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Business Owner - Early Stage Planning


Business owner, age 35 has profitable operating business.

Has no retirement plan in place and no exit strategy.

As Cash flow is limited only minor funding occurs in retirement plan.


Retirement is to start at age 60 and needs to last at least 25 years.


Plan for the sale of business, where to put money.

Utilize multiple asset classes so that investments particpate in different scenarios, not all the same. Provide flexibility to  make changes without incurring penalty for change.

Employ tax deferred, taxable and never taxed again asset buckets. Install private pension and flexible retirement benefit programs.



Utilize indexed universal life policy as cash accumulation and future parking of sale of business proceeds . Perform minimum required funding of  policy (reduces cash flow and provides protection)

Potential Tax free loan provisions will provide income after retirement. Indexed feature provide up or over investment returns.

Income feature is flexible in amounts, timing and on/off capability.


Review retirement plan options to ensure design is effective for owner's desires with structure of company and employee demographics.

Review funding options to determine if alternate methods (profit sharing) may be viable way to fund retirement plan

As time  passes, have owner  increase  funding into  retirement  plan,  both  personal  contributions and

business part icipation.


At owner reaches 55, investigate options available to guaranteed income stream via annuity or other investment vehicles.


Retirement - at minimum start funding ROTH @ $5,000 / year. Future increase to  maximum  federal permitted  deferral ($17,500)

Life $700 / month now, 25 years from now have $790,000 'bucket ' to deposit sale proceeds .

Annuity future - unknown



o    ROTH at 65 = $345K @ 5%

o     Assume beginning @ 40, full deposit into 401k ($22K) to age 60 @5% = $740K, $36K / yr 25 yrs @ 3% growth  (w 2% inflation)

Life -  Cash Value  at  65 = $1,477,000, loans for  20 yrs= $133,000  (Funds received from the life insurance

policy are limited to prevent taxation, preclude policy expiration and to ensure the policy pays a death benefit.)

Annuity -  lump sum deposit of business sale proceeds greater than life policy deposit (assume $250K), age

70, lifetime annual income of $25K

This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.

Both loans and withdrawals from a permanent life insurance policy may be subject to penalties and fees and, along with any accrued loan interest , will reduce the policy's account value and death benefit. Withdrawals are taxed only to the extent that they exceed the policy owner' s cost basis in the policy and usually loans are free from current Federal taxation . A policy loan could result in tax consequences if they policy lapses or is surrendered while a loan is outstanding.

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