The Wealth Assault on Boomers FOR AGENT USE ONLY RMD Overview for Insurance Professionals (For agent use only)

The Wealth Assault on Boomers Baby Boomers, those born between 1946 and 1964, are the fastest growing population in America. Boomers control the majority of wealth in America and average among the highest income levels.  There are currently 42 Million Baby Boomers in the Unites States  Boomers account for 35% of the U.S. Population  18% of all millionaires in the U.S. are over the age of 65  38% of all Boomers have household income over $75,000 annually  12 Million Baby Boomers own their own business, many with no plans to retire FOR AGENT USE ONLY

Not all roses for Baby Boomers Waiting for all Baby Boomers are taxes and distribution requirements that cause considerable damage to estate values, retirement accounts, and investment incomes. All Boomers are subject to the damaging effects of these taxes and requirements and all Boomer estates are impacted by the results. FOR AGENT USE ONLY

The damage comes in two forms Required Minimum Distributions (RMDs)  Designed to force liquidation of tax favored retirement accounts  Forces an increase in unearned income and marginal tax rates  Immediately destroys up to 50% of an account value Estate Taxes  Forces heirs to liquidate assets  Destroys the value of an estate  Can cause unrecoverable damage to family business FOR AGENT USE ONLY

The RMD Gotcha!  Many Baby Boomers will continue to work their business or career after age 70.  A large number of Boomer millionaires have sufficient assets and investment income to sustain them through their non-working years. These Boomers are not dependent on Social Security and do not want or need income from their retirement accounts.  Unfortunately, government mandated distributions do not care whether or not the funds are needed. Just the opposite, the government wants distributions to be taken in order to create a large tax revenue base. FOR AGENT USE ONLY

Two account types requiring distributions Social Security  Requires distribution by age 70 Qualified Retirement Accounts  IRA, 401(k), 403(b), Profit Sharing, SIMPLE, SEP  Requires distribution by April 1 following age 70 ½. FOR AGENT USE ONLY

Negative Impact of RMDs  Increases taxable income  Can cause an increase in the marginal income tax rate  Can subject Boomer to the new 3.8% investment surtax for Individual Incomes of $200K, $250K Married Filing Jointly  Forces liquidation of retirement accounts, and subjects accounts to income tax  Forces heirs to liquidate retirement accounts  Social Security creates unneeded income, the value of which is lost to heirs at death FOR AGENT USE ONLY

Example of impact from RMD Bob’s Earned Salary: $175,000 Unearned Investment Income: $45,000 IRA Value: $385, (k) Value: $520,000 Investment Accounts: $525,000 Real Estate Assets: $1,150,000 FOR AGENT USE ONLY Current Age 68 After RMD at Age 70 Earned Income$175,000 Unearned Income (Dividends, Interest, Rent) $45,000 IRA/401(k) Required Distribution (Asset value divided by 27.4) n/a$33,000 Social Security Benefitsn/a$38,000 Total Adjusted Gross Income $220,000$291,000 Marginal Tax Bracket 28% 33% Investment Income Surtax 0%3.8% Total Tax on Investment Income 36.8%

Calculating the RMD Bob’s RMD Calculation Distribution period from Uniform Lifetime Table: 27.4 IRA balance on December 31 of prior year: $385,000 IRA balance divided by distribution period = $14, (k) balance on December 31 of prior year: $520, (k) balance divided by distribution period = $18,978 FOR AGENT USE ONLY Accoun t Value Distributio n PeriodRMD IRA Balance $385, $14, (k) Balance $520, $18,97 8

Effect RMD has on the Estate  Current value of Social Security benefits and retirement accounts are $1,425,000  After RMD taxes at his marginal tax rate of 36.8% and the end of Social Security benefits at death, his heirs will only receive $571,960 FOR AGENT USE ONLY Bob’s estate assets are greatly destroyed with the loss of Social Security at death and the application of RMD taxes. Current Value of Assets Post RMD Value of Assets to HeirsLoss 401(k)$520,000$328,640-$191,360 IRA$385,000$243,320-$141,680 Social Security (x 10 Years) $380,000$ 0-$380,000 Total $1,425,000$571, ,040 Bob’s heirs will lose almost two-thirds of the value of assets passed on after Bob’s death, not taking into consideration any potential federal or state estate taxes.

Taking back what was lost An RMD Life Insurance Strategy allows the Boomer to recover losses from RMD taxes, ending Social Security payments and potential estate taxes.  Recovers all money lost from RMDs  Makes up for the loss due to ending Social Security benefits  Guarantees heirs money to pay any remaining RMD taxes due on inherited accounts  Only cost effective solution available to the RMD problem FOR AGENT USE ONLY

A cost effective solution for Bob Looking back at our example, Bob can recover all the lost value of ending Social Security benefits and RMD taxes with an $850,000 RMD life insurance strategy.  Small amount of premium guarantees large return for heirs  Premium is funded by unneeded RMD/Social Security Income  Heirs enjoy benefits tax free FOR AGENT USE ONLY

How much does it cost Bob?  If Bob at age 70 is a Preferred Non-Smoker $850,000 Guaranteed Death Benefit to age 110 Average annual premium $25,000  If Bob at age 70 is a Standard Non-Smoker $850,000 Guaranteed Death Benefit to age 110 Average annual premium $32,000  If Bob at age 70 is a smoker $850,000 Guaranteed Death Benefit to age 110 Average annual premium $58,000 FOR AGENT USE ONLY Tax-free benefit to heirs is 32x the annual premium! Tax-free benefit to heirs is 25x the annual premium! Tax-free benefit to heirs is 14x the annual premium!

An amazing sales opportunity Largest growing demographic in the U.S. presents an opportunity to provide a value-added solution to an increasing problem. All Baby Boomers face this problem, and an RMD Life Insurance Strategy is the only solution.  High net-worth customers  Growing population  Unneeded distributions fund the insurance strategy  Average premium is $15,000 annually  Fantastic sales material (the book) outlines the problem and strategy to customer FOR AGENT USE ONLY

Prospecting for the right customer The Wealth Assault on Boomers was written for the following customer… Age 65 and above; and Existing income of $150,000 or greater; and Professional-business owner that plans to work past age 70; or Individual with sufficient asset producing income past age 70; or Individuals not needing additional income from Social Security/401(k)/IRA; and Individuals wanting to leave full value of existing assets to heirs. FOR AGENT USE ONLY

The best prospecting tool The Wealth Assault on Boomers book is a great tool to help you prospect to affluent seniors.  Easy to read (Only 60 pages)  Effectively illustrates effects of RMDs and taxes  Helps clients calculate their own RMDs  Motivates client to create an RMD life insurance strategy FOR AGENT USE ONLY

This is a great way to break into a new market, increase sales in an existing market and deliver true value to your affluent customers. This is the opportunity of 2014! Call us today for your copies! Steve Clemens, Vice President Life Markets URL Insurance Group x132 FOR AGENT USE ONLY