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How overlooking this aspect of diversification could impact a client’s retirement income A life insurance educational presentation Presented by [Name]

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Presentation on theme: "How overlooking this aspect of diversification could impact a client’s retirement income A life insurance educational presentation Presented by [Name]"— Presentation transcript:

1 How overlooking this aspect of diversification could impact a client’s retirement income A life insurance educational presentation Presented by [Name] [Title] [Company/Office] [Phone] [ Address] MKT 12-51A March 2013 For Life Insurance Producer Use Only. Not for Use with the Public. TAX DIVERSIFICATION

2 Retirement Income - Will There Be ENOUGH? For Life Insurance Producer Use Only. Not for Use with the Public. *“Gen X and Y Investors Worry Retirement Savings Won’t Be Enough,” Michael S. Fischer, AdvisorOne, March 9, **”Many Small-Business owners aren’t prepared for Retirement,” Laura Petrecca, USA Today, March 1, /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 ** 2 of 27

3 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? 3 of 27 For Life Insurance Producer Use Only. Not for Use with the Public.

4 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

5 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates 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. 5 of 27

6 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Capital Gain Tax Rates Generally taxed at: Capital Gain Tax Rates 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. 6 of 27

7 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Tax Rates Generally taxed at: Capital Gains Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* Tax Diversification Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income *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. 7 of 27 For Life Insurance Producer Use Only. Not for Use with the Public.

8 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Tax Rates Generally taxed at: Capital Gains Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* Tax Diversification $100,000 Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income *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

9 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Capital Gains Tax Rates Generally taxed at: Capital Gains Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* Tax Diversification $100,000 Withdrawal: Less Taxes: Net After Tax Withdrawal: Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income 35% Tax Bracket $100, ,000 65,000 For Life Insurance Producer Use Only. Not for Use with the Public. 9 of 27 *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.

10 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Income Tax Rates Generally taxed at: Income Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* Tax Diversification $100,000 Withdrawal: Less Taxes: Net After Tax Withdrawal: Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income 35% Tax Bracket $100, ,000 65,000 What happens if Income Tax Rates go up? *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

11 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Capital Gains Tax Rates Generally taxed at: Capital Gains Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* Tax Diversification $100,000 Withdrawal: Less Taxes: Net After Tax Withdrawal: Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income 35% Tax Bracket $100, ,000 65,000 50% Tax Bracket $100, ,000 50,000 What happens if Income Tax Rates go up? *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

12 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Capital Gains Tax Rates Generally taxed at: Capital Gains Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* $15,000 Tax Diversification $100,000 Withdrawal: Less Taxes: Net After Tax Withdrawal: Additional Loss from Taxes: Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income 35% Tax Bracket $100, ,000 65,000 50% Tax Bracket $100, ,000 50,000 What happens if Income Tax Rates go up? *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

13 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Capital Gains Tax Rates Generally taxed at: Capital Gains Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* $15,000 Tax Diversification $100,000 Withdrawal: Less Taxes: Net After Tax Withdrawal: Additional Loss from Taxes: Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income 35% Tax Bracket $100, ,000 65,000 50% Tax Bracket $100, ,000 50,000 What happens if Income Tax Rates go up? $100,000 *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

14 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Capital Gains Tax Rates Generally taxed at: Capital Gains Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* $15,000 Tax Diversification $100,000 Withdrawal: Less Taxes: Net After Tax Withdrawal: Additional Loss from Taxes: Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income 35% Tax Bracket $100, ,000 65,000 50% Tax Bracket $100, ,000 50,000 15% Tax Bracket $100, ,000 85,000 What happens if Income Tax Rates go up? $100,000 *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

15 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Capital Gains Tax Rates Generally taxed at: Capital Gains Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* $15,000 Tax Diversification $100,000 Withdrawal: Less Taxes: Net After Tax Withdrawal: Additional Loss from Taxes: Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income 35% Tax Bracket $100, ,000 65,000 50% Tax Bracket $100, ,000 50,000 15% Tax Bracket $100, ,000 85,000 What happens if Income Tax Rates go up? What happens if Capital Gains Tax Rates go up? $100,000 *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

16 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Capital Gains Tax Rates Generally taxed at: Capital Gains Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* $15,000 Tax Diversification $100,000 Withdrawal: Less Taxes: Net After Tax Withdrawal: Additional Loss from Taxes: Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income 35% Tax Bracket $100, ,000 65,000 50% Tax Bracket $100, ,000 50,000 15% Tax Bracket $100, ,000 85,000 50% Tax Bracket $100, ,000 50,000 What happens if Income Tax Rates go up? What happens if Capital Gains Tax Rates go up? $100,000 *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

17 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Capital Gains Tax Rates Generally taxed at: Capital Gains Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* $15,000 Tax Diversification $100,000 Withdrawal: Less Taxes: Net After Tax Withdrawal: Additional Loss from Taxes: $35,000 Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income 35% Tax Bracket $100, ,000 65,000 50% Tax Bracket $100, ,000 50,000 15% Tax Bracket $100, ,000 85,000 50% Tax Bracket $100, ,000 50,000 What happens if Income Tax Rates go up? What happens if Capital Gains Tax Rates go up? $100,000 *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. 17 of 27 For Life Insurance Producer Use Only. Not for Use with the Public.

