1. WELCOMEWELCOME
Securing Your Clients Financial FutureSecuring Your Clients Financial Future
February 16, 2017February 16, 2017

4. What Would Your Clients Like to Have?
√ Security of Principle?
√ Tax-Deferral?
√ Liquidity?

5. Security of Principle
Guaranteed Interest Rate*
Access to funds**
Know the cost of getting your money
*May be penalty for early withdrawal than in contract
**Based on contract limits

6. 03/01/17 6
 The principle use of an annuity is the "scientific liquidation of capital."
1. A sum is deposited and allowed to accumulate.
2. A series of payments is then available to the owner (annuitant) that may
be withdrawn over a period of time, for a lifetime, or a combination of the
two.
3. Annuity payouts are based on the mortality of the individual, an expected
return on the deposit, and the law of large numbers.
 As life insurance is designed to protect against dying too soon,
annuities are designed to protect against living too long.
ANNUITIES

7. Tax-Deferral
Their Interest Grows Tax-Deferred, giving them the
Value of Triple Compounding……
Interest on Principle
Interest on Interest
Interest on Tax Savings – the money they would
have paid in taxes

9. Liquidity
Partial withdrawals are available for any reason, typically
after the first policy year*
The Cash They Need……..
 To Travel
 To Visit Family
 For Sudden Emergencies
 To Live Life
*Based on withdrawal privileges of the contract, surrender charges may
apply. If client is under 59 ½ , IRS penalty will apply

10. The Real Rate of Return
What happens without triple compounding?
Many people put their money in a conservative
instruments such as a CD* or money market
account because they aren’t sure what to do.
This money in their CD or Money Market Account
may be reduced by taxes and inflation and could
actually decrease in value.
*CDs are FDIC insured

11. The Real Rate of Return*
Deposit Amount $100,000
(4.50% Interest Rate) +4,500
33% Taxes -1,485
Amount after Tax $103,015
3.50% Inflation -3,605
Amount Left $99,410
Net Loss $590
*This is a hypothetical example

12. Taxable Equivalent Yields
Interest rate required on a
taxable investment to
equal the yield of tax-deferred
interest in accumulation.
For example, a person in the
35% tax bracket must earn
7.69% taxable to match
the 5% Tax-Deferred Yield.
Tax-
Deferred
Interest
18%
Taxable
28%
Taxable
35%
Taxable
4.5% 5.49% 6.25% 6.92%
5.% 6.10% 6.94% 7.69%
5.5% 6.71% 7.64% 8.46%
6% 7.32% 8.33% 9.23%
6.5% 7.93% 9.03% 10%
7% 8.54% 9.72% 10.77%
7.5% 9.15% 10.42% 11.54%
8% 9.76% 11.11% 12.31%
Annuity earnings will be taxed
in the “pay out” or distribution
phase

13. What is their Risk Tolerance?

14. What is your
Risk Tolerance?
CD

15. What is your
Risk Tolerance?
CD
Safety

16. What is your
Risk Tolerance?
CD
Safety
2/3/4+
%?

17. What is your
Risk Tolerance?
CD
Safety
2/3/4+
%?
STOCK

18. What is your
Risk Tolerance?
CD
Safety
2/3/4+
%?
STOCK
Upside
Market
Potential

19. What is your
Risk Tolerance?
CD
Safety
2/3/4+
%?
STOCK
Upside
Market
Potential
100%
Loss

20. What is your
Risk Tolerance?
CD
Safety
2/3/4+
%?
STOCK
Upside
Market
Potential
100%
Loss
√

21. What is your
Risk Tolerance?
CD
Safety
2/3/4+
%?
STOCK
Upside
Market
Potential
100%
Loss
√

22. What is your
Risk Tolerance?
CD
Safety
2/3/4+
%?
STOCK
Upside
Market
Potential
100%
Loss
√
√

23. What is your
Risk Tolerance?
CD
Safety
2/3/4+
%?
STOCK
Upside
Market
Potential
100%
Loss
√
√
Annuity
Deferred or
Immediate

25. TheTaxing of Social Security

26. Social Security History

27. Social Security Became Law
In 1935, President Roosevelt signed into
law the most significant legislation of our
time…The Social Security Act.

28. Social Security Became law
By 1940, Social Security began making benefit
payments to beneficiaries.
The U.S. Treasury ruled that benefit payments
were gifts and would not be subject to tax.
The first monthly payment was issued on
January 31, 1940 to Ida May Fuller of
Brattleboro, Vermont.

29. Tax Law Was Changed
In 1983 Congress changed the law and
allowed up to 50% of Social Security
Benefits to be subject to tax!!
In 1993 the law was changed again, now
up to 85% may be taxed!!!

30. What Causes Social Security to be Taxed?

31. What Causes Social Security to be Taxed?
The taxation of Social Security is based on the amount of
income you received in a calendar year.

