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TAX DIVERSIFICATION
How overlooking this aspect of diversification
could impact a client’s retirement income
A life insurance educational presentation
March 2013
MKT 12-51A
Presented by
[Name]
[Title]
[Company/Office]
[Phone]
[Email Address]
For Life Insurance Producer Use Only. Not for Use with the Public.
Retirement Income - Will There Be
ENOUGH?
2/3 of investors between age 21 and 50 doubt they
will have ENOUGH MONEY FOR RETIREMENT*
64% of Gen X and Gen Y investors expect that retirement
income will come FROM NON-RETIREMENT ACCOUNTS*
1/3 of small-business owners do not have a PERSONAL
OR BUSINESS-SPONSORED RETIREMENT **
*“Gen X and Y Investors Worry Retirement Savings Won’t Be Enough,” Michael S. Fischer, AdvisorOne, March 9, 2012.
**”Many Small-Business owners aren’t prepared for Retirement,” Laura Petrecca, USA Today, March 1, 2012.
For Life Insurance Producer Use Only. Not for Use with the Public.
2 of 27
What We’ll Cover
• Retirement income – will it be
enough?
• 3 buckets of tax diversification
• How tax diversification works
• What is in the overlooked
assets bucket?
For Life Insurance Producer Use Only. Not for Use with the Public.
3 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
For Life Insurance Producer Use Only. Not for Use with the Public.
4 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
For Life Insurance Producer Use Only. Not for Use with the Public.
5 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gain Tax Rates
For Life Insurance Producer Use Only. Not for Use with the Public.
6 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
*For life insurance, Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3)
withdrawals taken during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See
IRC Sections 72, 7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
7 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
$100,000
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken
during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
8 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
$100,000
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
35% Tax Bracket
Withdrawal:
Less Taxes:
Net After Tax
Withdrawal:
$100,000
-35,000
65,000
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken
during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
9 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
$100,000
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Income Tax Rates
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
What happens if Income Tax
Rates go up?
35% Tax Bracket
Withdrawal:
Less Taxes:
Net After Tax
Withdrawal:
$100,000
-35,000
65,000
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken
during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
10 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
$100,000
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
What happens if Income Tax
Rates go up?
Withdrawal:
Less Taxes:
Net After Tax
Withdrawal:
35% Tax Bracket
50% Tax Bracket
$100,000
$100,000
-35,000
-50,000
65,000
50,000
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken
during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
11 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
$100,000
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
What happens if Income Tax
Rates go up?
35% Tax Bracket
50% Tax Bracket
$100,000
$100,000
-35,000
-50,000
65,000
50,000
Withdrawal:
Less Taxes:
Net After Tax
Withdrawal:
Additional Loss
from Taxes:
$15,000
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken
during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
12 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
$100,000
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
$100,000
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
What happens if Income Tax
Rates go up?
35% Tax Bracket
50% Tax Bracket
$100,000
$100,000
-35,000
-50,000
65,000
50,000
Withdrawal:
Less Taxes:
Net After Tax
Withdrawal:
Additional Loss
from Taxes:
$15,000
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken
during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
13 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
$100,000
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
$100,000
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
What happens if Income Tax
Rates go up?
35% Tax Bracket
50% Tax Bracket
15% Tax Bracket
$100,000
$100,000
$100,000
-35,000
-50,000
-15,000
65,000
50,000
85,000
Withdrawal:
Less Taxes:
Net After Tax
Withdrawal:
Additional Loss
from Taxes:
$15,000
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken
during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
14 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
$100,000
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
$100,000
What happens if Income Tax
Rates go up?
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
What happens if Capital Gains
Tax Rates go up?
35% Tax Bracket
50% Tax Bracket
15% Tax Bracket
$100,000
$100,000
$100,000
-35,000
-50,000
-15,000
65,000
50,000
85,000
Withdrawal:
Less Taxes:
Net After Tax
Withdrawal:
Additional Loss
from Taxes:
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
$15,000
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken
during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
15 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
$100,000
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
$100,000
What happens if Income Tax
Rates go up?
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
What happens if Capital Gains
Tax Rates go up?
