1
Are you satisfied with
the progress you’ve made
toward your retirement?
Neither New York Life Insurance Company nor its agents provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions. 14618.RB.012013 SMRU520786(Exp.12/31/2014)
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Retirement isn’t what it used to be.
Then:
• People generally started working around age 20 and retired when they were 65. Because life
expectancy was shorter, the average retirement typically lasted about 10 years.
• That means people often had about 45 years to prepare for 10 years of retirement.
Begin Work Retire Life Expectancy
Age 85
Age 65
Age 55
Age 45
Age 35
Age 25 Age 75
45 years 10 years
Once, retirees didn’t need as much in personal savings for
retirement because they could count on Social Security and
company pensions.
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Now:
• Many young adults enter the workforce later and want to retire earlier.
• Thanks to medical advances and healthier lifestyles, people are living longer.
• That means people may be retired for as many years as they worked.
Retirement isn’t what it used to be.
People must increasingly rely on personal savings and assets.
• Many key sources of income have been reduced.
Begin Work Retire Life Expectancy
Age
85Age
65Age
55Age
45Age
35Age
25Age
7530 years 30 years
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Traditional sources of retirement income.
What would happen if one leg was shorter than the other two?
The stool—which represents your retirement income—would lack stability.
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Traditional sources of retirement income.
1Social Security and Medicare Board of Trustees, A Summary of the 2012 Annual Reports, http://www.ssa.gov/OACT/TRUSM/index.html
Social Security
• Social Security can’t cover
most retirees’ primary
expenses
1and faces a
potentially uncertain
future.
Pensions Plans
• Fewer companies are
offering pension plans,
choosing instead to shift
the costs to employees
with 401(k) plans and other
defined contribution plans.
Personal Savings
• Retirees must increasingly
rely on personal savings, so
they need to consider how
their savings vehicles will be
affected by taxes.
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Personal assets are critical.
Most people have more questions than answers
when it comes to planning for retirement:
• How much will I need?
• How much will I have?
• How much do I need to save to cover the shortfall?
For personal savings, people want to know:
• Where should I put my money?
• How will I be affected by taxes?
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Where do you think tax rates are going?
• Tax rates are currently at historically low levels, and no one knows where it’ll be when you retire.
• Tax diversifying your retirement income might be sensible.
0
20
40
60
80
100
40%
20%
0%
1950 1954 1958 1962 1934 1938
1926 1930 1942 1946 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014
60%
80%
100%
Highest Tax Bracket
100%
80%
60%
40%
20%
0%
1926 1930 1934 1938 1942 1946 1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 201 4 Lowest Tax Bracket
The graph above illustrates the high and low marginal tax rates over history. Exemptions, deductions, and state and local taxes are not taken into account when illustrating these marginal tax rates. Your actual tax rates may vary from those shown on the graph. Remember that historical rates are not a guarantee of future rates. Source: www.taxfoundation.org/taxdata/show/151.html
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The “tax perfect” retirement plan.
With proper planning, you can minimize the effect taxes will
have on your retirement planning. Ideally, you would be able to
create a retirement plan that includes three key attributes:
Contributions that are tax deductible
Accumulation that is tax deferred
Distributions that are tax free
01.
02.
03.
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The “tax perfect” retirement plan.
Right now you can’t have all three, but you can include
1 and 2 or 2 and 3 in your retirement planning.
1 Municipal bonds may be subject to alternative minimum tax.
2 The primary purpose of life insurance is to provide a death benefit. Using a life insurance policy to supplement retirement income can negatively impact the insurance benefit and cash value, and can possibly contribute to policy lapse.
1. Contributions Tax deductible After tax
2. Accumulation Tax deferred Tax deferred
3. Distributions Taxable Tax free
Financial Vehicles
Traditional IRA Roth IRA
401(k) plan Tax-free municipal bond
1Pension plan Cash value
life insurance
2Profit-sharing plan
Keogh plan
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The benefits of tax diversification.
Without Tax Diversifi cation Tax Diversifi cation Strategy
$100,000
401(k)/Qualifi ed Plans
$50,000
401(k)/Qualifi ed Plans
$50,000
3Cash Value Life Insurance
100% taxable 100% taxable tax free
2$100,000 taxed at 25%
1$50,000 taxed at 15%
1$50,000 taxed at 0%
2= $25,000 tax = $7,500 tax = $0 tax
$75,000 to spend
after taxes $92,500 to spend after taxes
Retirement Income of $100,000
Hypothetical example for illustrative purposes only
1 Assumed marginal federal income tax bracket under current rates.
2 If structured properly. Policy loans and partial policy value surrenders will reduce the death benefit of the policy and may cause the life insurance policy to lapse. Distributions exceeding cost basis will result in taxation.
3 The cash value in a life insurance policy is accessed through policy loans, which accrue interest at the current rate, and cash withdrawals and loans will decrease the total death benefit and total cash value. Policy values are based on non-guaranteed factors, such as dividends and interest rates, which are subject to change. Therefore, the supplemental retirement income is not guaranteed.
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There are three things that can prevent
you from reaching your goals.
