In June of 1988, Congress re-defined investment-driven insurance contracts and created two new definitions of insurance policies; MEC and Non-MEC.

Non-MEC's posses very unique tax advantages and can be used for a variety of purposes which are covered below.

It is commonly referred to a "Private Pension Plan".

Here's a Sampling of the Potential Benefits

Providing you keep the contract in force and it is not surrendered or lapsed, you enjoy the following potential benefits:

  • 100% Tax-Free Compounding of All Earnings
  • No Income Tax or Tax Consequences on Withdrawals
  • Unlimited Contributions
  • 100% Income Tax and Probate-Free Life Insurance Benefits
  • No 10% IRS Penalty On Withdrawals Before Age 59-1/2
  • No Forced Distribution At Age 70-1/2
  • Flexibility To Fit Your Changing Needs

A Better Alternative?

While tax qualified plans (IRA, 401(k), SEP) are popular methods to help accumulated retirement assets they're not always the perfect solution for some.

For one thing, when you have a tax qualified plan you have to play by the IRS rules.

Sure, you do get the benefits of tax-deferred growth but you'll be hit with a hefty penalty if you withdraw your money before age 59-1/2 (under most circumstances), you have contribution limitations and forced distribution at 70-1/2.

In addition, when you pass away, these assets are subject to both income and estate tax.

This may offer a more Flexible Solution

A "private" pension plan is retirement planning alternative that many tax-conscious investors are quickly discovering. Better than tax-deferred, a private pension is tax free providing you keep the contract in force and it is not surrendered.

First, a "private" pension plan allows investors to enjoy the potential rewards of investing with some of the largest financial institutions in the world on a completely tax-free basis. That's right--all earnings are reinvested without paying taxes along the way.

Second, after the plan has been in force for 1 year, most plans allow you to withdraw up to 90% of your plan's value 100% tax-free. (The only expense you incur for this privilege is a low "loan" fee that nets out at 0 to 1%.). Since you pay no income tax, you avoid that 30% to 40% cut you'd have to give up on the income from your IRA.

Third, the plan's tax-free status means that no income you withdraw can raise your overall income tax bracket, so you avoid any indirect tax hike, too.

Fourth, because the IRS doesn't define it as a "qualified" retirement plan, there are no limits on how much you can contribute to a private pension, nor on when you take your money out. So if you want to retire early and need to tap into your plan before you reach age 59-1/2, you won't have to worry about paying a 10% IRS-imposed penalty.

On the other hand, if you reach age 70-1/2 and still don't need the money in your private pension plan, you won't be forced to take mandatory distribution.

How Does A Private Pension Work?

Private Pension Plans are set up through simple investments in what is known as 7-Pay or Non-MEC Pay Life Insurance.

When Congress stripped most tax-advantaged insurance plans of their enormously appealing benefits in 1988, the powerful insurance industry did consumers a genuine favor by ensuring a select few plans intended for serious savings -- including these types of policies -- remained intact.

It's Fairly Easy To Set Up A Private Pension

While these plans aren't extremely complicated, there are definite rules and guidelines to setting them up for maximum accumulation and maximum potential benefits.

That's why it helps to have someone with experience at the helm to set up the plan and ensure you're off to a trouble-free start.

When you call us, we'll help you find the most suitable solution and recommend a specific plan to meet your financial goals. We will also provide you information detailing exactly how a private pension plan works.

You can also set up a tax-free private pension plan as a "corporate" retirement plan for you, your partners, and selected staff members without having to worry about discrimination rules.

They are also a great tool for Buy-Sell Agreements.

A tax-free private pension plan can also be an excellent method of attracting and retaining key employees.

Action To Take

Click HERE to obtain Private Pension Plan information

For Faster Service Call 1-800-480-7526






Home.gif (1460 bytes)

Copyright 1998 Fielder Financial Management, LTD.
All Rights Reserved.

Securities offered through Fortune Financial Services, Inc. member FINRA, SIPC.  Fielder Financial Management, Ltd. not affiliated with Fortune Financial Services, Inc.  Mark Fielder, Financial Professional, CA. Insurance Lic. # 0690576.

Disclosure: Private Pension Plans (also known as IBRP's - Insurance Based Retirement Plans) are long-term investment plans.  Investors should have a minimum 10 year time horizon.  Private Pension Plans can be fixed yield or variable yield (based on sub-account options).  Variable plans are subject to market fluctuations, investment risks and possible loss of principal and/or death benefits.  For more complete information about variable plans, including charges and expenses, obtain a prospectus by calling 1-800-480-7526. Read it carefully before you invest or send money. Providing the contract is kept in force and not surrendered, withdrawals are not subject to income taxes under IRC Section 7702.  Lapsed contracts may be subject to income tax.  Early termination of contracts may result in surrender penalties imposed by the underwriting firm.  Consult your tax advisor.