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Life Income Strategy™

Life Income Strategy™. Life Income Strategy ™. 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

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Life Income Strategy™

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  1. Life Income Strategy™

  2. Life Income Strategy ™ • 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

  3. Six Important Questions • What if you could save for retirement without being subjected to the volatility affecting the market today? • What if you could find an investment platform that provides a positive minimum, guaranteed interest-credit rate? • What if you could put away unlimited amounts of money on a tax-advantaged basis? (Federal regulations limit annual contributions on tax-qualified plans i.e. pensions, profit sharing, 401k, 403b and 457Plans). • What if your new plan provided unlimited matching contributions? • Would you be interested in a retirement savings plan that never goes negative? • What if you could find a way to achieve an 87% probability of an 7% return without active management – No More Dartboards.

  4. Case Study • 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 • Options • IRA, ROTH, Annuity, Managed Account…

  5. Life Income Strategy ™Cash Flow Diagram Yrs 1-15 EMPLOYER INSURANCE POLICY 1. ER' Pays Bonus To EE' By Paying Premium Directly To Life Carrier Annual Premium Rec'd From ER’ Premium Paid To Life Carrier EXECUTIVE EXECUTIVE Male-age 50 5

  6. Life Income Strategy ™Cash Flow Diagram Yrs 1-15 EMPLOYER INSURANCE POLICY 1. ER' Pays Bonus To EE' By Paying Premium Directly To Life Carrier Annual Premium Rec'd From ER’ Premium Paid To Life Carrier Reported As Income EXECUTIVE 2. EE' Reports Bonus As Income Male-age 50 6

  7. Life Income Strategy ™Cash Flow Diagram Yrs 1-15 EMPLOYER INSURANCE POLICY 1. ER' Pays Bonus To EE' By Paying Premium Directly To Life Carrier Annual Premium Rec'd From ER IRS Premium Paid To Life Carrier Reported As Income EXECUTIVE 2. EE' Reports Bonus As Income3. EE' Pays Tax To IRS April 15, next year, Tax Paid To IRS On Bonus Received Male-age 50 7

  8. Life Income Strategy ™Cash Flow Diagram Yrs 1-15 EMPLOYER INSURANCE CARRIER 1. ER' Pays Bonus To EE' By Paying Premium Directly To Life Carrier Annual Premium Rec'd From ER’ IRS Premium Paid To Life Carrier Reported As Income Reimbursement For Tax Paid EXECUTIVE 2. EE' Reports Bonus As Income3. EE' Pays Tax To IRS April 15, next year, Tax Paid To IRS On Bonus Received Male-age 50 8

  9. Life Income Strategy ™Cash Flow Diagram Ages 65+ INSURANCE POLICY 5. At Retirement, Tax- Free Income Paid To EE' BENEFICIARY Initial Death Benefit $ 1,818,534 EXECUTIVE 5. Retirement Income @ Age 65 $174,922 Tax Free Income For Life 7.50% ROR Male-age 50 9

  10. Participant Summary Cost Benefits

  11. Doing Nothing vs. Adopting LIS

  12. Life Income Strategy with Life Insurance * Qualified Plan *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. 12

  13. How Annual Point-to-Point Works S&P 500 28% 28% Total Return 5.6% Average Return 20% 10% -20% -10% 1,000 The above chart is for illustration only and does not attempt to predict actual results.

  14. How Annual Point-to-Point Works Penn Mutual’s Crediting Strategy Reset Reset Reset Reset 38% Total Return 7.6% Average Return +1% +13% +13% +1% +10% S&P 500 28% 20% 10% 28% Total Return 5.6% Average Return -10% -20% 1,000 The above chart is for illustration only and does not attempt to predict actual results.

  15. 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.

  16. 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.

  17. Is Your Retirement Program on Life Support? 13% Cap 1% Guarantee 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

  18. Male age 5040% income tax rate at retirementgross rate of return of 8% is assumed in all plans

  19. What Are Your Choices?

  20. 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)

  21. Who is Penn Mutual? • 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) • 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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