Clients Can Have Their Cake and Eat It Too With Tax-Smart Income

Registered investment advisors know that perhaps the most important objective for retirees is steady, low-risk income that allows those clients to maintain the lifestyle to which they grew accustomed during their working years. It’s even better when that income is realized in tax-advantaged fashion.

Lincoln Financial’s variable annuities help clients access tax-efficient income. For financial professionals looking to articulate the benefits and inner workings of variable annuities, it boils down to a few simple premises: a long-term approach, access to top investment managers, tax-deferral and lifetime income.

Compelling traits to be sure, but the variable annuities proposition is enhanced with Lincoln’s i4LIFE® Advantage optional benefit. For an added cost,1 i4LIFE® Advantage brings more benefits to the firm’s variable annuity offerings. Those include maximizing income by minimizing the tax when investing with nonqualified money – while retaining opportunities for investment growth, access and control.2

“The beneficial tax exclusion treatment delivers a portion of taxable gains AND a portion of the original investment (nontaxable principal) with each payment.3 Imagine a slice of cake with both icing AND cake,” according to Lincoln Financial.

Discover the i4LIFE® Advantage

Take the case of systemic withdrawals, applying Lincoln’s aforementioned cake metaphor. “Each payment comes from the fully taxable gains before tapping into the original investment amount (nontaxable principal). If it were cake, every slice would be icing — no cake until the icing is all gone,” notes the asset manager.

In simple terms, the aim of a variable annuity with the i4LIFE® Advantage kicker is to deliver as much after tax income as possible to the client.

Getting Tax-Smart with the i4LIFE® Advantage

When acknowledging that taxes are a part of life, the cake metaphor is relevant because the tax efficiencies offered by Lincoln’s the i4LIFE® Advantage become all the more prominent.

For example, the feature offers clients penalty-free income prior to age 59.5. That can be meaningful for clients looking to pay for college educations for children or bolster long-term care savings. i4LIFE® Advantage also allows the holder of the annuity to provide joint income to someone that isn’t a spouse, which can be particularly advantageous for parents looking to help their children get off to strong financial starts.

Lincoln’s i4LIFE® Advantage also features the ability to make tax-efficient distributions through a trust, which could lower recipients tax obligations. The tax benefits don’t end there. Highlighting the potential potency of this variable annuity add-on are the abilities of i4LIFE® Advantage to deliver tax-smart gifted income while ameliorating some of the tax complexities associated with inheriting variable annuities.

Ready to learn more? Please visit the i4LIFE Advantage website.

i4LIFE® Advantage is available for an additional charge of 0.40% (single and joint life) above standard contract expenses. There is a credit to clients who select a minimum Access Period of the greater of 20 years or until age 85  —  with a $500,000 deposit the credit is 0.10% annually and with a $1,000,000 deposit the credit is 0.20% annually (see prospectus for complete details).

For a defined time based on the Access Period chosen. The maximum Access Period for qualified contracts is to age 100 (115 for nonqualified money). The longer the Access Period, the lower the income payments. You may extend the length of the Access Period before the Lifetime Income Period begins, which will decrease subsequent i4LIFE® payments.

The exclusion ratio only applies until the principal has been returned, and then the payments are fully taxable.

Important information:

Lincoln Financial Group® affiliates, their distributors, and their respective employees, representatives and/or insurance agents do not provide tax, accounting or legal advice. Please consult an independent professional as to any tax, accounting or legal statements made herein.

Variable annuities are long-term investment products designed for retirement purposes and are subject to market fluctuation, investment risk, and possible loss of principal. Variable annuities contain both investment and insurance components and have fees and charges, including mortality and expense, administrative, and advisory fees. Optional features are available for an additional charge. The annuity’s value fluctuates with the market value of the underlying investment options, and all assets accumulate tax-deferred. Withdrawals of earnings are taxable as ordinary income and, if taken prior to age 59½, may be subject to an additional 10% federal tax. Withdrawals will reduce the death benefit and cash surrender value.

Investors are advised to consider the investment objectives, risks, and charges and expenses of the variable annuity and its underlying investment options carefully before investing. The applicable prospectuses for the variable annuity and its underlying investment options contain this and other important information. Please call 888-868-2583 for free prospectuses. Read them carefully before investing or sending money. Products and features are subject to state availability.

Lincoln variable annuities (contract forms 30070-A 8/03, 30070-B, and state variations) are issued by The Lincoln National Life Insurance Company, Fort Wayne, IN, and distributed by Lincoln Financial Distributors, Inc., a broker-dealer. The Lincoln National Life Insurance Company does not solicit business in the state of New York, nor is it authorized to do so.

Contracts sold in New York (contract forms 30070-A-NY and 30070-B-NY) are issued by Lincoln Life & Annuity Company of New York, Syracuse, NY, and distributed by Lincoln Financial Distributors, Inc., a broker-dealer.

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