1. Getting More for a Client’s Income Options
August 2019 Study Group
Getting More for a Client’s Income Options

2. Objectives
Identify opportunities for client income options from defined benefits
Explain how the solution is structured

3. On the Call
Steve Schreiber Assistant Vice President of Advanced Design

4. The Concept / Idea DB Plan or Annuity Single Life Taxable Payout
Joint Life Taxable Payout
Client owns a DB plan that offers a lifetime payout at retirement.
The DB plan will also offer a joint payout to continue payments to a spouse.
All income paid by DB plan is fully taxable
If client health permits, in some cases the difference between the single and joint income levels can be used to purchase a life insurance policy on the plan participant.
Life insurance replaces the taxable income with an income tax-free asset.

5. Income Maximization

6. The Concept / Idea DB Plan or Annuity Insurance Company Single Life
Taxable Payout
Annuity
Life
Insurance
Tax-Favored
Insurance Proceeds
Insurance
Company
Client owns a DB plan that offers a lifetime payout at retirement.
The DB plan will also offer a joint payout to continue payments to a spouse.
All income paid by DB plan is fully taxable
If client health permits, in some cases the difference between the single and joint income levels can be used to purchase a life insurance policy on the plan participant.
Life insurance replaces the taxable income with an income tax-free asset.

7. Example DB Plan or Annuity Single Taxable Income of 5,600 per month
55 Year Old Spouse
59 Year Old Male
Joint Taxable Income of
4,500 per month
Client owns a DB plan that offers a lifetime payout at retirement.
The DB plan will also offer a joint payout to continue payments to a spouse.
All income paid by DB plan is fully taxable
If client health permits, in some cases the difference between the single and joint income levels can be used to purchase a life insurance policy on the plan participant.
Life insurance replaces the taxable income with an income tax-free asset.

8. Choosing the Single Life Income
DB Plan or
Annuity
Single Taxable Income of
5,600 per month
Layered Life
Insurance
1,100 Extra Income
Available for Insurance
Client owns a DB plan that offers a lifetime payout at retirement.
The DB plan will also offer a joint payout to continue payments to a spouse.
All income paid by DB plan is fully taxable
If client health permits, in some cases the difference between the single and joint income levels can be used to purchase a life insurance policy on the plan participant.
Life insurance replaces the taxable income with an income tax-free asset.

9. The Future Annuity Need
Work backwards from the annuity needed at a future point in time
Insurance
Company
Life Insurance Amount is
Based on Annuity Needed
Annuity Needed for
4,500 of Lifetime Income
Client owns a DB plan that offers a lifetime payout at retirement.
The DB plan will also offer a joint payout to continue payments to a spouse.
All income paid by DB plan is fully taxable
If client health permits, in some cases the difference between the single and joint income levels can be used to purchase a life insurance policy on the plan participant.
Life insurance replaces the taxable income with an income tax-free asset.

10. SPIA amount needed for lifetime monthly income of 4,500
Layered Insurance
Spouse's Age
SPIA amount needed for lifetime monthly income of 4,500
Death benefit
Monthly Premium
Age 55
1,052,230.39
for 10 years
185,043.07
45.97
Age 65
867,187.32
for 20 years
228,656.42
90.50
Age 75
638,530.90
for 20+ years
784.42
Total Day 1 DB
920.89
Client owns a DB plan that offers a lifetime payout at retirement.
The DB plan will also offer a joint payout to continue payments to a spouse.
All income paid by DB plan is fully taxable
If client health permits, in some cases the difference between the single and joint income levels can be used to purchase a life insurance policy on the plan participant.
Life insurance replaces the taxable income with an income tax-free asset.

11. Layered Insurance
As life expectancy of the spouse changes over time and the face amount stays flat, the annuity income for the life proceeds increases until the life insurance decreases.

12. Joint Income vs Single Income
The Choice of Joint Income
The Choice of Single Income + Insurance
4,500 per month in income for the life of both individuals
5,600 per month in income for the life of the owner of the defined benefit
1,052,233 in death benefit on day one to cover 4,500 per month in income on day 1 of plan implementation
Option to convert policies for estate enhancement
Income after in monthly insurance premiums = 4, per month

13. Getting More for a Client’s Income Options
August 2019 Study Group
Getting More for a Client’s Income Options