32. Provisional Income –
How it Works - Single
For a single person Social Security can become taxable
after your income plus (+) ½ of the amount received
from
Social Security exceeds $25,000:
 Up to 50% of Social Security Benefits can be taxed!
If the amount exceeds $34,000:
 Up to 85% of Social Security Benefits can be taxed

33. Provisional Income –
How it Works - Married
For Married or head of household Social Security can
become taxable after your income plus (+) ½ of the
amount received from Social Security exceeds $32,000:
 Up to 50% of Social Security Benefits can be taxed!
If the amount exceeds $44,000:
 Up to 85% of Social Security Benefits can be taxed

34. If you are single, Social Security is taxed when your
threshold income exceeds $25,000
Over $34,000 Up to 85% of
Social Security
is taxed
$34,000
to
$25,000
Up to 50% of
Social Security
is taxed
$25,000
and
Under
No tax on
Social Security
Income
(Threshold)

35. If you are married, Social Security is taxed when
your threshold income exceeds $32,000
Over $44,000 Up to 85% of
Social Security
is taxed
$44,000
to
$32,000
Up to 50% of
Social Security
is taxed
$32,000
and
Under
No Tax on
Social Security
Income
(Threshold)

36. Provisional Income

37. What is Provisional Income
1099 Income from
Savings &
Investments
Provisional Income Contributes to
Taxing Social Security

38. What is Provisional Income?
Income from these accounts may be the reason you pay
more taxes including the tax on your Social Security!
½ Social
Security
Corporate
Bonds
Tax Free
Bonds
Dividends
Capital
Gains
Mortgage
Certificates
US
Treasury
Money
Market
Certificate
Of
Deposits
IRA
Distributions
Threshold
Income

39. There May be a Better Way
It’s not so important about the amount of
interest you earn on your money……..
but how your money earns its interest!

40. There May be a Better Way
Is the interest on your Certificates of
Deposits, Money Market accounts or
other plans affecting the taxation of your
Social Security Benefits?
Are you paying income taxes on interest
or money earned but do not currently
need?

41. Reduce Provisional Income
When income is deferred instead of taxed it
reduces provisional income and may lower
amounts below the allowed thresholds.

42. Section 72
Section 72 of the Internal Revenue Code
allows “income credited on a deferred
annuity contract is not currently includable
as income.”
Based on Section 72, income credited inside an annuity
will not create a tax on Social Security!

44. Combo Leads
The benefit of combination leads is that they allow you to
easily customize your message to your preferred product
types
Mix and Match to find the perfect prospect for your
business
These are ideal lead pieces for the perpetual cross-seller
Annuities, LTC and Combo Leads

45. JM6: Combo Sample
National Average:
1.43%
Annuities, LTC and Combo Leads

46. BP-CP10:Annuity Sample
National Average = 1.24%
Annuities, LTC and Combo Leads

47. Sam Q. Prospect
Sam is retired and living comfortably.
He receives a Pension and Social Security.
His savings are in CD’s, Mortgage Certificates,
Money Market Accounts.
He doesn’t need the interest so he reinvests the
interest back into his certificates

48. Sam Q. Prospect
* Estimated Income Tax
*$6,828Total Federal Income Taxes
$47,400Total Income Received
$4,400Money Market
$12,400CD’s, Mortgage Certificates
$11,400Social Security
$19,200Pension

49. Sam’s Social Security Threshold
…Triggered a tax on Sam’s Social Security!!
<$16,800>Over Threshold
$25,000Threshold limit
$41,700Threshold Income
$4,400Money Market
$12,400CD’s, Mortgage Certificates
$5,700½ Social Security
$19,200Pension

50. Sam’s Tax on Social Security
Social Security $11,400
Social Security
(subject to tax)
$9,690
Tax on Social
Security
$2,665*
*Estimated based on tax table

51. An Annuity would have stopped the tax on
Sam’s Social Security Income
Total Threshold
Income
$41,700 $41,700
*Annuity (Deferred
interest)
<$16,800> $0
Threshold income $24,900 $41,700
Threshold limit
(single)
$25,000 $25,000
Over or Below
Threshold
Below Over
Social Security taxed $0 $9,690
Tax on Social
Security
$0 $2,665
Federal tax due $1,598 $6,828
*Assumes the interest paid by the Annuity is the same as paid by the Certificates of
Deposit and Money Market Accounts.
*With Annuity *Without Annuity

52. An Annuity is the only interest producing
asset that will not create a tax on Social
Security
Annuity – Deferred
√
Certificates of Deposits
√
Money Market Account
√
Bonds including Tax Free
√
Dividends – Mutual Fund
√
Gains-Mutual Fund
√
Yes No

53. Net Retirement income would have increased!
Why pay tax on interest you don’t use?
Pension-$19,200 + $11,400 SS
Tax paid from Pension and SS
Net Retirement income after
tax
Pct% increase in retirement
income
*With Annuity *Without Annuity
$30,600 $30,600
1,598 6,828
$29,002 $23,772
18% 0%
*Assumes the Annuity interest rate to be the same as the taxable
interest accounts with no withdrawals taken from the annuity. Taxable
interest assumed to be reinvested back into savings.

