Sample Historical Performance
$100,000 invested 20 Years ago
(5/1/1994 to 5/1/2014)
7 yrs to
recover!
This chart is for illustrative purposes only. Past performance does not guarantee future results, and your own results will vary.
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Is Your Retirement Program on Life Support?
40
30
13% Cap
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10
1% Guarantee
0
-10
-20
-30
-40
S&P Index Annual Return
Life income Strategy Returns
68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 Year
Represents the application of the Life Income Strategy over the same period (never goes negative)
Represents 34 years of S&P 500 returns
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Male age 50
40% income tax rate at retirement
gross rate of return of 8% is assumed in all plans
Mutual Fund
Annuity
Qualified Plan
Life Income
Strategy ™
Before-Tax
Contribution
$50,000
$50,000
$50,000
$50,000
After-Tax
Contribution
$30,000
$30,000
$50,000
$30,000
Cash at
Age 65
$746,276
$706,944
$1,274,490
$956,053
After-Tax
proceeds on
Death at age
65
$701,834
$604,166
$764,694
$1,933,667
After-Tax
Income age
66-100
$48,500yr
$29,129/yr
$52,200/yr
$90,000/yr
$1,649,500
$990,386
$1,774,800
$3,060,000
Total After-Tax
Income
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What Are Your Choices?
Save
More
Save
Smarter
Die
Sooner
Work
Longer
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Final Thoughts … Life Income Strategy ™ Advantages
(Based on Current Federal Income Tax Laws)
For the Participant
 No sponsoring organization insolvency risk – no substantial risk of forfeiture
 Internal earnings accumulate tax-deferred – distributions are income tax-free
 No contribution limits
 Life insurance death benefit protection
 Diversifies both your portfolio and pre-tax vs. after-tax retirement income
resources
 Take distributions when desired – not subject to distribution rules or penalties
 Protects against fluctuating tax rates
 Predictable control of balance sheet liability
 No benefit performance liability
 No actuarial fees
 Optional employer contributions (no limitations or caps)
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Who is Penn Mutual?
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Chartered in 1847
Second Oldest Mutual Life Insurance Company in
North America
A.M. Best: A+, Moody’s: Aa3, S&P: AA- (AM Best -Jan.
2010, S&P-Nov. 2009)
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One of 11 Carriers rated “A” or better by AM Best
for last 75 yrs, July 2010 Best’s Review
Total Assets: $14.1 billion as of 9/30/2011
Increased surplus in 2008, 2009, 2010, 2011
2010 EOY Surplus to Asset ratio of 20.3%.
Industry average 10.9%
87.3% of total assets in investment grade bonds,
Class 1-2
Penn Mutual has never increased COI’s on any
block of business!
Fixed income investments represent 87% of
invested assets
No commercial mortgage loans
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