FOR AGENT USE ONLY PLEASE BE ADVISED: ALL SPECIFIC LEGAL AND TAX - PowerPoint PPT Presentation

STRATEGIC AGENT PARTNERS WORK WITH A VARIETY OF LIFE INSURANCE AND ANNUITY PRODUCTS WITH SEVERAL LEADING COMPANIES. PRODUCT AVAILABILITY VARIES BY STATE. GUARANTEES ARE BASED UPON THE CLAIMS-PAYING ABILITY OF THE ISSUER. FOR AGENT USE ONLY

PLEASE BE ADVISED: ALL SPECIFIC LEGAL AND TAX QUESTIONS SHOULD BE REFERRED TO YOUR LEGAL AND TAX ADVISERS

TIMES ARE CHANGING • LONGER LIFE EXPECTANCIES • INFLATION EROSION • SOCIAL “INSECURITY” • EMPLOYER PENSION PLANS AT RISK • TAX LAW UNCERTAINTY

“SIXTY IS THE NEW FIFTY” Longer Life Expectancy Year 1950 1960 1970 1980 1990 2000 2004 Life 68.2 69.7 70.8 73.7 75.4 76.9 77.8 Expectancy at Birth Life expectancy has increased nearly ten years since 1950! Source: National Center For Health Statistics, Department of Health and Human Services (2004).

INFLATION EROSION Purchasing Power Year Inflation Rate of One Dollar* 1967 (Base Year) - $1.00 1972 3.3% 80 cents 1976 6.5% 55 cents 1982 6.7% 37 cents 1987 4.4% 29 cents 1992 2.9% 24 cents 1997 1.5% 21 cents 2002 2.4% 19 cents 2006 2.5% 17 cents Over the last 38 years, the annual inflation rate in the U.S. has averaged 4.75%. * Source: United States Bureau of Labor Statistics, Consumer Price Index, (DATE). Purchasing Power amounts are rounded to the nearest cent.

SOCIAL “INSECURITY” “UNLESS ACTION IS TAKEN TO STRENGTHEN SOCIAL SECURITY, IN N JUS UST 11 YEARS RS WE WILL LL BE BEGIN IN PAYI YING NG MO MORE IN BENEFI FITS S THAN WE COLLECT LECT IN TAXE XES. S. WITHOUT CHANGES, BY 2041 THE SO SOCI CIAL AL SE SECU CURIT RITY Y TRUST ST FUNDS DS WILL BE EXHAUSTED… THERE WILL NOT BE ENOUGH YOUNGER PEOPLE WORKING TO PAY ALL OF THE BENEFITS SCHEDULED FOR THOSE WHO ARE RETIRING. AT THAT POINT, THERE WILL BE ENOUGH MONEY TO PAY ONLY ABOUT 74 CENTS FOR EACH DOLLAR OF BENEFITS THAT RETIREES ARE SCHEDULED TO RECEIVE.” Text taken directly from the front page of a 2007 Social Security Statement

EMPLOYER PENSION PLANS AT RISK • SINCE 2000, THE PENSION BENEFIT GUARANTEE CORPORATION HAS RECEIVED A “RECORD NUMBER OF EXTRAORDINARILY LARGE CLAIMS” FOR FAILING PENSIONS. • IN 2000, $900 MILLION IN CLAIMS PAID • IN 2005, $3.7 BILLIO ION IN CLAIMS PAID The number of insured pension plans has decreased by 75% since 1985. Source: Pension Insurance Data Book 2005, Pension Benefit Guarantee Corporation (PBGC). The PBGC insures about 2/3 of the private sector defined benefit pension plans.

THE TREND CONTINUES NE NEARL RLY Y ONE NE TH THIRD IRD OF ALL U.S. COMPANIES CLOSED, FROZE OR TERMINATED THEIR DEFINED BENEFIT PENSION PLANS AT THE END OF 2007. Source: Pension Insurance Data Book 2005, Pension Benefit Guarantee Corporation. The PBGC insures about 2/3 of the private sector defined benefit pension plans.

TAX LAW UNCERTAINTY • TAX REFORM ACT OF 1986 • OMNIBUS BUDGET RECONCILIATION ACT OF 1987 • OMNIBUS BUDGET RECONCILIATION ACT OF 1989 • OMNIBUS BUDGET RECONCILIATION ACT OF 1990 • OMNIBUS BUDGET RECONCILIATION ACT OF 1993 • SMALL BUSINESS JOB PROTECTION ACT OF 1996 • TAX RELIEF ACT OF 1997 • ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001 • JOB CREATION AND WORKER ASSISTANCE ACT OF 2002 • JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003 • AMERICAN JOBS CREATION ACT OF 2004 • TAX INCREASE PREVENTION AND RECONCILIATION ACT OF 2005 • PENSION PROTECTION ACT OF 2006 • TAX RELIEF AND HEALTH CARE ACT OF 2006 14 major federal tax bills have been enacted since 1986!

THE GOOD OLD DAYS FOR MANY INDIVIDUALS, SOCIAL SECURITY AND COMPANY PROVIDED PENSION PLANS SUPPLIED ENOUGH INCOME FOR A COMFORTABLE RETIREMENT.