18 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Capital Gains Tax Rates Generally taxed at: Capital Gains Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* $15,000 Tax Diversification $100,000 Withdrawal: Less Taxes: Net After Tax Withdrawal: Additional Loss from Taxes: $35,000 Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income 35% Tax Bracket $100, ,000 65,000 50% Tax Bracket $100, ,000 50,000 15% Tax Bracket $100, ,000 85,000 50% Tax Bracket $100, ,000 50,000 What happens if Income Tax Rates go up? What happens if Capital Gains Tax Rates go up? $100,000 *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. 18 of 27 For Life Insurance Producer Use Only. Not for Use with the Public.

19 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Capital Gains Tax Rates Generally taxed at: Capital Gains Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* $15,000 Tax Diversification $100,000 Withdrawal: Less Taxes: Net After Tax Withdrawal: Additional Loss from Taxes: $35,000 Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income 35% Tax Bracket $100, ,000 65,000 50% Tax Bracket $100, ,000 50,000 15% Tax Bracket $100, ,000 85,000 50% Tax Bracket $100, ,000 50,000 35% Tax Bracket $100, ,000 What happens if Income Tax Rates go up? What happens if Capital Gains Tax Rates go up? $100,000 *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. 19 of 27 For Life Insurance Producer Use Only. Not for Use with the Public.

20 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Capital Gains Tax Rates Generally taxed at: Capital Gains Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* $15,000 Tax Diversification $100,000 Withdrawal: Less Taxes: Net After Tax Withdrawal: Additional Loss from Taxes: $35,000 Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income 35% Tax Bracket $100, ,000 65,000 50% Tax Bracket $100, ,000 50,000 15% Tax Bracket $100, ,000 85,000 50% Tax Bracket $100, ,000 50,000 35% Tax Bracket $100, ,000 50% Tax Bracket $100, ,000 What happens if Income Tax Rates go up? What happens if Capital Gains Tax Rates go up? $100,000 *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. 20 of 27 For Life Insurance Producer Use Only. Not for Use with the Public.

21 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Capital Gains Tax Rates Generally taxed at: Capital Gains Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* $15,000 Tax Diversification $100,000 Withdrawal: Less Taxes: Net After Tax Withdrawal: Additional Loss from Taxes: $35,000$0 Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income 35% Tax Bracket $100, ,000 65,000 50% Tax Bracket $100, ,000 50,000 15% Tax Bracket $100, ,000 85,000 50% Tax Bracket $100, ,000 50,000 35% Tax Bracket $100, ,000 50% Tax Bracket $100, ,000 What happens if Income Tax Rates go up? What happens if Capital Gains Tax Rates go up? $100,000 *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. 21 of 27 For Life Insurance Producer Use Only. Not for Use with the Public.

22 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Real Estate Stocks Stock Funds Capital Gains Tax Rates Generally taxed at: Capital Gains Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* $15,000 Tax Diversification $100,000 Withdrawal: Less Taxes: Net After Tax Withdrawal: Additional Loss from Taxes: $35,000$0 Has your client Overlooked this bucket? Why failure to diversify tax liabilities at retirement could potentially hurt your client's retirement income *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. 35% Tax Bracket $100, ,000 65,000 50% Tax Bracket $100, ,000 50,000 15% Tax Bracket $100, ,000 85,000 50% Tax Bracket $100, ,000 50,000 35% Tax Bracket $100, ,000 50% Tax Bracket $100, ,000 What happens if Income Tax Rates go up? What happens if Capital Gains Tax Rates go up? $100, of 27 For Life Insurance Producer Use Only. Not for Use with the Public.

23 LIFE INSURANCE RETIREMENT PLAN(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 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. Tax Advantages Financial Protection PLUS: Premium Flexibility Potential Creditor Protection*** May Be Funded Through A “C” Corporation More Potential Retirement Assets Tax-Free Death Benefit** Tax-Free Distributions* Tax-Deferred Accumulation Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* 23 of 27 For Life Insurance Producer Use Only. Not for Use with the Public.

24 Framing the Details of LIRP Annual Premiums Death Benefit *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

25 Benefits of LIRP Tax-Free Death Benefit 3 Financial protection NOW Cash Accumulation Tax-deferred accumulation for the future Policy loans and withdrawals to help supplement retirement income. Potential for Income LATER Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* 3 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. 25 of 27 For Life Insurance Producer Use Only. Not for Use with the Public.

26 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” 401(K) Pension Plans Traditional IRAs Income Tax Rates Taxed at: Income Tax Rates Municipal Bonds Roth IRAs Life Insurance Retirement Plan (LIRP) Tax Free* Generally: Tax Free* Real Estate Stocks Stock Funds Tax Rates Generally taxed at: Capital Gains Tax Rates 26 of 27 For Life Insurance Producer Use Only. Not for Use with the Public.

27 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 Insurance Company Newport Beach, CA (800) Pacific Life & Annuity Company Newport Beach, CA (888) Investment and Insurance Products: Not a Deposit – Not FDIC Insured– Not Insured by any Federal Government Agency – No Bank Guarantee – May Lose Value MKT 12-51A 27 of 27 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. For Life Insurance Producer Use Only. Not for Use with the Public.


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