Modified Endowment Contract (MEC): A Modified Endowment Contract is a life insurance policy that has failed the seven-pay test and was entered into after June 21, 1988. While the death benefit from a MEC is still (generally) income tax free and the policy cash value still grows on at tax-deferred basis, withdrawals and loans from life insurance policies that are classified as modified endowment cotnracts may be subject to tax at the time the withdrawal or loan is made. A federal tax penalty may also apply if the widthdrawal or loan is taken prior to age 59 1/2. The basic illustration accompanying this supplemental illustration will indicate if the policy you are considering is a MEC.

Desired After-Tax Retirement Income :this represents the amount of annual income you would like to have at retirement. It can be indexed for inflation if desired. Both the initial amount and the index rate are based on information provided by you, the client.

Inflation Rate : the rate at which prices for goods and services increase over time, expressed on an annual basis. (This rate is the pre-retirement inflation rate for the income.)

Current Qualified Plan Balance :the current total balance of all of your qualified retirement assets, such as 401(k)s and IRAs. Qualified plans are plans that satisfy requirements of the Internal Revenue Code and are eligible to receive certain tax benefits.

Ongoing Contributions to Qualified Plan: the amount of the total of regular contributions to your retirement plan, including your employer’s contribution.

Other Expected Retirement Income :this amount represents annual retirement income from other sources such as social security benefits, defined benefit pension plans or personal savings. It can be indexed for inflation to match your expected payout rate. Both the initial amount and the index rate are based on information provided by you, the client.

Non-Qualified Retirement Savings : – the current total balance on all non-qualified retirement assets, if applicable, such as plans used to provide additional benefits for a highly rewarded employee.

Total Projected Income :an estimate of your after-tax income in retirement, based on a specific number of years given by you, the client.

Shortfall:this is the income gap that you will need to close in order to have sufficient income in retirement.