Tax Buckets
Name the 3 tax buckets
Tax Now, Tax Later, Tax Never
What is the Rule of 72 formula?
72 ÷ rate of return = years to double money.
What is considered the foundation of the Financial House?
Protection (Insurances and Emergency Fund)
What type of insurance builds cash value?
Permanent insurance (Whole Life and VUL)
Which rider provides an additional death benefit if death occurs from an accident?
Accidental Death Benefit Rider.
Give 3 examples of accounts in the Tax Later bucket
Traditional IRA, 401(k), 403(b)
What is the #1 asset and #1 tool in Rule of 72?
Asset = Time
Tool = Money
Why is disability insurance important in the Financial House?
It protects the client’s income-producing ability.
What are 3 features of Whole Life insurance?
Guaranteed death benefit, cash value growth, and dividends (not guaranteed).
Which rider waives premiums if the insured becomes disabled?
Disability Waiver of Premium Rider
Why can Required Minimum Distributions (RMDs) create tax problems later in retirement?
They can push retirees into higher tax brackets
At 8% interest, approximately how long does money take to double?
9 years.
Why should protection planning come before investments?
Investments are vulnerable if foundational protection is missing.
What dividend options are available on Whole Life?
There are 4
Paid-Up Additions, accumulation, premium payment, or cash.
Which rider allows access to death benefits for terminal illness?
Living Benefits Rider.
Explain how tax diversification works
Combining taxable and tax-free income sources can reduce overall taxes in retirement.
How does inflation affect purchasing power over time?
Inflation reduces what money can buy over time.
Explain the purpose of the Retirement area in the Financial House.
It represents long-term income and financial accumulation planning.
How can policy cash value be accessed?
Through policy loans or surrendering paid-up additions
Which rider helps with pay for expenses regarding a chronic condition?
Chronic Care Rider.
Explain the farmer analogy for Tax Now, Tax Later, and Tax Never.
Tax Now = pay taxes on the seed
Tax Later = taxes on harvest
Tax Never = no taxes on harvest
A client earns 8% annually and inflation averages 3%. What is the client’s approximate real rate of return, and why does that matter?
Approximately 5% real ROR. It matters because inflation reduces actual purchasing power, so the real return reflects the true growth of wealth over time.
Draw and explain the Financial House.
Candidate explains the structure and purpose of each section.
What is the maximum issue age for the Chronic Care Rider on a Whole Life Insurance policy?
Age 70
Which rider guarantees the option to buy more insurance later without evidence of insurability?
Policy Purchase Option Rider. (PPO)