Retirement Planning

[Agent] is a Registered Representative of Equity

Services Inc., [branch office address and telephone

number].

Securities are offered solely by Equity Services, Inc.,

Registered Broker/Dealer Affiliate of

National life Insurance Company, Montpelier, Vermont [DBA name] is independent of

Equity Services, Inc. National Life Group is a trade name of

National Life Insurance Company and its affiliates.

This information is not intended as tax or legal advice. Please consult with your Attorney or

Accountant prior to acting upon any of the information

contained in this presentation.

TC32934(0107)TC32934(0107)

Please note that agents who use this presentation must submit the cover slide with their securities Please note that agents who use this presentation must submit the cover slide with their securities disclosure for review and approval prior to use. Agents should also be aware that changes made to disclosure for review and approval prior to use. Agents should also be aware that changes made to

the presentation may require refiling with the NASD., which can be a 4-6 week processthe presentation may require refiling with the NASD., which can be a 4-6 week process

Retirement Planning for the Business Owner

Presented by:

[DBA]

Welcome

Business Succession Planning

Proper Business Succession Planning includes:

• Estate Planning

• Retirement Planning

• Executive Benefit Planning


Proper succession planning requires capital:• To avoid estate liquidation

• To retire comfortably without draining business assets

• To resolve conflicts between interested parties


Lack of capital at owner’s death accounts for many failed business successions


• Solid planning to avoidfamily conflict

• A qualified – and interested - successor

Successful Transitions Need:


• Solid planning to avoidfamily conflict

• A qualified – and interested - successor

• Continued support and loyaltyof key employees




• Solid planning to avoid family conflict

• A qualified – and interested – successor

• Continued support and loyalty of key employees

• A new owner and management who are ready for change


Many businesses fail not because

of an owner’s unexpected death,

but due to insufficient retirement

capital for a retiring owner.


A complete business succession plan covers three inter-related strategies:

• Estate Planning• Retirement Planning• Executive Benefits

Planning


There are two sides to retirement planning:

• Setting your goals• Developing a plan to reach

your goals

Retirement Planning

Uncle Sam offers a variety of tax-favored ways for

business owners to sponsor a retirement plan.

Retirement Planning

Only 30% of small businesses sponsor a qualified retirement

plan

Source: NFIB 2005

Retirement Planning

What happens to a businesswithout a retirement plan?

• Assets tied up in business• Often unable to sell at

acceptable price

Result: no retirement

Retirement PlanningSolutions

Qualified Retirement Plans:

• Tax-favored• Accumulate retirement assets

using company dollars• Build employee loyalty

and support

Qualified Plans

Qualified plans allow thebusiness owner to:

• Target their personal retirement income needs

Qualified Plans

Qualified plans allow the business owner to:


• Substantially reduce company’s taxes

Qualified Plans

Qualified plans allow the business owner to:


• Substantially reduces their company’s taxes

• Tailor a plan to address their specific needs and objectives

Qualified Plans

• Defined Contribution Plans: Retirement income is defined by plan contributions

• Defined Benefit Plans: Retirement income is defined by the benefit desired

Two basic types of qualified retirement plans:

Qualified Plans

Objectives:

• Defined Contribution Plans: Prefer to manage contributions• Defined Benefit Plans: Prefer to promise specified benefits

Features:

• Company manages annual contributions• Individual (portable) accounts• Easier and less expensive to administer than defined benefit plans

Defined Contribution Plans

Applicable guidelines must be followed to qualify for favorable tax treatment.


Employer creates a pension trust

Total contribution deposited into employee’s account

Investment earnings realized on contributions


Tax Benefits:

• Tax deferred accumulated• Flexible contributions• Contributions tax deductible to employer


Retirement Income:

• Total contributions

• Accrued earnings


Survivor Benefits:• Non-insured plans• Insured plans



Two basic forms of defined contribution plans:

• Pension plans• Profit sharing plans

Defined Contribution PlansProfit Sharing

Features:

• Maximum funding flexibility• Employer contributions are discretionary

• Contribution flexibility with small to medium sized businesses

• Ability to reward employees in profitable years is profit popular with larger, well-established companies


Tax Factors:

• Maximum employer deductible contribution 25% of the total payroll of all participants in the plan

• Maximum individual allocation amount of lesser of 100% of compensation or $45,000

• Must intend to fund on regular basis• Allocation formula must be defined


• Contributions do not have to be the same for all plan participants

• Forfeitures may be used to further increase participants' benefits


How it works:

