Supplemental Income Strategy
Providing Income When Your Clients Need it Most
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For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Agenda
• Identify potential
clients & concerns
• The Supplemental
Income strategy
• Case studies &
action plan
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Identify Potential
Clients & Concerns
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Do you Know this Client
• Age 30-55
• Long term
• Has a need
for life
insurance death
benefit protection
Do you Know
this client?
• High income,
generally
$100,000+
investment
horizon
• Typically making
maximum
contributions
to qualified
retirement plans
Has a need for life insurance death
benefit protection
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
The Concern
Have I saved enough money to
account for all the “unexpected
events ” in life? I’m looking for
financial product that
will protect my loved ones today
as well as supplement my
own future income needs.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
The Issue: Traditional Investments Alone May
Not Meet All Their Needs
•
•
•
•
•
Qualified plan contribution limits based on income
Income replacement for beneficiaries
Efficient wealth transfer
Limited tax-favored investment options
Tax-free income potential1
1Distributions are generally treated first as tax-free recovery of basis and then as taxable income, assuming the policy is not a Modified
Endowment Contract (MEC). However, different rules apply in the first fifteen policy years, when distributions accompanied by benefit
reductions may be taxable prior to basis recovery. Non-MEC loans are generally not subject to tax but may be taxable when the policy
lapses, is surrendered, exchanged or otherwise terminated. In the case of a MEC, loans and withdrawals are taxable to the extent of policy
gain and a 10% penalty may apply if taken prior to age 59 ½. Always confirm the status of a particular loan or withdrawal with a qualified
tax advisor. Cash value accumulation may not be guaranteed depending on the type of product selected. Investments in variable life
insurance are subject to market risk, including loss of principal. Withdrawals and/or policy loans will reduce the policy’s death benefit and
cash value, and may cause the policy to lapse. Upon lapse, the policyholder may have reportable income to the extent total distributions
exceed his or her basis in the policy.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
The Supplemental Income Strategy
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
What is Supplemental Income?
Using tax-free withdrawals and
loans from a properly structured
and funded life insurance
policy’s cash value to
supplement a client’s income
needs for such items as
retirement and college funding.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Compare the Alternatives
Life
Insurance
Qualified Plan/
Traditional IRA
Deferred
Annuities
Roth IRA/
Roth 401K
Municipal
Bonds
NO1
YES
NO
YES
NO
YES
YES
YES
YES
Potential Income Tax-Advantaged
Withdrawals/Loans
YES
NO
NO
YES
Income Tax-Free Insurance Death Benefit
YES3
N/A
NO
N/A
N/A
Only if MEC4
YES
YES
YES
NO
YES
NO
YES
NO
NO
Feature
Income Based Funding/Contribution
Limits
Potential Income Tax-Deferred
Accumulations
Penalty Tax for Early Withdrawal
Cost of Insurance Charges
TAX
EXEMPT2
TAX
EXEMPT2
1 Life insurance contributions are not limited above certain income guidelines. Generally, there is not a specific limit on dollars allocated to purchase life insurance, however there
are maximum premium limits determined by a specified policy face amount according to the Internal Revenue Code. The face amount of coverage each carrier will underwrite will
also differ.
2 AMT may apply.
3 For Federal income tax purposes, life insurance death benefits generally pay income tax–free to beneficiaries. In certain situations, however, life insurance death benefits may
be partially or wholly taxable. Clients should consult their professional tax advisor for information regarding their particular facts and circumstances.
4 Distributions from a life insurance policy are loans and withdrawals. Certain withdrawals may be subject to income tax in the first fifteen years depending on criteria set forth in
Internal Revenue Code 7702(f)(7)(B). After fifteen years, assuming the policy is not a Modified Endowment Contract (MEC), withdrawals up to the policy’s tax basis are not
taxable. Policy loans are not taxable provided that the policy remains in force until the insured dies. Should the policy lapse or be surrendered prior to the death of the insured,
there may be tax consequences. Loans and withdrawals will decrease the cash value and death benefit.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Potential Solutions- Life Insurance
for creating more income
• Tax-deferred growth
• Tax-free withdrawals and loans1
• Tax-free exchanges between all underlying investment
options
• No specified dollar amount contribution limits2
• Self-completing
• No required distributions
1Distributions are generally treated first as tax-free recovery of basis and then as taxable income, assuming the policy is not a Modified Endowment Contract
(MEC). However, different rules apply in the first fifteen policy years, when distributions accompanied by benefit reductions may be taxable prior to basis
recovery. Non-MEC loans are generally not subject to tax but may be taxable when the policy lapses, is surrendered, exchanged or otherwise terminated. In
the case of a MEC, loans and withdrawals are taxable to the extent of policy gain and a 10% penalty may apply if taken prior to age 59 ½. Always confirm
the status of a particular loan or withdrawal with a qualified tax advisor. Cash value accumulation may not be guaranteed depending on the type of product
selected. Investments in variable life insurance are subject to market risk, including loss of principal. Withdrawals and/or policy loans will reduce the
policy’s death benefit and cash value, and may cause the policy to lapse. Upon lapse, the policyholder may have reportable income to the extent total
distributions exceed his or her basis in the policy.
