FOR LIFE
The Lincoln National Life Insurance Company, Fort Wayne, IN,Lincoln Life & Annuity Company of New York, Syracuse, NY
Not FDIC-insuredNot a deposit Not insured by any federal government agency
Not guaranteed by any bank or savings association May go down in value
©2012 Lincoln National CorporationLCN1210-2072646
Beyond retirement plan limitsProtecting a legacy and adding supplementing retirement income with tax-advantaged life insurance
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Agenda
Add flexibility
Enhance control
Supplement existing retirement planning
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Income vs cash flow
Common forms of retirement income
Net after-taxCash Flow
IRS form 1040line 8b
Modified Adjusted Gross Income
Adjusted Gross IncomeIRS form 1040 line 37
Tax exemptTax deferredTaxable Tax free
Possible shrinkage from taxation
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Income affects
Income Tax expense
SocialSecuritybenefits
Medicarepremiums
85% of your benefits are taxable with income over 34K
Your premiums increase with income over 85K
over triple!
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IRC Sec.101(a)(1) Death proceeds are received income tax free by the beneficiary
Rev. Rul. 74-500The inside build up of cash surrender values is generally not taxed
IRC Sec. 72(e)(s)Policy loans are not includable in income on non-MEC policies
IRC Sec. 72(v)There is no penalty for “early” distributions prior to age 59½
IRC Sec. 1035(a) Life Insurance may be exchanged income tax free for an annuity
Life insurance taxation
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Net after-tax cash flow
Income from a 401(k)
Cash flow from a life insurance policy
$20,000 distribution
28% tax
Pre-tax contributions After-tax premiums
$14,400
net after-tax cash flow
$20,000 distribution
0% tax
$20,000
net after-tax cash flow$20,000 distribution
35% tax
$13,000
net after-tax cash flow
$20,000 distribution
0% tax
$20,000
net after-tax cash flow
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Cash flow affects
Cash flow from a life insurance
policy
Tax expense
SocialSecuritybenefits
Medicarepremiums
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Needs
Wants
Dreams
Legacy
Travel, entertainment, gifts, motorcycle
Food, shelter, clothing
Grandchild’s education, vacation home, RV
Heirs, charities
Financial in
dependence
Post-retirement expensesF
requ
ency
Less
More
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Asset and expense matching
Needs
Wants
Dreams
Legacy
Expenses
Asset conversions
Annuities, dividends,
interest
Employer pension, 401K,
IRA, social security
Life insurance living benefits
Life insurance death benefits
Traditional assets
Supplemental assets
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Order of depletionSome retirees plan to deplete qualified plans over their lifetime with one of two results at death:•Excess in qualified plans •Ran out of money
Qui
z
Would your beneficiaries rather have?(A)$1 of qualified money or (B)$1 of life insurance cash value?
Loans and withdrawals reduce your policy’s cash surrender value and death benefit, may cause the policy to lapse, and may have tax implications
Cash value life insurance
Living benefits
in the form of policy loans
Death benefits
transfer income tax-free
+
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Flexibility
Option 1Retire at A65Social Security @ A65Draw down assets to LE
Option 2Retire at A65Social Security @ A65Draw down assets to life expectancyAccess life insurance cashvalues post-LE
Option 3Retire at 63Access life insurance cash values until A65Social Security @ A65Draw down assets to life expectancyAccess life insurance cash values post-LE
Option 4?
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Add flexibility
Enhance control
Supplement existing retirement planning
Family protection
Life insuranceretirement planning
LCN1210-2072646
Important disclosures. Please read.
This material was prepared to support the promotion and marketing of life insurance. Lincoln Financial Group® affiliates, their distributors, and their respective employees, representatives, and/or insurance agents do not provide tax, accounting, or legal advice. Any tax statements contained herein were not intended or written to be used, and cannot be used for the purpose of avoiding U.S. federal, state, or local tax penalties. Please consult your own independent advisor as to any tax, accounting, or legal statements made herein.
Lincoln life insurance policies are issued by The Lincoln National Life Insurance Company, Fort Wayne, IN, and distributed by Lincoln Financial Distributors, Inc., a broker/dealer. The Lincoln National Life Insurance Company does not solicit business in the state of New York, nor is it authorized to do so.
Policies sold in New York are issued by Lincoln Life & Annuity Company of New York, Syracuse, NY, and distributed by Lincoln Financial Distributors, Inc., a broker/dealer.
All guarantees and benefits of the insurance policy are backed by the claims-paying ability of the issuing insurance company. They are not backed by the broker/dealer and/or insurance agency selling the policy, or any affiliates of those entities other than the issuing company affiliates, and none makes any representations or guarantees regarding the claims-paying ability of the issuer.Products and features are subject to state availability. Limitations and exclusions may apply.
©2013 Lincoln National Corporation
Visit LincolnFinancial.com
Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates.
Affiliates are separately responsible for their own financial and contractual obligations.
1/13 Z03Order code: LIF-SRP-PPT111
Not a deposit Not FDIC-insured Not guaranteed by any bank or savings association May go down in value
Not insured by any federal government agency
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