Securities and Insurance Products:
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Certificate of Deposit/Money Market Accounts. Does not include amounts invested in Roth 401(k)/TSA/457(b). Non-qualified annuities purchased with after-tax dollars enjoy the same tax-deferred growth and ordinary income taxation as qualified annuities. May be subject to Alternative Minimum Tax (AMT) and may impact taxation of Social Security benefits. Life insurance death benefits are generally income tax free pursuant to U.S. IRC §101(a). Contract cash values can be accessed during the insured’s lifetime via loans and withdrawals. Loans are generally income tax free as long as the policy remains in force. Withdrawals are tax free to the extent of basis. Policies which are modified endowment contracts (MECs) receive less favorable tax treatment. Qualified distributions are income tax free. Roth IRA distributions are qualified if the account has been open for 5 tax years, and the owner is age 59½, dies, is disabled, or is a first-time homebuyer ($10,000 lifetime limit). Roth 401(k) distributions are qualified if the plan participant has contributed to the account for 5 tax years, and is 59½, dies, or disabled. This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. If you would like information about your particular investment needs, please contact a financial professional. Life insurance and annuities are issued by The Prudential Insurance Company of America, Newark, NJ, and its affiliates. Securities products and services offered through Pruco Securities, LLC (member SIPC). Each of the foregoing is a Prudential Financial company located in Newark, NJ, and each is solely responsible for its own financial condition and contractual obligations. Prudential Financial, its affiliates, and their licensed financial professionals do not give tax or legal advice. Please obtain such advice about your personal situation from your tax and legal advisors. Product availability varies by carrier and state. Our policies contain exclusions, limitations, reductions in benefits, and terms for keeping them in force. A financial professional can provide you with costs and complete details. It is possible to lose money by investing in securities.
© 2021 Prudential Financial, Inc. and its related entities. 1044575-00001-00 Ed. 02/2021 ISG_DG_ILI46_01
Not Insured by FDIC or Any Federal Government Agency. May Lose Value. Not a Deposit of or Guaranteed by Any Bank, Credit Union, Bank Affiliate, or Credit Union Affiliate.
1 Certificate of Deposit/Money Market Accounts. 2 Does not include amounts invested in Roth 401(k)/TSA/457(b). 3 Non-qualified annuities purchased with after-tax dollars enjoy the same tax-deferred growth and ordinary income taxation as qualified annuities. 4 May be subject to Alternative Minimum Tax (AMT) and may impact taxation of Social Security benefits. 5 Life insurance death benefits are generally income tax free pursuant to U.S. IRC §101(a). Contract cash values can be accessed during the insured’s lifetime via loans and withdrawals. Loans are generally income tax free as long as the policy remains in force. Withdrawals are tax free to the extent of basis. Policies which are modified endowment contracts (MECs) receive less favorable tax treatment. 6 Qualified distributions are income tax free. Roth IRA distributions are qualified if the account has been open for 5 tax years, and the owner is age 59½, dies, is disabled, or is a first-time homebuyer ($10,000 lifetime limit). Roth 401(k) distributions are qualified if the plan participant has contributed to the account for 5 tax years, and is 59½, dies, or disabled. This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. If you would like information about your particular investment needs, please contact a financial professional. Life insurance and annuities are issued by The Prudential Insurance Company of America, Newark, NJ, and its affiliates. Securities products and services offered through Pruco Securities, LLC (member SIPC). Each of the foregoing is a Prudential Financial company located in Newark, NJ, and each is solely responsible for its own financial condition and contractual obligations. Prudential Financial, its affiliates, and their licensed financial professionals do not give tax or legal advice. Please obtain such advice about your personal situation from your tax and legal advisors. Product availability varies by carrier and state. Our policies contain exclusions, limitations, reductions in benefits, and terms for keeping them in force. A financial professional can provide you with costs and complete details. It is possible to lose money by investing in securities.
Accessibility
• Municipal Bonds & Bond Funds • Life Insurance • Roth IRA/401(k)
• Municipal Bonds & Bond Funds 4 • Life Insurance 5 • Roth IRA/401(k) 6
• Traditional 401(k) • Traditional IRA/SEP/SIMPLE • Annuities • 403(b) • 457(b)
• Traditional 401(k) 2 • Traditional IRA/SEP/SIMPLE • Annuities 3 • 403(b) 2 • 457(b) 2
• Mutual Funds • CD/MMAs • Real Estate
• Mutual Funds • CD/MMAs 1 • Real Estate
How does your retirement portfolio stack up to the tax challenge? Will you pay more than you should when you spend your hard-earned savings? Take the Tax Challenge and find out.