35% Tax Bracket
50% Tax Bracket
15% Tax Bracket
50% Tax Bracket
$100,000
$100,000
$100,000
$100,000
-35,000
-50,000
-15,000
-50,000
65,000
50,000
85,000
50,000
Withdrawal:
Less Taxes:
Net After Tax
Withdrawal:
Additional Loss
from Taxes:
$15,000
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken
during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
16 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
$100,000
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
$100,000
What happens if Income Tax
Rates go up?
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
What happens if Capital Gains
Tax Rates go up?
35% Tax Bracket
50% Tax Bracket
15% Tax Bracket
50% Tax Bracket
$100,000
$100,000
$100,000
$100,000
-35,000
-50,000
-15,000
-50,000
65,000
50,000
85,000
50,000
Withdrawal:
Less Taxes:
Net After Tax
Withdrawal:
Additional Loss
from Taxes:
$15,000
$35,000
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken
during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
17 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
$100,000
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
$100,000
What happens if Income Tax
Rates go up?
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
$100,000
What happens if Capital Gains
Tax Rates go up?
35% Tax Bracket
50% Tax Bracket
15% Tax Bracket
50% Tax Bracket
$100,000
$100,000
$100,000
$100,000
-35,000
-50,000
-15,000
-50,000
65,000
50,000
85,000
50,000
Withdrawal:
Less Taxes:
Net After Tax
Withdrawal:
Additional Loss
from Taxes:
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
$15,000
$35,000
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken
during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
18 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
$100,000
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
$100,000
What happens if Income Tax
Rates go up?
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
$100,000
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
What happens if Capital Gains
Tax Rates go up?
35% Tax Bracket
50% Tax Bracket
15% Tax Bracket
50% Tax Bracket
35% Tax Bracket
$100,000
$100,000
$100,000
$100,000
$100,000
-35,000
-50,000
-15,000
-50,000
-0
65,000
50,000
85,000
50,000
100,000
Withdrawal:
Less Taxes:
Net After Tax
Withdrawal:
Additional Loss
from Taxes:
$15,000
$35,000
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken
during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
19 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
$100,000
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
$100,000
What happens if Income Tax
Rates go up?
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
$100,000
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
What happens if Capital Gains
Tax Rates go up?
35% Tax Bracket
50% Tax Bracket
15% Tax Bracket
50% Tax Bracket
35% Tax Bracket
50% Tax Bracket
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
-35,000
-50,000
-15,000
-50,000
-0
-0
65,000
50,000
85,000
50,000
100,000
100,000
Withdrawal:
Less Taxes:
Net After Tax
Withdrawal:
Additional Loss
from Taxes:
$15,000
$35,000
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken
during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
20 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
$100,000
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
$100,000
What happens if Income Tax
Rates go up?
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
$100,000
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
What happens if Capital Gains
Tax Rates go up?
35% Tax Bracket
50% Tax Bracket
15% Tax Bracket
50% Tax Bracket
35% Tax Bracket
50% Tax Bracket
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
-35,000
-50,000
-15,000
-50,000
-0
-0
65,000
50,000
85,000
50,000
100,000
100,000
Withdrawal:
Less Taxes:
Net After Tax
Withdrawal:
Additional Loss
from Taxes:
$15,000
$35,000
$0
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken
during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
21 of 27
Tax Diversification
Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income
$100,000
•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
$100,000
What happens if Income Tax
Rates go up?
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
$100,000
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
What happens if Capital Gains
Tax Rates go up?
35% Tax Bracket
50% Tax Bracket
15% Tax Bracket
50% Tax Bracket
35% Tax Bracket
50% Tax Bracket
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
-35,000
-50,000
-15,000
-50,000
-0
-0
65,000
50,000
85,000
50,000
100,000
100,000
Withdrawal:
Less Taxes:
Net After Tax
Withdrawal:
Additional Loss
from Taxes:
$15,000
$35,000
$0
Has your client
Overlooked this
bucket?
