Live Better, LeaveMore - Corporate Systems ESS · PDF fileLive Better, LeaveMore ... sacrifice...

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Live Better, LeaveMore™

Preparing for the transition into retirement and beyond

Life insurance products are issued by: Metropolitan Life Insurance Company 200 Park AvenueNew York, NY 10166metlife.com

1410-2528CLVL22661-1 L1014393244[exp0416][xGU,MP,VI] © 2014 METLIFE, INC.

MetLife Insurance Company USA11225 North Community House RoadCharlotte, NC 28277

Any discussion of taxes is for general informational purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax or accounting advice. Clients should confer with their qualified legal, tax and accounting advisors as appropriate.

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 or other financial products and services. 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 life insurance policies have limitations, exclusions, charges, termination provisions and terms for keeping them in force. Contact your financial professional for costs and complete details.

Legacy Advantage Survivorship Universal Life is issued by MetLife Insurance Company USA on Policy Form 5E-32-05 and in New York only by Metropolitan Life Insurance Company on Policy Form 1E-32-05. All product guarantees are subject to the financial strength and claims-paying ability of the issuing insurance company.

Insurance Products: • 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

Please work with your financial professional to learn more about MetLife’s Core Stories for Life.

LIFE InSUrAnCE

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Life.your way

Strive to live your dreams. Discover the flexibility of life insurance — protect, accumulate and transfer wealth now and in the future.

Be free to live life, your way.

1

It is common to imagine a retirement that will

be primarily devoted to your personal enjoyment

as a reward for many years of hard work and

disciplined savings. It should be a time to

focus on all the little things you didn’t have

the opportunity to do while working or raising

a family. The onset of retirement, however,

also happens to be when many people begin

considering what assets will be left behind

for loved ones or charity. This can leave many

retirees feeling conflicted between living the

retirement they envisioned and creating a legacy.

Perhaps you recognize this conflict now in your

own life. Do you deal with this dilemma by

scrutinizing every financial decision?

Too often, retirees believe that it is necessary to

sacrifice amenities, such as travel and hobbies, in

their efforts to maximize the amount of wealth

left to their beneficiaries. Unfortunately, in the

absence of planning, these personal sacrifices

could inadvertently result in less efficient

wealth transfer or create larger tax burdens for

beneficiaries. Wealth transfer taxes, if applicable,

may significantly diminish an estate before it is

received by the beneficiaries.

LIVE BETTER, LEAVE MORETM from MetLife is a

strategy that aims to help clarify your wishes

for retirement and legacy so that you may take

steps to effectively achieve these goals with

the assets you have accumulated thus far. It is

founded on the idea that once your legacy goals

have been prepared for, the emotional conflict

which often exists can be decreased or perhaps

even eliminated — allowing you to live better

today. You have the potential to leave a legacy

without feeling deprived.

Please note: This document is intended to provide introductory information on the subject matter. MetLife does not provide tax and legal advice. You should consult with independent financial, tax and/or legal professionals before making financial investment or planning decisions.

WAsn’T RETIREMEnT WhEn YOu WERE FInALLY GOInG TO LIVE ThE “GOOd LIFE”?

ARE YOu cOnFIdEnT YOu WILL LEAVE ThE LEGAcY YOu dEsIRE TO LOVEd OnEs?

hAVE YOu WORkEd WITh YOuR FInAncIAL pROFEssIOnAL TO IdEnTIFY ThE BEsT AppROAch TO MEET YOuR LEGAcY And RETIREMEnT IncOME GOALs?

?

Traditionally, legacy planning has

begun with examining an individual’s

portfolio with regard to what assets will

be needed to generate lifetime income

and provide a cushion for emergencies.

Only after those two amounts are

satisfied is anything remaining considered

for a legacy. unfortunately, with literally

thousands of calculators available to

analyze an existing portfolio — feeling

confident you have saved enough for your

own lifetime may seem nearly impossible.

This uneasiness can create a stalemate

with regards to actively preparing for

either potential income streams or

inheritances. Too often, the result is a

mistaken belief that the only way to

save for legacy goals is through personal

sacrifice.

cOnsIdER ThE BEnEFITs OF pAYInG YOuR FuTuRE GOALs FIRsT

To accumulate assets, many financial professionals and

successful retirees suggest ‘paying your future first’. In other

words, determine how much you might need to save for the

future, evaluate the possibility of living comfortably on what

remains and then strike a balance between the two goals.

The result is a particular confidence that arises from creating

significant savings with minimal sacrifice.

Wouldn’t the same approach seem to make sense now

as you attempt to balance your retirement income and

future wealth transfer goals? Working with your financial

professional, you can identify and set aside your desired

legacy in an effort to ensure your wealth transfer priorities

are addressed. Your financial professional can then help

estimate the likelihood that remaining assets will be able to

generate sufficient lifetime income, and may even identify

additional income potential within the portfolio. If you think

this approach could help clarify your goals, reduce anxiety

and provide you the freedom to better enjoy your savings in

retirement — you should talk to your financial professional

about Live Better, Leave More.

2

3

EVALuATE ThE ALTERnATIVEs

Nearly as important as defining your goals in the Live Better,

Leave More strategy, is ensuring or improving the efficiency

of your portfolio’s underlying assets. The transition from

accumulating assets to actually using them is no small feat.

Be open to considering some adjustments to your current

approach. For example, if you currently reinvest dividends on

stocks, bonds or mutual funds, simply turning off that option

could be one easy way to create more spendable income.

Your financial, legal and tax professionals may suggest

similar alternatives for your consideration that apply to your

particular situation.

Your financial professional may also suggest life

insurance to help fund the legacy portion of your

vision. Life insurance is a popular financial product for

wealth transfer because, when owned and structured

properly, it features:

• An income tax free death benefit.