2 Contributions to the policy have to fall within certain guidelines and that there are limitations. However these limits are not based on the clients earnings.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Implementing the Strategy
1
Discuss
Discuss Goals
goals with Client
client
2
Determine
DetermineLife
life insurance
Insurance needs
Needs
3
Inventory IRAs, employer sponsored qualified plans and other
Inventory Current IRAs, Qualified Plans and other Savings
savings
4
Determine
Determine Premium
premium Amount
amount
5
Provide client
Client personalized
Personalizedillustration
Illustrationand
and product
Productprospectus*
Prospectus
6
Initiate Underwriting
underwriting
* If applicable
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Case Studies & Action Plan
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Age: 35
Case Study
Recently divorced
with 2 children
Owns Jack’s
GardensLandscaping
Company
SIMPLE IRA
balance $30,000
$50,000 other
investments
Meet Jack
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Possible
retirement
shortfall
Goals:
• Life insurance
death benefit for
minor children
• Supplement
retirement
income if
needed
How the Policy Can Build Cash Value
Potential cash value and death benefit amounts
Policy Year
Age Insured
Cash Value
Cash Value
Death Benefit
Death Benefit
Assuming Current
Charges and
Crediting Rates
Guaranteed
Crediting Rates
and Charges
Assuming Current
Charges and
Crediting Rates
Guaranteed
Crediting Rates
and Charges
1
36
$4,161
$3,265
$3,197,206
$3,197,189
10
45
$225,724
$180,382
$3,203,323
$3,197,189
25
60
$892,000
$566,259
$2,556,971
$1,697,189
39
74
$1,947,404
$979,278
$3,451,043
$1,697,189
50
85
$3,613,621
$1,301,744
$4,010,028
$1,697,189
Hypothetical Example: Male, Age 35, Standard Non-Smoker. Policy Premium of $25,000 for 20 Years using the MetLife Promise Whole Life product
and assumes current crediting rate values and current dividend scale projections. Actual results may vary. Dividends are not guaranteed. See a full
policy illustration for additional details. Premium structure is $1,500,000 Flex Term Rider until age 85.
This information is hypothetical. A personalized illustration must be provided before purchasing a whole life insurance product.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Benefits to your Clients
 Tax-deferred growth potential
 Tax-free withdrawals and loans*
 Tax-free exchanges
between investment options, if
variable product
 No income based contribution
limits
 Self-completing
 No required distributions
*Withdrawals and/or policy loans will reduce the policy’s death benefit and cash value, and may cause
the policy to lapse. Upon lapse for any reason, the policyholder may have reportable income to the
extent total distributions exceed his or her basis in the policy.
Contributions must fall within certain guidelines, but there are no contribution limitations based on the
client's income.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Benefits to You
 Deepens client relationships
 May uncover additional
retirement plan savings
opportunities
 May uncover additional
assets
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Action Plan
1
2
3
4
5
6
Discuss Strategic
strategic partnership
Partnership
Identify
Clients
Identify and
and Qualify
qualify clients
Schedule
ScheduleTime
time for Client
client meetings
Meetings and discuss
Discuss approach
Approach
Inventory Assets
assets
Evaluate
EvaluateNeed
need for
for Life
life insurance
Insurance death
Death benefit
Benefit
Evaluate
Evaluate Potential
potential Need
need for supplemental
Supplemental income
Income
7
Client with Personalized
Illustration
Provide clientProvide
with personalized
illustration, product
prospectus* and
and
ePresentation
this
strategy
ePresentation
forfor
this
strategy
8
Initiate Underwriting
underwriting process
Process
If
*Ifapplicable
applicable
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Important Information
The information contained in this document is not intended to (and cannot) be used by anyone to avoid IRS penalties. This document
supports the promotion and marketing of insurance products. Clients should seek advice based on their particular circumstances from
an independent tax advisor since any discussion of taxes is for general informational purposes only and does not purport to be
complete or cover every situation.
MetLife, its agents, and representatives may not give legal, tax or accounting advice and this document should not be construed as
such. Clients should confer with their qualified legal, tax and accounting advisors as appropriate.
Like most insurance policies, MetLife’s policies contain charges, limitations, exclusions, termination provisions and terms for keeping
them in force. Contact your financial representative for costs and complete details.
MetLife Promise Whole Life is issued by MetLife Investors USA Insurance Company on Policy Form 5E-12-10 in all jurisdictions except
New York, where they are issued by Metropolitan Life Insurance Company on Policy Form 1E-12-10-NY. All guarantees are subject to
the claims-paying ability and financial strength of the issuing insurance company.
Insurance Products Are:
• Not A Deposit • Not FDIC-Insured • Not Insured By Any Federal Government Agency
• Not Guaranteed By Any Bank Or Credit Union • May Go Down In Value
BDVL23642 L54L1213354059[exp1214]
© 2013 METLIFE INC. 2013PEANUTS Worldwide
For Producer or Broker/Dealer Use Only. Not for Public Distribution.