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The Boomer Tax Dilemma

The Boomer Tax Dilemma. The Boomer Tax Dilemma. 70 million Baby Boomers are Retiring Their Retirements are severely under-funded. Their Health Care costs are outpacing inflation. They will need someone to pay for them. What ’ s the probability?. That future tax bracket rates will increase?.

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The Boomer Tax Dilemma

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  1. The Boomer Tax Dilemma

  2. The Boomer Tax Dilemma • 70 million Baby Boomers are Retiring • Their Retirements are severely under-funded. • Their Health Care costs are outpacing inflation. • They will need someone to pay for them. For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  3. What’s the probability? • That future tax bracket rates will increase? For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  4. World’s aging countries Source: OECD (2007), CIA (2007) For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  5. US Historic Tax Brackets For agent or broker use only. Not to be used with the general public. LCN0810-2021955 Source: IRS

  6. Do you know? • Is tax-deferred investing dead? For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  7. Do you know? • Is tax-deferred investing dead? • Do you have a plan? For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  8. We have a plan • Variable Universal Life Insurance (VUL) Offers: • An immediate income-tax-free death benefit • Potential for market returns by investing in equity sub accounts • Tax-free access to cash values via • Withdrawals to basis • Income tax-free loans Note: Loans and withdrawals will reduce the policy’s account value and death benefit, may effect your guarantees, may cause the policy to lapse, and may have tax consequences. For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  9. Why VUL? • Let’s examine the after tax benefit of VUL compared to: • Traditional taxable investments • Traditional tax-deferred investments For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  10. How Much Benefit? • Annual Taxable Returns: • Gross Return: 8.0 % • Mgmt Fees: - 1.0 % • Pre Tax Return: 7.0 % This example is for illustrative purposes only. * Tax Brackets are not actual rates, but hypothetical in nature and may not be accurate in the future For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  11. How Much Benefit? • Tax Deferred Returns: • Gross Return: 8.0 % • Mgmt Fees: - 1.0 % • Pre Tax Return: 7.0 % 1 Assumes tax deferral for 30 years This example is for illustrative purposes only. * Tax Brackets are not actual rates, but hypothetical in nature and may not be accurate in the future For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  12. VUL Comparison $25,000 per year paid for 4 years into a Lincoln AssetEdgeSM VUL 53 year old male preferred underwriting A client squarely in the baby boomer population. For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  13. VUL Internal Rate of Return • Assumptions: • $416,325 of death benefit • 8% gross return • 53 M Preferred • level death benefit – minimized in year 12 • Policy is not a MEC (Modified Endowment Contract) Source: Lincoln Illustration System. The IRR is at a point 30 years in the future, with a gross rate of return of 8%, with current mortality assumptions. At a gross rate of 0% with guaranteed mortality the policy will lapse prior to year 30. For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  14. Comparing the Alternatives Annualized after-tax IRR 30 years in the Future • This example is for illustrative purposes only. • *Tax Brackets are not actual brackets, but hypothetical in nature and may not be accurate in the future • VUL Assumptions • $416,325 of death benefit, level • 8% gross return • 53 M Preferred • Policy is not a MEC For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  15. What is your Protection Against Future Tax Increases? Protect a portion of your assets from future income taxes. Get there with Lincoln’s VUL Portfolio and the Elite Series For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  16. How do we implement • Prospects up to age 60 with Assets in taxable accounts. • Action Steps: • Transfer 25% of account into Lincoln AssetEdgeSM VULover 4 years (3 years + 1 day) • To Illustrate: • 7 pay TAMRA premium solve for Death Benefit • DB option LEVEL • Variable DB -11 years at TAMRA. Yr 12+ $100,000 • Pay premiums for 4 years For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  17. Value of VUL to Client • Immediate death benefit • EZ Tax Free switch to income producing assets • we just accelerated the timetable and created greater flexibility when the switch inevitably occurs. • Transferred control of tax recognition to client For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  18. Value of VUL to Advisor • Client gets insurance protection • Great differentiator from other advisors • VUL offers a chassis for an EZ Tax Free switch to income producing assets • No more 1099s • Great prospecting tool – “what is your current plan to protect against increasing tax brackets?” For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  19. What is it? • THIS IS NOT SUPPLEMENTAL RETIREMENT INCOME • IT IS PORTFOLIO TAX MANAGEMENT For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  20. What was that again? Protect a portion of your assets from future income taxes. Get there with Lincoln’s VUL Portfolio and the Elite Series For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  21. Lincoln AssetEdgeSM VUL is issued on policy form LN698 and state variations by The Lincoln National Life Insurance Company, Fort Wayne, IN, distributed by Lincoln Financial Distributors, Inc., and offered through broker/dealers with an effective selling agreement. The Lincoln National Life Insurance Company is not authorized, nor does it solicit business in the state of New York. Contractual obligations are backed by the claims-paying ability of The Lincoln National Life Insurance Company. Policies sold in New York are issued on policy form LN698 by Lincoln Life & Annuity Company of New York, Syracuse, NY, and distributed by Lincoln Financial Distributors, Inc. Contractual obligations arebacked by the claims-paying ability of Lincoln Life & Annuity Company of New York. Policy values will fluctuate and are subject to market risk and to possible loss of principal. Product and features subject to state availability. Lincoln variable universal life insurance is sold by prospectus. Carefully consider the investment objectives, risks, and charges and expenses of the policy and its underlying investment options. This and other important information can be found in the prospectus for variable universal life policy and the prospectus for the underlying investment options. Prospectuses are available upon request and should be read carefully before investing or sending money. For a current prospectus, please call 800 444-2363 or go to www.LincolnFinancial.com. Disclosure For agent or broker use only. Not to be used with the general public. LCN0810-2021955

  22. Thank you • Questions? For agent or broker use only. Not to be used with the general public. LCN0810-2021955

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