©2008 lincoln national corporation for agent or broker use only. not to be used with the general...

©2008 Lincoln National CorporationFor agent or broker use only. Not to be used with the general public.

LCN0810-2021955 10/08.

[Name][Title]Lincoln Financial Distributors

The Boomer Tax Dilemma

For agent or broker use only. Not to be used with the general public. LCN0810-2021955

The Boomer Tax Dilemma

70 million Baby Boomers are Retiring

• Their Retirements are severely under-funded.

• Their Health Care costs are outpacing inflation.

• They will need someone to pay for them.


What’s the probability?

That future tax bracket rates will increase?


World’s aging countries

CountryHighest

Effective Tax Rate

Median Age

% of population over age

65

Belgium 65 41.4 17.5

Japan 65 43.8 21.6

Denmark 62 40.3 15.7

Finland 62 41.8 16.6

France 61 39.2 16.3

United States 48 36.7 12.7

Source: OECD (2007), CIA (2007)


US Historic Tax Brackets

YearsHighest

Effective Tax Rate

1920s 73

1930s 79

1940s 93

1950s 92

1960s 91

1970s 72

1980s 70

1990s 39

2000s 38Source: IRS


Do you know?

Is tax-deferred investing dead?


Do you know?

Is tax-deferred investing dead?

Do you have a plan?


We have a plan

Variable Universal Life Insurance (VUL) Offers:

• An immediate income-tax-free death benefit

• Potential for market returns by investing in equity sub accounts

• Tax-free access to cash values via• Withdrawals to basis • Income tax-free loans

Note: Loans and withdrawals will reduce the policy’s account value and death benefit, may effect your guarantees, may cause the policy to lapse, and may have tax consequences.


Why VUL?

Let’s examine the after tax benefit of VUL compared to:

• Traditional taxable investments

• Traditional tax-deferred investments


How Much Benefit?

Annual Taxable Returns:

Gross Return: 8.0 %

Mgmt Fees: - 1.0 %

Pre Tax Return: 7.0 %

Tax Bracket Annual After Tax Return

15 % 6.80%

28 % 5.76%

35 % 5.20%

40 %* 4.80%

50 %* 4.00%

60 %* 3.20%

70 %* 2.40%

This example is for illustrative purposes only.* Tax Brackets are not actual rates, but hypothetical in nature and may not be accurate in the future


How Much Benefit?

Tax Deferred Returns:

Gross Return: 8.0 %

Mgmt Fees: - 1.0 %

Pre Tax Return: 7.0 %

Tax Bracket Annual After Tax Return1

15 % 7.48%

28 % 6.96%

35 % 6.65%

40 %* 6.40%

50 %* 5.87%

60 %* 5.24%

70 %* 4.48%1 Assumes tax deferral for 30 years

This example is for illustrative purposes only.* Tax Brackets are not actual rates, but hypothetical in nature and may not be accurate in the future


VUL Comparison

$25,000 per year paid for 4

years into a Lincoln AssetEdgeSM

VUL

53 year old male preferred

underwriting

A client squarely in the baby

boomer population.


VUL Internal Rate of Return

# Payments1 Preferred Best

Preferred Standard Preferred Smoker

Smoker

4 6.17 6.04 5.82 5.33 4.98

Source: Lincoln Illustration System. The IRR is at a point 30 years in the future, with a gross rate of return of 8%, with current mortality assumptions. At a gross rate of 0% with guaranteed mortality the policy will lapse prior to year 30.

Assumptions:• $416,325 of death benefit • 8% gross return• 53 M Preferred• level death benefit – minimized in year 12• Policy is not a MEC (Modified Endowment Contract)


Comparing the Alternatives

Tax Bracket Taxable Tax deferred VUL

15 % 5.95% 6.50% 6.04%

28 % 5.04% 6.01% 6.04%

35 % 4.55% 5.72% 6.04 %

40 %* 4.20% 5.49% 6.04 %

50 %* 3.50% 4.99% 6.04 %

60 %* 2.80% 4.41% 6.04 %

70 %* 2.10% 3.71% 6.04 %

Annualized after-tax IRR 30 years in the Future

1. This example is for illustrative purposes only.2. *Tax Brackets are not actual brackets, but hypothetical in nature and may not be accurate in the future3. VUL Assumptions

• $416,325 of death benefit, level • 8% gross return• 53 M Preferred• Policy is not a MEC


Protect a portion of your assets from future

income taxes.

Get there with Lincoln’s VUL Portfolio

and the Elite Series

What is your Protection Against Future Tax Increases?


How do we implement

Prospects up to age 60 with Assets in taxable accounts.

Action Steps:

• Transfer 25% of account into Lincoln AssetEdgeSM VUL over 4 years (3 years + 1 day)

To Illustrate:

• 7 pay TAMRA premium solve for Death Benefit

• DB option LEVEL

• Variable DB -11 years at TAMRA. Yr 12+ $100,000

• Pay premiums for 4 years


Value of VUL to Client

• Immediate death benefit

• EZ Tax Free switch to income producing assets • we just accelerated the timetable and

created greater flexibility when the switch inevitably occurs.

• Transferred control of tax recognition to client


Value of VUL to Advisor

• Client gets insurance protection

• Great differentiator from other advisors

• VUL offers a chassis for an EZ Tax Free switch to income producing assets

• No more 1099s

• Great prospecting tool – “what is your current plan to protect against increasing tax brackets?”


What is it?

THIS IS NOT SUPPLEMENTAL RETIREMENT INCOME

IT IS PORTFOLIO TAX MANAGEMENT


Protect a portion of your assets from future

income taxes.

Get there with Lincoln’s VUL Portfolio

and the Elite Series

What was that again?


Disclosure

Lincoln AssetEdgeSM VUL is issued on policy form LN698 and state variations by The Lincoln National Life Insurance Company, Fort Wayne, IN, distributed by Lincoln Financial Distributors, Inc., and offered through broker/dealers with an effective selling agreement. The Lincoln National Life Insurance Company is not authorized, nor does it solicit business in the state of New York. Contractual obligations are backed by the claims-paying ability of The Lincoln National Life Insurance Company.

Policies sold in New York are issued on policy form LN698 by Lincoln Life & Annuity Company of New York, Syracuse, NY, and distributed by Lincoln Financial Distributors, Inc. Contractual obligations arebacked by the claims-paying ability of Lincoln Life & Annuity Company of New York.

Policy values will fluctuate and are subject to market risk and to possible loss of principal. Product and features subject to state availability.

Lincoln variable universal life insurance is sold by prospectus. Carefully consider the investment objectives, risks, and charges and expenses of the policy and its underlying investment options. This and other important information can be found in the prospectus for variable universal life policy and the prospectus for the underlying investment options. Prospectuses are available upon request and should be read carefully before investing or sending money. For a current prospectus, please call 800 444-2363 or go to www.LincolnFinancial.com.


Thank you

Questions?

©2008 lincoln national corporation for agent or broker use only. not to be used with the general...

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