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Page 1: Supplemental Life Insurance For Retirement Planning Life Insurance for Retirement Planning, ... a participating whole life insurance ... Is Supplemental Life Insurance for Retirement

Have you ever considered life insurance apotential source of additional funding for yourretirement? That’s right –– life insurance.

Life insurance usually is not the first vehiclethat comes to mind when you explore the dif-ferent avenues available for retirement fund-ing. Supplemental Life Insurance forRetirement Planning, otherwise known asSLIRP, is a strategy that uses a life insurancepolicy structured to generate a tax-deferredcash flow during retirement.

The funding vehicle for the SLIRP strategy isa participating whole life insurance policyissued by an insurance company. This type ofpolicy provides tax-deferred cash value accu-mulation, tax-free withdrawals contingentupon certain stipulations, and a tax-freedeath benefit to your beneficiary(ies).

Traditional Sources of RetirementFunding and Their Pitfalls There are several conventional vehicles mostindividuals turn to for their retirementincome: Social Security, company or govern-ment pension plans, and personal invest-ments, such as IRAs and 401(k)s. But, as youbegin estimating how much income you willneed to live securely in retirement, considerthese facts:■ Social Security may not meet all of your

retirement income needs. In fact, theamount of Social Security benefits you willreceive is limited to a percentage of your cur-rent earnings. Here’s an idea of what youcan expect from Social Security: if annualearnings are $25,000, $40,000, or $60,000,Social Security can provide 50%, 27%, or23% of your annual income, respectively, atnormal retirement age.

Supplemental LifeInsurance For

Retirement PlanningH E L P I N G T O P R O T E C T Y O U R F U T U R E

Even though you may thinkyou are well on your way to acomfortable nest egg, relyingsolely upon traditional meansfor your retirement incomecould prove costly.

■ If you plan to work during retirement, thereare limits on the amount of wages a retireeage 65 to 69 can earn without a reduction inSocial Security benefits. The figure forretirees age 65 in 1998 was $14,500.

■ Social Security may also be reduced if youbegin collecting benefits before age 65.

■ There are limitations on the amount ofcompensation that can be considered inpension plan benefit formulas. Mostpension plans will only replace 40% to60% of pre-retirement earnings. Pensionplan benefits are also often integrated with(and usually reduced by) Social Securitybenefits.

■ There are limitations on the amount youcan contribute to qualified plans, such asIRAs and 401(k)s.

These pitfalls may force you to depend heavilyon your personal assets and other investmentsto fill your retirement gap.

Whole Life Insurance and SLIRP In its plain vanilla form, whole life insurance isa tool to protect your loved ones. In return forpaying a guaranteed level premium, a wholelife policy provides death benefit protectionand the ability to accumulate cash value.

Whole life insurance generates cash value ona tax-deferred basis as long as the policyremains in force. A portion of the premiumsbuilds cash value each year, providing a safeand convenient way to set aside funds forfuture needs, in addition to providingprotection. Over the long term, cash valueaccumulation can be considerable, especiallysince taxes on the cash value’s accumulationare deferred. The cash value is available throughpolicy loans to help meet financial needs.

Page 2: Supplemental Life Insurance For Retirement Planning Life Insurance for Retirement Planning, ... a participating whole life insurance ... Is Supplemental Life Insurance for Retirement

A participating whole life policy isalso eligible to receive dividends, if andwhen they are declared by the insurancecompany issuing your policy.1 Dividendsrepresent a partial return of premium.

How Does SLIRP Work?In essence, the SLIRP strategy relies ona whole life policy’s cash value anddividends. Here’s how it works: ■ Dividend values, if available, are with-

drawn from the policy up to an amountequal to your cost basis. In the case of alife insurance policy, your cost basisgenerally means the total amount ofpremiums paid. As long as withdrawalsdo not exceed your cost basis, there isno taxable distribution.

■ After you reach your cost basis, loanscan be made against the policy’s cashvalue. Interest will be at current rates,but the loan does not need to berepaid. The interest can simply beadded to the amount of the loan. Keepin mind that neither the loan nor theinterest needs to be repaid.2 However, theamount of your unpaid loan plus anyinterest accrued will be deducted fromthe policy’s death benefit beforepayment to your beneficiary(ies).

The result is a cash flow that can supple-ment your retirement income.

Take the Steps Needed toSupplement Your RetirementNo matter what your retirement dreamsare, it’s important that you take the time toprepare yourself for a future that’s free fromfinancial worry. The responsibility of retire-

ment security and comfort falls squarely onyour shoulders. And with Americans livinglonger, healthier lives, the more sourcesyou can turn to for income in retirement,the more likely you will be able to lead thelifestyle you deserve and expect.

Is Supplemental Life Insurance forRetirement Planning right for you? Thatdepends on your individual retirementobjectives. If you would like more informa-tion on this strategy, contact your NewYork Life agent today. There is no cost orobligation for this service.

1 Dividends are not guaranteed, nor are current dividends an estimate of future performance.

2 The Internal Revenue Code requires that taxes be paidon all gains if you surrender the policy or the policy laps-es for nonpayment of premium. Policy loans that exceedyour cost basis are treated as gains, if the policy goes outof force prior to death. Your policy, therefore, should bekept in force until death.

New York Life Insurance Company

New York Life Insurance and Annuity

Corporation (A Delaware Corporation)

51 Madison Avenue

New York, NY 10010

Visit our Web site at www.newyorklife.com

13544 (199)

Benefits of SLIRPSupplemental Life Insurance forRetirement Planning offers thesebenefits:■ A generally income tax-free death

benefit.■ Can be tailored to meet individual

needs.■ Can be structured to avoid early

withdrawal penalties. ■ Can be pledged as collateral for a loan. ■ Availability of a Waiver of Premium

rider to continue premium paymentsupon total disability.

■ Government-defined annual contri-bution limits do not exist, providedthe policy stays within the tax lawdefinition of a life insurance contract.