54. JESSE SLOME

56. $1,598
$3,480
$6,828
Summary of Tax Savings
0% 50% 100%
$2,665
$623
0
Reduced tax amounts based on a percentage of taxable
income ($16,800) illustrated as deferred income
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
Total Federal Tax
Tax on Social Security

57. Gary and Lisa
Gary and Lisa are retired and travel quite a bit.
Gary and Lisa receive a Pension and a distribution from an
IRA.
They also receive 1099 income and Social Security.
They don’t need the 1099 income so they reinvest the
interest.

58. Gary and Lisa
Pension/
IRA Distribution
$24,450
1099 Income $20,000
Social Security $15,000
Total Income $59,450

59. Gary and Lisa
Tax on Social Security
Social Security $15,000
Social Security
(85% subject to tax)
$12,750
Tax on
Social Security
$1,913*
*Estimated based on tax table @ 15%

60. Gary and Lisa
Tax on Remaining Income
Pension/IRA
Income
$24,450
1099 Income $20,000
Tax on
Remaining
Income
$3,073*
*Estimated based on tax table @ 15%

61. Gary and Lisa
Potential Tax Liability
Social Security $15,000
85% subject to tax $12,750
Tax on
Social Security
$1,913*
Pension/IRA Income $24,450
1099 Income $20,000
Tax on
Remaining Income
$3,073*
Total Tax Potential $4,986
*Estimated based on tax table @ 15%

62. Total Threshold
Income
$59,450 $59,450
*Annuity
(Deferred interest)
<$20,000> $0
Threshold income $39,450 $59,450
Threshold limit
(married)
$44,000 $44,000
Over or Below
Threshold
Below Over
Social Security taxed
(assuming qualified deductions)
$0 $12,750
Tax on
Social Security
$0 $1,913*
Federal tax due $555.00* $3,073*
*With Annuity *Without Annuity
There May be a Better Way
Total Tax Potential $555.00* $4,986
*Assumes earnings from an annuity are not withdrawn and left to accumulate. Assumes standard deductions

63. There May be a Better Way
Total Threshold Income $59,450 $59,450
*Annuity
(Deferred interest)
<$20,000> $0
Threshold income $39,450 $59,450
Threshold limit
(married) $44,000 $44,000
Over or Below Threshold Below Over
Social Security taxed $0 $12,750
Tax on Social Security $0
Federal tax due $555.00* $3,073*
By repositioning Gary and Lisa’s 1099 assets (that created taxable
income) into a Deferred Annuity, the tax of $1,913 on their Social
Security was eliminated!
Potential total tax savings…$4,431
*Without Annuity*With Annuity
Total Tax Potential $555.00 $4,986
1099 Asset
Created
Income
$1,913
*Assumes earnings from an annuity are not withdrawn and left to accumulate. Assumes standard
deductions

64. There May be a Better Way
Gary and Lisa did not withdraw the $20,000 taxable interest they
earned from their 1099 assets, rather they had the earnings roll
back into the assets.
They were forced into taking money from their *monthly retirement
checks to pay the tax on this 1099 income that they did not access.
NET RETIREMENT INCOME
*Retirement income is Pension and Social Security combined
*$39,450
*$39,450
$38,895
$34,464
With a
Deferred
Annuity
With a
Deferred
Annuity
Without a
Deferred
Annuity
Without a
Deferred
Annuity

67. There May be a Better Way
Interested earned within a Deferred Annuity
(and not withdrawn)
may stop or reduce the income tax on Social Security and could
increase Net Retirement Income!
NET RETIREMENT INCOME
*Retirement income is Pension and Social Security combined
With a
Deferred
Annuity
With a
Deferred
Annuity
*$39,450
$38,895
*$39,450
$34,464
Without a
Deferred
Annuity
Without a
Deferred
Annuity

68. Questions to uncover their needs!Questions to uncover their needs!

70. 03/01/17 70
Effective Questioning
 Did you have to pay taxes on your Social Security last year?
 Did you have to pay Federal Taxes on your Social Security last year?
 What percent of your Social Security was taxed.
 Is the interest that caused you to go over the Social Security threshold, resulting in
this tax, something you need to live on?
 What benefits would you see in comparing rates of interest on income without
receiving a 1099 that is reportable to the IRS?
 Would not having to report this interest on your 1040 have helped reduce or
eliminate the taxes you paid on your Social Security?
 Of the money you have left, how much do you not want to risk in the market so you
can feel more comfortable trying to get upside gain on the rest of your money?

71. Annuity Values Accumulate Tax Deferred
Your money grows faster with an Annuity because
you earn interest on dollars that would otherwise
be paid as taxes.
The principle earns interest, the interest
compounds, and the money saved in taxes earns
interest.
With this tax-deferred status, you can accumulate
more money over a shorter period of time and
consequently earn a greater return.

72. Example:Example:

73. Example cont.Example cont.