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken
during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
22 of 27
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
LIFE INSURANCE RETIREMENT
PLAN(LIRP)
PLUS:
More
Potential
Retirement
Assets
Tax-Deferred
Accumulation
Tax
Advantages
Tax-Free
Distributions*
Financial
Protection
Tax-Free
Death Benefit**
• Premium Flexibility
• Potential Creditor
Protection***
• May Be Funded
Through A “C”
Corporation
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken during the
first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72, 7702(f)(7)(B),
7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
**For federal income tax purposes, life insurance death benefits generally pay income tax-free to beneficiaries pursuant to IRC Section. 101(a)(1). In certain situations, however, life insurance death benefits may be
partially or wholly taxable. Situations include, but are not limited to: the transfer of a life insurance policy for valuable consideration unless the transfer qualifies for an exception under IRC Section. 101(a)(2)(i.e.
the transfer-for-value rule); arrangements that lack an insurable interest based on state law; and an employer-owned policy unless the policy qualifies for an exception under IRC Section. 101(j).
***State law may provide life insurance and annuities with certain asset protection benefits. As a general rule, a debtor may not transfer property with the intent to avoid debt due to his creditors. The laws
governing asset protection, however, are complex and the consequences of poor planning may be both civil and criminal penalties. Anyone contemplating an asset protection plan should not
undertake such without the advice of legal counsel.
For Life Insurance Producer Use Only. Not for Use with the Public.
23 of 27
Framing the Details of LIRP
*Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals
taken during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract.
See IRC Sections 72, 7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits.
For Life Insurance Producer Use Only. Not for Use with the Public.
24 of 27
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
Benefits of LIRP
Financial protection NOW
• Tax-Free Death Benefit3
Tax-deferred accumulation for the
future
• Cash Accumulation
3Tax-free
income assumes, among other things: (1)
withdrawals do not exceed tax basis (generally, premiums paid
less prior withdrawals); (2) policy remains in force until death;
(3) withdrawals taken during the first 15 policy years do not
occur at the time of, or during the two years prior to, any
reduction in benefits; and (4) the policy does not become a
modified endowment contract. See IRC Sections 72,
7702(f)(7)(B), 7702A. Any policy withdrawals, loans and
loan interest will reduce policy values and may reduce benefits.
Potential for Income LATER
• Policy loans and withdrawals to help supplement
retirement income.
For Life Insurance Producer Use Only. Not for Use with the Public.
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•401(K)
•Pension Plans
•Traditional IRAs
Taxed at: Income Tax
Rates
•Real Estate
•Stocks
•Stock Funds
Generally taxed at:
Capital Gains Tax Rates
Tax Diversification
• Overlooking tax diversification
could impact a client’s
retirement income
• Look to the “Overlooked
Assets” bucket
• LIRP may help a client with
“Protection Now, Income Later”
•Municipal Bonds
•Roth IRAs
•Life Insurance
Retirement Plan (LIRP)
Generally: Tax Free*
For Life Insurance Producer Use Only. Not for Use with the Public.
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This material is not intended to be used, nor can it be used by any
taxpayer, for the purpose of avoiding U.S. federal, state or local tax
penalties. This material is written to support the promotion or
marketing of the transaction(s) or matter(s) addressed by this
material. Pacific Life, its distributors and their respective
representatives do not provide tax, accounting or legal advice. Any
taxpayer should seek advice based on the taxpayer’s particular
circumstances from an independent tax advisor.
Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued
by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and
features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues.
Insurance products and their guarantees, including optional benefits and any fixed subaccount crediting rates, are backed by the financial
strength and claims-paying ability of the issuing insurance company. Look to the strength of the life insurance company with regard to such
guarantees as these guarantees are not backed by the broker-dealer, insurance agency or their affiliates from which products are purchased.
Neither these entities nor their representatives make any representation or assurance regarding the claims-paying ability of the life insurance
company.
Please Note: This material is designed to provide introductory information in regard to the subject matter covered and cannot be used in
conjunction with the sale of variable universal life insurance.
Investment and Insurance Products: Not a Deposit – Not FDIC Insured– Not Insured by any Federal Government
Agency – No Bank Guarantee – May Lose Value
Pacific Life Insurance Company
Newport Beach, CA
(800) 800-7681 • www.PacificLife.com
MKT 12-51A
Pacific Life & Annuity Company
Newport Beach, CA
(888) 595-6996 • www.PacificLifeandAnnuity.com
For Life Insurance Producer Use Only. Not for Use with the Public.
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