• An estate tax free death benefit, if the policy is owned

and structured properly.

• The possibility to leverage a limited number of premium

payments into a sizeable death benefit, in the event death

is premature.

• Death benefit guarantees on some products, subject to

the financial strength of the issuing company.

• The potential to access a permanent product’s policy cash

value through withdrawals or policy loans, income tax free.

3

A note About life insurAnce distributions:

Loans and withdrawals will decrease the cash value and death benefit. If the policy does not perform as expected it may be necessary to reduce or

stop distributions, and/or premium payments may need to be resumed to avoid a policy lapse. There may be tax consequences if the policy lapses

or is surrendered prior to the death of the insured.

Distributions 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 an additional 10%

tax may apply if taken prior to age 59½. 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.

As with any financial decision, be certain to

evaluate and understand the taxes and other

charges associated with changes in strategy or

investment product. Your tax and legal advisors

should play an important role in this process

and may also have valuable advice for your

specific situation.

4

ThE cOncERn

Mike and sarah are ages 62 and 60, respectively. Their

portfolio is comprised of four primary assets:

• Income — $75,000 from pensions and Social Security

• Traditional IRA — $500,000 with estimated annual

growth of 6% annually

• home — $375,000

• Municipal bond portfolio — $500,000 with 4% annual

income that is currently being reinvested into the portfolio

The couple’s primary goal is to provide each of their three

children with an inheritance of $500,000. They anticipate

pension and Social Security being their major sources

of retirement income, and intend to keep the IRA as an

emergency fund or to help their income keep pace with

inflation. Their current thinking is that the municipal bond

portfolio will be left for the children’s inheritance.

Assuming they live an additional twenty-five years, the bond

portfolio continues to generate the same income and all

income continues to be reinvested into the portfolio — the

value could potentially grow to $1,332,918. Is there a way

they can meet their goal without sacrificing any of their

current income or IRA assets?

Meeting with our financial professional

and being introduced to the Live Better,

Leave More concept really changed our

outlook on the future. By quantifying

our wishes through a series of open

and honest conversations, we found

we were able to live the retirement we

wanted and still provide a legacy for our

children and grandchildren. Now that

we have set aside a legacy, we feel free

to use the remainder of our assets for

our own enjoyment, such as travel and

hobbies — without feeling guilty.

Case study: Mike & Sarah

55

ThE sOLuTIOn

After meeting with their financial and tax

professionals and evaluating many options, they decide

to slowly liquidate the bond portfolio and use a portion of

the proceeds to purchase a Legacy Advantage Survivorship

Universal Life (LASUL) insurance policy from MetLife. For

a $1.5 million guaranteed death benefit1 the premium

would be $18,917 annually for the remainder of their lives,

assuming Mike and Sarah are both non-smokers and meet

standard underwriting criteria. At this time they believe the

flexibility of owning the policy themselves outweighs the

potential estate tax advantages that might be recognized if

owned by an irrevocable life insurance trust (ILIT), but agree

to continue to review this decision with their tax and legal

advisors periodically.

Mike and Sarah ultimately opt to withdraw bond income

and principal in the amount of $30,000 annually. This

amount enables them to pay the life insurance premiums as

well as income taxes associated with the sale of the bonds

and still have approximately $10,000 remaining for their

personal use. At the end of twenty-five years, the bond

portfolio would be worth approximately $33,000 under

these assumptions.

1 Guarantees are subject to the financial strength and claims paying ability of the issuing insurance company. Availability of life insurance products and riders may vary by state.

6

ThE BEnEFIT

using the Live Better, Leave More strategy, Mike and

sarah were able to guarantee1 their goals of providing

each of their three children with a $500,000 income

tax free inheritance by way of purchasing the Legacy

Advantage Survivorship Universal Life insurance policy.

Feeling confident they will provide the desired legacy for

their loved ones also allows them the emotional freedom to

use the remainder of the portfolio to supplement their other

sources of retirement income.

While Mike and Sarah’s specific circumstances allowed them

to Live Better and Leave More, the degree to which each

individual will be able to see results will depend on many

factors including: current assets, health, age, interest rates,

taxes and more.

1 Guarantees are subject to the financial strength and claims paying ability of the issuing insurance company. Availability of life insurance products and riders may vary by state.

Mike and sarah’s portfolio

7

Live Better, Leave More is designed

for individuals who, through this

process, have determined that they

can generate sufficient income to

live the life they want and still have

excess assets for their legacy. The best

way to learn what opportunities are

available for you is to meet with your

financial, tax and legal professionals

and review this strategy with regards

to your specific situation.

7

current ApproAch live better leAve More

Bond portfolio current value $500,000 with estimated 4% income annually

LASUL policy and remaining bond portfolio after $30,000 annual withdrawal for 25 years

Annual income Pension and Social Security

$75,000 $86,083

emergency fund Traditional IRA estimated growth

5% annually$500,000 $500,000

legacy for children in 25 years

$1,332,918 $1,533,566

This example is for illustrative purposes only. Actual results will vary.

8

There are concepts that focus on helping you or your business:

• create financial protection for your family

• Grow equity to help preserve your

lifestyle, and

• Leave a legacy to the ones you love

Life insurance is a flexible product that offers

death benefit protection and may also offer

an opportunity to save for your own future.

Evaluating all available financial opportunities

may help you reach your financial goals. Life

insurance is one of those opportunities —

providing protection for today and helping

prepare for tomorrow.

This material is part of a series

of financial strategies using life

insurance named Core Stories for Life.

These materials are designed to aid

you and your financial professional

in understanding the benefits of life

insurance as a key financial asset

within your overall portfolio.

Core Stories for Life.

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LIFE InSUrAnCE

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