THE NEW REALITY: PAY YOURSELF FIRST • SOCIAL AL SECURIT ITY Y AND PENSIONS: ONS: WILL PROVIDE A MUCH SMALLER PORTION. • PERSO SONAL NAL SAVINGS: INGS:WILL PROVIDE THE MAJORITY OF EACH RETIREMENT DOLLAR Relying primarily on government programs and employer-sponsored pension plans could leave you short of income during your retirement years

SUPPLEMENTING SAVINGS WITH CASH VALUE LIFE INSURANCE • SIMPLE • TAX-DEFERRED GROWTH • INCOME TAX-FREE RETIREMENT CASH FLOW* • ACCESS TO CASH WITHOUT GOVERNMENT PENALTIES** • PROTECTION FROM CREDITORS (VARIES BY STATE) • INCOME TAX-FREE DEATH BENEFIT *Cash flow is tax free as long as policy withdrawals and loans are properly structured. **Under current tax laws.

THREE PHASES Accumulation Phase Retirement Cash Flow Death Benefit Phase

ACCUMULATION PHASE Accumulation Phase Retirement Cash Flow Death Benefit Phase • Annual life insurance premiums • Policy cash value grows income tax deferred • Policy cash value creditor protected (varies by state)

RETIREMENT CASH FLOW PHASE Accumulation Phase Retirement Cash Flow Death Benefit Phase • Cash value accessed to provide tax-free retirement income • Cash value also available for other needs such as education funding or family and charitable gifting programs

DEATH BENEFIT PHASE Accumulation Phase Retirement Cash Flow Death Benefit Phase • Income tax-free, lump- sum death benefit to heirs • Death benefit may be structured to pass estate tax free to heirs

SUMMARY Accumulation Phase Retirement Cash Flow Death Benefit Phase • Annual life • Cash value is accessed • Income tax-free, insurance premiums to provide tax-free lump-sum death retirement cash flow benefit to heirs • Policy cash value • Cash value is also • Death benefit may grows income tax deferred available for other needs be structured to such as education pass estate tax free • Policy cash value is funding or family and to heirs creditor protected charitable gifting (varies by state) programs

CASE STUDY: GARY & SUSAN PROFI FILE • MARRIED, BOTH AGE 45 • HAVE LIFE INSURANCE COVERAGE ON GARY ($250,000) • RETIREMENT SAVINGS CONSIST OF A 401(K) ($150,000) AND A ROLLOVER IRA ($120,000)

GARY & SUSAN’S GOALS • THEY WANT TO RETIRE AT AGE 65 • THEY NEED ADDITIONAL RETIREMENT CASH FLOW • THEY ARE INTERESTED IN TAX SAVINGS • THEY NEED ADDITIONAL DEATH BENEFIT PROTECTION

SOLUTION: CASH VALUE LIFE INSURANCE • PERMANENT LIFE INSURANCE POLICY ON GARY (OR SUSAN) • ANNUAL PREMIUMS OF $10,000 FOR 20 YEARS • DEATH BENEFIT IS MINIMIZED TO CREATE MORE CASH VALUE • INCOME TAX-FREE RETIREMENT CASH FLOW FOR 15 YEARS STARTING AT AGE 65

RETIREMENT SUPPLEMENT BENEFITS Accumulation Retirement Income Death Benefit Annual tax-free $10,000 annual policy cash flow Death benefit of insurance premium of $28,509 $72,018 at age 85 for 15 years Tax-deferred policy Income tax-free Income tax-free cash value and death retirement cash flow death benefit paid benefit for family starting at age 65 to heirs protection

SUMMARY: COST & BENEFITS COST • $10,000 ANNUAL PREMIUM • $200,000 TOTAL PREMIUMS TO AGE 65 BENEFIT ITS • PRE-RETIREMENT FAMILY DEATH BENEFIT • $524,475 AT AGE 65 • RETIREMENT CASH FLOW BENEFIT STARTING AT AGE 65 • $28,509 ANNUAL TAX-FREE CASH FLOW FOR 15 YEARS* • $427,635 TOTAL TAX-FREE CASH FLOW FOR GARY AND SUSAN • POST-RETIREMENT DEATH BENEFIT • $72,018 AT AGE 85

PERSONALIZED ILLUSTRATION Annual Annual Total Retirement Total Income Income Death Year Age Premium Premiums Cash Flow Received Tax Benefit 1 46 $10,000 $10,000 0 0 $203,040 5 50 $10,000 $50,000 0 0 $248,021 10 55 $10,000 $100,000 0 0 $316,996 20 65 $10,000 $200,000 0 0 $524,475 21 66 0 $200,000 $28,509 $ 28,509 0 $495,941 25 70 0 $200,000 $28,509 $142,545 0 $381,805 30 75 0 $200,000 $28,509 $285,090 0 $231,691 35 80 0 $200,000 $28,509 $427,635 0 $ 59,365 Example depicts Virtus Value – “Wash Loan” with an annual premium of $10,000 for twenty years and policy loans taken for 15 years starting in year 21. The interest rate credited to the policy shown is 4.8% in years 1-10 and 5.3% in years 11 and later. Adverse income tax consequences may result if the policy is surrendered or allowed to lapse prior to maturity

PROTECT YOUR SAVINGS WAIVER OF PREMIUM FOR TOTAL DISABILITY RIDER PROTECTS YOUR CASH VALUES IN THE EVENT OF DISABILITY In the event of the insured’s disability for six months, premiums will be waived and cash values will continue to accumulate.