Solutions That Leave an Impression In the Wholesale Brokerage World

1. Solutions That Leave an Impression In the Wholesale Brokerage World

2. Putting Your IRA To Work –Three Strategies for Transferring Wealth .

3. Is this YOU? • Retired, under age 70 • Owns an IRA • Not taking any money out of IRA • If not, will you need RMDs after you reach age 70 ½? • Retired, over age 70 • Don’t need your RMDs • Tend to reinvest your RMDs • If it weren’t for RMDs, you wouldn’t take any money out of your IRA

4. IRA Reviews How do we tend to look at IRAs for individuals that do not need their RMDs? • Take out an RMD • Rebalance the IRA for appropriate asset allocation (in relation to the rest of your portfolio) • Put it back in the drawer until next year • Next year. . . Repeat the process It’s not really a “long-term strategy”

5. Projected IRA Values $100,000 IRA; 7% hypothetical annual return

6. Consider This: When you are forced to take an RMD you don’t need, and then asked to reinvest it…you may be compounding a problem • There might be a better way. Today you will learn about three new recommendations you can consider.

7. Case Study • John Smith, age 70 • Normal health • Survives until age 80 • Jane Smith, age 65 • Normal health • Survives until age 85 • IRA Balance: $500,000 • IRA Hypothetical Annual Return: 7.00%

8. In The Absence Of A Strategy Keep in mind that IRA owners are not required to take an RMD in the year 2009. For information specific to your situation, please refer to an illustration prepared especially for you. Taking additional withdrawals from the IRA to pay life insurance premiums may not be the best alternative. Whenever life insurance premiums exceed RMDs, you should consider paying those premiums from sources other than the IRA. *Some values have been rounded for simplicity. ** Taxes include Federal and State income taxes.

9. IRA Legacy Strategies 3 IRA Strategies that have the potential to: • Keep your IRA in your Care, Custody, and Control • For the rest of you and your spouses life • In case of emergency • Significantly increase the value of your IRA legacy, and • Take no additional market risk in your portfolio

10. X • Your money can go to three places at your death. C G L.O. • Cross out the one you would least like to get your money at that time. • Most choose the “government”

11. You Have Control Today you will learn: • You have control over how much of your money each of these three circles gets, and. . . • How much your decisions about the three circles will affect your IRA legacy

12. L.O. C G *Values have been rounded for simplicity.

13. Choose From 3 IRA Strategies • Income Tax Offset • Income Tax Elimination • Legacy Enhancement

14. Income Tax Offset

15. Income Tax Offset • Daughter’s estimated income taxes when she inherits $711,519* = $249,032 • Assumes taxes at 35% • Purchase a $250,000 survivorship Universal Life policy today • Name the Daughter as the beneficiary • It’s almost like having someone else pay the IRA income taxes for you! • What does it cost to do that? *Some values have been rounded for simplicity.

16. Income Tax Offset For information specific to your situation, please refer to an illustration prepared especially for you. Taking additional withdrawals from the IRA to pay life insurance premiums may not be the best alternative. Whenever life insurance premiums exceed RMDs, you should consider paying those premiums from sources other than the IRA. • What does the life insurance policy cost? • Approximately $3,909 per year • Based on M70 / F65, Standard underwriting class • Where do we find $3,909 per year? • From the RMDs that John & Jane don’t need $18,249* in year 1 $33,794* in year 10 $48,187* in year 20 • The life insurance premium is just a fraction of the total RMD amount *Values have been rounded for simplicity.

17. Results of Income Tax Offset • The IRA remained in John & Jane’s C-C-C (Care, Custody, and Control) • The after-tax legacy increased by over 50% • From $462,487 to $711,519* • John & Jane took no additional market or investment risk in the portfolio *Some values have been rounded for simplicity.

18. L.O. C G *Values have been rounded for simplicity.

19. Income Tax Elimination

20. Income Tax Elimination • We forecasted the future value of the IRA • Approximately $711,519 at Jane’s death • Instead of purchasing a $250,000 survivorship policy, purchase a $711,519 survivorship policy • Still name daughter as beneficiary • Daughter inherits $711,519 income-tax-free • That’s over 50% more (net after-tax) than her original $462,487 after-tax inheritance! • Jane names a Charity* as beneficiary of her $711,519 IRA • No income taxes are due—charities are considered exempt from paying income taxes * The term “charity,” as used in this context, means a charitable organization exempt from income tax under the Internal Revenue Code.

21. Income Tax Elimination For information specific to your client’s situation, please refer to an illustration prepared especially for you. Taking additional withdrawals from the IRA to pay life insurance premiums may not be the best alternative. Whenever life insurance premiums exceed RMDs, you should consider paying those premiums from sources other than the IRA. • What does the life insurance policy cost? • Approximately $11,125 per year • Where do we find $11,125 per year? • From the RMDs that John & Jane don’t need • $18,249 in year 1 • $33,794 in year 10 • $48,187 in year 20

22. Results of Income Tax Elimination • IRA remained in John & Jane’s C-C-C • More than tripled the total legacy: • Original legacy was $462,487 after-tax • New legacy: • $711,519 income-tax-free to daughter • $711,519 income-tax-free to Charity • $1,423,038 total legacy • John and Jane took no additional market risk in the portfolio

23. L.O. C G *Values have been rounded for simplicity.

24. Legacy Enhancement

25. Legacy Enhancement • From a tax perspective, what is one of the worst assets to die with? IRA • If you don’t need the RMDs, then stop the growth! • Withdraw the annual earnings • $500,000 x 7% = $35,000 per year • $35,000 – 25% tax = $26,250 • $26,250 as an annual premium can purchase approx. $1,678,902 income-tax-free death benefit • Based on M70 / F65, Standard underwriting class. • $500,000 IRA donated to Charity

26. Results of Legacy Enhancement • IRA remained in John & Jane’s C-C-C • Increased the total legacy by nearly 5 times! • Original legacy was $462,487 after-tax • New legacy: • $1,678,902 income-tax-free to daughter • $500,000 income-tax-free to Charity* • $2,178,902 total legacy • John and Jane took no additional market risk in the portfolio * The term “charity,” as used in this context, means a charitable organization exempt from income tax under the Internal Revenue Code.

27. L.O. C G *Values have been rounded for simplicity.

28. Flexibility of Legacy Enhancement • You can change how you divide the inheritance between your Loved Ones and the Charity at any time prior to your death.

29. Choose From 3 IRA Strategies • Income Tax Offset • Income Tax Elimination • Legacy Enhancement

30. Questions