1. Tax Diversifying
Your Retirement Income
This presentation includes a discussion of one or more tax-related topics. This tax-related discussion was prepared to assist in the
promotion or marketing of the transactions or matters addressed in this material. It is not intended (and cannot be used by any taxpayer)
for the purpose of avoiding any IRA penalties that may be imposed upon the taxpayer. Taxpayers should always seek and rely on the
advice of their own independent tax professionals. Please understand that New York Life Insurance Company, its affiliates and
subsidiaries, and agents and employees of any thereof, may not provide legal or tax advice to you.
Retirement Isn’t What It Used to Be
Retirement typically lasted
about 10 years
Social Security, defined
benefit pensions and
some personal savings
covered basic expenses
Retirement can last longer
Many key sources of
income have been reduced
Increased reliance on
Social Security Is Shaky
Social Security was
never intended to be
the only source of
income for retirement
The maximum Social
Security Benefit in 2010
for a worker retiring at
full retirement age is
$2,346 per month1
There are limits on how
much you can earn
before your Social
Security benefits are
reduced and/or taxed
Without changes, by 2041 the Social Security
Trust Fund will be exhausted* and there will be
enough money to pay only about 75 cents for
each dollar of scheduled benefits.
* These estimates are based on the intermediate assumptions from the Social
Security Trustees’ Annual Report to the Congress.
Fewer Pensions, Limits on Qualified Plans
Only 22% of today’s workforce has access to a defined
benefit pension plan1
Fewer employer contributions to pension plans; limits on
company matching of 401(k) plans1
More reliance on employee contributions
Limitations on contributions
‘Trends in Retirement Plan Coverage Over the Last Decade,” Monthly Labor Review, Stephanie Costo, February 2006.
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, the questions are:
– Where should I put my money?
– How will I be affected by taxes?
Where Do You Think Taxes Are Going?
Tax rates are currently at historically low levels, suggesting
they may be higher when you retire
Tax-diversifying your retirement savings might be sensible
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 show on the graph. Remember that historical rates are not a guarantee of future rates.
Source: U.S. Department of Treasury, Internal Revenue Service, Statistics of Income, Historical income Tax Returns (2008)
Is Tax Deferral the Best Strategy?
30 years ago, tax rates were so
high and there were so many
tax brackets, deferring income
generally reduced the tax
In the new tax reality, the tax
leverage benefits of deferring
may not exist
Lower tax rates and fewer tax
brackets today call for a
Your Retirement Savings Tax Options
Cash value life
A Non-Traditional Solution
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 total death benefit and total cash value.
In addition to protecting your family, cash value life insurance
can provide an ideal way to tax-diversify your retirement
– Premiums are paid with after-tax dollars
– Generates cash value that generally accumulates on a
– Allows you access to policy values – before or during
retirement – generally on a tax-free basis1
Upon your death, when many other investments
are taxed, your beneficiaries also receive the
death benefit income tax free
A “Self- Completing” Plan!
If you live…
– You enjoy all the “living benefits” of life insurance,
including the potential for supplemental tax-free
If you become disabled…
– With the purchase of the Disability Waiver of
Premium Rider, your premiums are waived, and all
the benefits of your policy stay in force1
If you die…
– Your family receives the full value
of the policy, less any unpaid loans
and loan interest, income tax free
1 Available on whole life policies
The Benefits of Tax Diversification
Retirement Income of $90,000
$90,000 taxed at
= $22,500 tax
Tax Diversification Strategy
$45,000 taxed at
= $6,750 tax
Cash Value Life Ins.
$45,000 taxed at
= $0 tax
1 Marginal federal income tax bracket under current rates. 2 If structured properly.
$67,500 to spend
$83,250 to spend after taxes