When consulting with business owner clients on retirement it’s important for them to consider how "retired" they want to be.
Will the business owner step back completely? Or will they reduce their business responsibilities?
Is your client ready to step back from the business?
BOLD sales support
Contact the Securian Financial Advanced Sales Team today.
1-888-413-7860, option 3
How to approach business owner retirement with clients
The business owner saver strategy (BOSS) can help your clients become independent of their business through diversification of wealth. With the BOSS strategy, business owners don’t have to sell their business in order to retire.
The business owner saver strategy helps your clients become independent of the business by diversifying their wealth.
How does a business owner saver strategy work?
The company makes a cash distribution to the owner. Business owner uses the cash to diversify his or her wealth and reduce risk with the purchase of retirement tools like life insurance.
Using the BOSS with life insurance
Benefits
Death benefit protection
- Policy’s death benefit can help replace your client's income for their family if they die*
*If owner/insured are different, the death benefit will be paid upon death of the insured.
Diversification
- Helps divert some of the wealth from the business to personal assets
- Further diversifies retirement income sources for a more secure retirement
Retirement
- Cash value the your policy can provide a source of supplemental retirement income
Flexible
- Customizable for your client's situation
- Can be terminated or modified at any time
Considerations
- Distributions in excess of the owner’s tax basis are taxable
- S corporation distributions are taxable if it accumulates earnings or profits greater than its basis and accumulated adjustments account (AAA)
- Life insurance products contain fees (which may increase over time), such as mortality and expense charges, and may contain restrictions, such as surrender periods
- Policy loans and withdrawals may create an adverse tax result in the event of policy lapse or surrender, and will reduce both the surrender value and death benefit
- Depending upon policy experience, additional premium payments may be needed to keep the policy from lapsing
- Client's underwriting result may make this strategy cost prohibitive
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Key resources
Learn how to use BOLD with clients
Your business owner clients need life-stage specific tools. We’ll help you find the right solution.
View the step-by-step processLife insurance products contain fees, such as mortality and expense charges, (which may increase over time) and may contain restrictions, such as surrender periods.
Please keep in mind that the primary reason for purchasing life insurance is the death benefit.
Additional agreements may be available. Agreements may be subject to additional costs and restrictions. Agreements may not be available in all states or may exist under a different name in various states and may not be available in combination with other agreements.
Policy loans and withdrawals may create an adverse tax result in the event of lapse or policy surrender and will reduce both the surrender value and death benefit. Withdrawals may be subject to taxation within the first fifteen years of the contract. Clients should consult their tax advisor when considering taking a policy loan or withdrawal.
The Policy Design chosen may impact the tax status of the policy. If too much premium is paid, the policy could become a modified endowment contract (MEC). Distributions from a MEC may be taxable and if the taxpayer is under the age of 59 ½ may also be subject to an additional 10% penalty tax.
An annuity is intended to be a long-term, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but taxes and penalties may apply to non-qualified distributions. Please consult a tax advisor for specific information. There are charges and expenses associated with annuities, such as surrender charges (deferred sales charges) for early withdrawals.
This information may contain a general discussion of the relevant federal tax laws. It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. This information is provided to support the promotion or marketing of ideas that may benefit a taxpayer. Taxpayers should seek the advice of their own tax and legal advisors regarding any tax and legal issues applicable to their specific circumstances.
For financial professional use only. Not for use with the public. This material may not be reproduced in any form where it is accessible to the general public.
DOFU 10-2022
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