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Years it takes to double the investment
Taxable Account — 16 Years to Double (36% Annual Tax)
Taxable Account — 14 Years to Double (24% Annual Tax)
Tax-Deferred Account — 10 Years to Double
Growth Rate
7%
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It is important to note that the Years to Double example above does not guarantee investment results or function as a predictor of how your investment will perform. It is simply an approximation of the impact a targeted rate or return would have. Investments are subject to fluctuating returns and there can never be a guarantee that any investment will double in value.
Be aware that certain tax events can take a substantial bite out of the investment return within these assets.
Invest with after-tax dollars; potential to enjoy capital gains rate on some investments.
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This chart shows how taxes can impact investment performance on non-qualified assets. Be aware that certain tax events can take a substantial bite out of the investment return within these assets. Taxes could increase the time needed to reach your goals. Looking at a 7% growth rate for these three different accounts: A tax-deferred account would take 10 years to double. A taxable account at a 24% annual tax rate would take 14 years to double. And a taxable account at a 36% annual tax rate would take 16 years to double. It is important to note that the Years to Double example does not guarantee investment results or function as a predictor of how your investment will perform. It is simply an approximation of the impact of a targeted rate of return would have. Investments are subject to fluctuating returns and there can never be a guarantee that any investment will double in value.
• Portfolio Turnover: A measure of a fund’s holdings that have been sold and replaced during the prior year. • Tax Drag: Can have a significant impact on investment performance over time since any annual taxes due on investments can lower returns. • Rebalancing a Portfolio: When this happens, it often results in selling the over-performing investments and buying the under-performing investments. This can create a significant tax liability.
With no immediate taxes due, these assets can allow more of your money to stay invested to help compound growth.
$100,000 withdrawal during a retirement year. 401(k): 32% Ordinary Income Tax, Mutual Fund—Assumes no cost basis and 15% Capital Gains Tax. Actual results will depend on your personal financial situation.
Hypothetical Scenario
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Invest with pre-tax dollars to enjoy tax-deferred growth. Fully taxed as ordinary income when taken.
The expanded chart shows the columns now with four rows. The column on the left is the non-diversified investments. That column has a 401(k) withdrawal of $100,000 with an ordinary income tax of $32,000 taken out, leaving a Total Net Income of $68,000. The column on the right has three different investments to show a diversified portfolio. The first is a 401(k) with a $33,000 withdrawal with an ordinary income tax of $10,560 taken out, leaving a Net Income of $22,440. The next is a Mutual fund with a $33,000 withdrawal with an ordinary income tax of $4,950 taken out, leaving a Net Income of $28,050. The last is a life insurance policy with a $34,000 withdrawal. There is no ordinary income tax because this life insurance policy is not subject to taxes. Net Income from the life insurance policy is $34,000. If you add up the total Net Income from the right-hand columns you are left with $84,490. This chart illustrates that a diversified portfolio can leave you with a higher total net income. A hypothetical scenario: $100,000 withdrawal during a retirement year. 401(k) with a 32% Ordinary Income Tax, a Mutual Fund assumes no cost basis and 15% Capital Gains Tax. Actual results will depend on your personal financial situation. There are two main columns with a “less than” symbol between them. The one on the left shows Total Net Income of $68,000 and is that is less than the column on the right that shows Total Net Income of $84,490. If you expand the chart, the explanation of how these numbers are determined appears.
• Increase your overall tax-burden, especially if taxes increase in the future • Potentially expose yourself to higher-tax brackets and trigger additional taxes • Reduce the amount of money you’re able to spend in retirement
Relying too heavily on these assets in the future and/or in retirement means you may:
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Understand the full value of life insurance, including the tax benefits. Taxes have a major impact on the money that’s available later in life and on what’s left for your family after you die. So, when there’s a need for life insurance, make sure to look at all the ways it can help.
Taking advantage of tax-exempt strategies, including life insurance, can go a long way in helping you:
Invest with after-tax dollars to enjoy income tax-free growth potential.
Life insurance that builds cash value can help reduce overall exposure to taxes and round out a diversified tax strategy as part of a retirement portfolio. The primary purpose of life insurance is to provide death benefit protection; this strategic approach assumes death benefit protection is a priority for you. Life Insurance can also help to diversify not just your tax strategy but your assets, too.
• Control how you’re taxed in retirement • Protect you from the uncertainties of what taxes will be in the future • Keep more of the money you’ve worked hard to accumulate
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