Total company contribution – $50,000Total company compensation – $750,000

Employee A $75,000 or 10% of total compensation

Employee B $50,000 or 6% of total

compensation

$5,000 or 10% of total company contribution

$3,000 or 6% of totalcontribution

Compensation Profit Sharing Account



• Traditional plans

• Age–weighted

• New comparability

All favor businesses in which the owners and key employees are older

OR more highly compensated

Types of Profit Sharing Plans:

Defined Contribution Plans 401(k)

• Profit sharing plan

• Elective deferrals


• Provides the profit sharing concept

• Gives employees tax-advantage way to save for themselves

• Profit Sharing Plan

• Elective deferrals

Must Meet Actual DeferralPercentage Tests:

• Matching contribution tests,

or• Contribution made to every rank and-file participant’s account



Unlike profit sharing and 401(k) plans, a defined

contribution pension plan obligates an employer to a

specific contribution amount.


Most common forms of defined contribution pension plan are:

• Money purchase plans

• Target benefit plans


Questions

and

Distribution Options

Distribution Planning

Insure a lifetime income level:

Recalculate annual/monthly/quarterlydistribution from plan every yearorUse plan distribution to purchase annuity

Surrender charges may apply in the early years of an annuity contract and certain withdrawals prior to age 59 1/2 may be assessed a 10% penalty tax. Guarantees are dependent upon the claims-paying ability of the issuing company.

Distribution PlanningImmediate Annuity

• Guarantees payments over lifetime

• Ability to ensure retirement income for spousal survivors

Distribution Planning

Types of Annuities:

• Single premium fixed interest deferred annuities

• Single premium variable deferred annuities

• Flexible premium variable deferred annuities

• Single premium fixed interest immediate annuities

•Single premium variable immediate annuities

Sentinel Advantage Variable Annuity, form series 7400/7401/7400ID(0199)/7401ID(0199), is issued by National Life and distributedby Equity Services, Inc., Registered Broker/Dealer affiliate of National Life Insurance Company, One National Life Drive,Montpelier, Vermont 05604.

Sentinel Advantage is sold by prospectus. For more complete information, including charges and expenses, please request a prospectus from your registered representative or call (802) 229-3900. Please read is and consider carefully the Fund’s objectives, risks, charges, and expenses before you invest or send money. The prospectus contains this and other information about the investment company.

Distribution PlanningDeferred Annuities

Features:

• Accumulate tax-deferred

• Takes advantage of compound interest

Surrender charges may apply in the early years of an annuity contract and withdrawals prior to age 59 1/2 may be assessed a 10% federal tax penalty.

Distribution PlanningAnnuity Income Option

• Benefits remaining at death may be forfeited

• Benefits may be passed onto surviving spouse

• Benefits may be guaranteed for certain amount of time

Defined Benefit Plans

Features:

• Provides retirement income of determinable amount for life• Formulas recognize age, salary and service


Calculation:

• Contribution is calculated annually by an enrolled actuary• Based on the value of future estimated benefits


Tax Factors:

• Maximum annual benefit (2007)

is lesser of $180,000 or

average compensation in last 3 years of work• No specific contribution limit


Social Security Integration:

• May enhance benefits for owners and other higher-compensated employees

• May reduce the cost of including lower-paid employees in the plan

Defined Benefit Plans412(i)

• Suitable for small businesses

• Funded with life insurance and annuities

– Provides death benefits from day 1

– Policy values fund defined benefit atretirement

– Maximum tax-deductible contribution

Features:

• Maximum owner’s retirement benefit

• Fully insured, pre-determined benefit amount

• Large deductions due to lower plan assumptions


Features:

Benefits:


• Easy to explain

• Does not require enrolled actuary

• Employer contributions tax deductible

• Contributions not taxable to employees until withdrawn

Hybrid Plans

• Plans have features of both defined benefit and defined contribution plans

• Cash Balance Plans

– Hypothetical Accounts

– Defined Benefit Limits

Combining Plans

• Maximize contributions by having both a defined benefit and a defined

contribution plan

• May have fully deductible defined benefit plan and make a 6% deductible contribution to a defined contribution plan

• Sophisticated carve out and floor offset designs

Retirement PlanningSummary

Retirement planning is critical to the business owner who must plan retirement wisely if his or

her business is to survive an ownership transfer.

Retirement Planning

Questions

& Answers

Thank You

Retirement Planning

Economy & Finance

Transcript of Retirement Planning