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WELCOMEWELCOME

Securing Your Clients Financial Securing Your Clients Financial FutureFuture

February 16, 2017February 16, 2017

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What Would Your Clients Like to Have?√ Security of Principle?

√ Tax-Deferral?

√ Liquidity?

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Security of PrincipleGuaranteed 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

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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 A series of payments is then available to the owner (annuitant) that may be withdrawn over a period of time, for a lifetime, or a combination of the two.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

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Tax-DeferralTheir Interest Grows Tax-Deferred, giving

them theValue of Triple Compounding……

Interest on Principle

Interest on Interest

Interest on Tax Savings – the money they would have paid in taxes

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Liquidity

Partial withdrawals are available for any reason, typicallyafter the first policy year*

The Cash They Need……..To TravelTo Visit FamilyFor Sudden EmergenciesTo Live Life

*Based on withdrawal privileges of the contract, surrender charges may apply. If client is under 59 ½ , IRS penalty will apply

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The Real Rate of ReturnWhat happens without triple compounding?

Many people put their money in a conservativeinstruments such as a CD* or money marketaccount because they aren’t sure what to do.

This money in their CD or Money Market Accountmay be reduced by taxes and inflation and couldactually decrease in value.

*CDs are FDIC insured

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The Real Rate of Return*

Deposit Amount $100,000(4.50% Interest Rate) +4,500

33% Taxes -1,485Amount after Tax $103,0153.50% Inflation -3,605

Amount Left $99,410Net Loss $590

*This is a hypothetical example

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Taxable Equivalent YieldsInterest rate required on ataxable investment toequal the yield of tax-

deferredinterest in accumulation.

For example, a person in the

35% tax bracket must earn

7.69% taxable to matchthe 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

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What is their Risk Tolerance?

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What is yourRisk Tolerance?

CD

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What is yourRisk Tolerance?

CD

Safety

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What is yourRisk Tolerance?

CD

Safety

2/3/4+

%?

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What is yourRisk Tolerance?

CD

Safety

2/3/4+

%?

STOCK

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What is yourRisk Tolerance?

CD

Safety

2/3/4+

%?

STOCK

Upside

Market

Potential

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What is yourRisk Tolerance?

CD

Safety

2/3/4+

%?

STOCK

Upside

Market

Potential

100%

Loss

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What is yourRisk Tolerance?

CD

Safety

2/3/4+

%?

STOCK

Upside

Market

Potential

100%

Loss

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What is yourRisk Tolerance?

CD

Safety

2/3/4+

%?

STOCK

Upside

Market

Potential

100%

Loss

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What is yourRisk Tolerance?

CD

Safety

2/3/4+

%?

STOCK

Upside

Market

Potential

100%

Loss

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What is yourRisk Tolerance?

CD

Safety

2/3/4+

%?

STOCK

Upside

Market

Potential

100%

Loss

Annuity

Deferred or Immediate

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The Taxing of Social Security

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Social Security History

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Social Security Became LawIn 1935, President Roosevelt

signed into law the most significant legislation of our

time…The Social Security Act.

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Social Security Became lawBy 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.

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Tax Law Was ChangedIn 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!!!

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What Causes Social Security to be Taxed?

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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.

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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

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Provisional Income –How it Works - Married

For Married or head of household Social Security canbecome taxable after your income plus (+) ½ of

theamount 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

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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)

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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)

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Provisional Income

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What is Provisional Income

1099 Income from

Savings & Investments

Provisional Income Contributes to

Taxing Social Security

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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

DividendsCapital

Gains

Mortgage

Certificates

US

Treasury

Money

Market

Certificate

Of

Deposits

IRA

Distributions

Threshold

Income

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There May be a Better WayIt’s not so important about the

amount of interest you earn on your money……..

but how your money earns its interest!

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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?

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Reduce Provisional Income

When income is deferred instead of taxed it reduces provisional income and may lower amounts below the

allowed thresholds.

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Section 72Section 72 of the Internal Revenue Codeallows “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!

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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

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JM6: Combo Sample

National Average: 1.43%

Annuities, LTC and Combo Leads

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BP-CP10: Annuity Sample

National Average = 1.24%

Annuities, LTC and Combo Leads

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Sam Q. ProspectSam 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

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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

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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

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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

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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 $41,700Threshold limit

(single)$25,000 $25,000

Over or Below Threshold

Below Over

Social Security taxed $0 $9,690Tax 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

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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

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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

taxPct% increase in

retirementincome

*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.

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JESSE SLOME

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$1,598

$3,480

$6,828

Summary of Tax Savings

0% 50% 100%

$2,665

$6230

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

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Gary and LisaGary 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.

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Gary and Lisa

Pension/IRA Distribution

$24,450

1099 Income $20,000

Social Security $15,000

Total Income $59,450

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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%

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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%

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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%

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Total Threshold Income

$59,450 $59,450

*Annuity (Deferred interest)

<$20,000> $0

Threshold income $39,450 $59,450Threshold 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 AnnuityThere 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

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There May be a Better WayTotal Threshold Income $59,450 $59,450

*Annuity (Deferred interest)

<$20,000> $0

Threshold income $39,450 $59,450Threshold limit

(married) $44,000 $44,000

Over or Below Threshold Below Over

Social Security taxed $0 $12,750

Tax on Social Security $0Federal 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

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There May be a Better WayGary and Lisa did not withdraw the $20,000 taxable interest they

earned from their 1099 assets, rather they had the earnings rollback into the assets.

They were forced into taking money from their *monthly retirementchecks 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

Without a Deferred Annuity

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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

*$39,450

$38,895*$39,450

$34,464

Without a Deferred Annuity

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Questions to uncover their Questions to uncover their needs!needs!

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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?

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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.

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Example:Example:

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Example cont.Example cont.

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