1 The cash value in a life insurance policy is accessed through policy loans, which accrue interest at the current rate, and cash withdrawals. Loans and withdrawals will decrease the death benefit and cash value. Policy loans and withdrawals may be taxable if the policy is a modified endowment contract and may carry a 10% tax penalty if policyowner is not yet age 59½. Certain withdrawals from a policy that is not a modified endowment contract that are made within the first 15 years after the policy is issued may be taxable.
2 The Option to Purchase Paid-Up Additions (OPP) rider allows the policyowner to pay additional premiums into the policy to purchase paid-up additions, and is included with all regularly underwritten New York Life whole life products. Certain conditions must be met. There is an up-front expense charge on any OPP premium.
3 Guarantees dependent on the claims-paying ability of the issuing insurer.
4 Available for an additional charge; waives premium if qualified disability; limits apply.
5 Systematic (billable) OPP payments may qualify for the Disability Waiver of Premium benefit (if WP is included on the policy); scheduled OPP payments (through billable or Check-O- Matic arrangement) cannot be more than the standard OPP limits.
In Oregon, the Whole Life policy form number is 1CC12213-50. The rider form numbers are as follows: Disability Waiver of Premium: 208-225; and Option to Purchase Paid-Up Additions: 1CC11213-330.
If you live, will you accumulate
enough money?
If you die, will your family be able to
save enough without you?
If you become disabled, how will you
maintain your insurance policy?
• Permanent life insurance accumulates cash
value tax deferred.
• The cash value can be assessed tax-free to
help pay for college, or any other important
need.
1• Additional premiums paid into your policy
provide additional guaranteed cash value.
2• Life insurance provides a guaranteed death
benefit
3that can help provide the funds for
college.
• This can give your family peace of mind knowing
your child’s future doesn’t have to change if
something happens to you.
• You can make additional premium payments into
your life insurance policy, giving you guaranteed
additional death benefit protection.
2• A popular, optional rider waives the premiums
on your policy if you become disabled, keeping
your policy inforce and allowing your cash value
to continue to accumulate.
4• If you are making scheduled additional
payments into your policy, this additional
premium
5will also continue to be made by New
York Life, allowing your death benefit and cash
value to grow even more.
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A non-traditional solution.
In addition to protecting your family, Whole Life insurance:
• Can be paid for with after-tax dollars
• Generates cash value that accumulates on a tax-deferred basis
• Allows you access to policy values—before or during retirement—generally
on a tax-free basis
1• Provides a death benefit to your beneficiaries that is generally income tax free ,
unlike other investments
1 The cash value in a life insurance policy is accessed through policy loans, which accrue interest at the current rate, and cash withdrawals and loans will decrease the total death benefit and total cash value. Policy values are based on non-guaranteed factors, such as dividends and interest rates, which are subject to change.
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Which of your financial products
provide these benefits?
Enhance the value of your Whole Life policy with
additional options:
5The Option to Purchase Paid-Up Additions (OPP)
rider allows you to pay additional money into your
policy to increase your death benefit and cash
value. The more you fund it, the faster your cash
value grows.
If you become totally disabled, the Disability
Waiver of Premium rider
6can ensure your policy
remains in force, and that your cash value continues
to accumulate.
1 All guarantees are based on the claims-paying ability of the issuer, New York Life Insurance Company.
2 Dividends which provide opportunity for cash value growth, is not guaranteed.
3 Varies by state.
4 Accessing cash value via policy loans, which is generally tax free, accrues interest and reduces cash value and death benefit.
5 Within certain limits and conditions in jurisdictions where approved. Please consult your New York Life agent for complete information.
6 There is no additional charge for the Waiver of Premium rider on all newly issued Standard or better Whole Life policies with face amounts $99,999 or less, for issue ages under 60.
Tax-Free Access to Cash
Values4 Income Tax-Free
Death Benefit
Guaranteed Death Benefit1
Premium Guaranteed
Never to Increase
Guaranteed Cash Value Growth
Additional Growth Through Dividends2 Tax-Deferred
Cash Value Growth Protected
from Creditors3
Whole
Life
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“Bank” on the living benefits of whole life.
Use the loan option on your cash value Whole Life policy as a
flexible source of funds. What might you need money for?
Bank Loan Policy Loan
Approval process No approval process
Possible denial Cannot be turned down
Loan amount limited by bank determination Loan amount limited to cash value
Interest rate based on credit rating Competitive interest rate regardless of credit rating
Must be paid back in specific time frame No fixed payment plan
Need credit/affects credit No credit check/won’t show up on credit report
Best of all, you can have the money
with just a simple phone call!
If you had to borrow money for any of these needs, where would you get it?
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Plus, whole life can improve your portfolio.
Some of the smartest minds agree:
• Use life insurance to hedge against the loss of what
may be your largest asset, your human capital.
• The cash value of life insurance has characteristics
of fixed income assets.
• Portfolios that include life insurance cash value
have higher estimated expected returns than those
without.
According to an independent study by third-party Ibbotson & Associates, a diversified portfolio that includes cash value life insurance as part of the fixed income asset class has a higher expected return and lower risk/volatility (standard deviation).