Nationwide - 

Using life insurance for retirement income is getting easier

The recent passage of the Consolidated Appropriations Act of 2021 (the stimulus package) included changes to Internal Revenue Code Sections 7702 and 7702A — used by carriers to determine whether a policy qualifies as life insurance.

These updates offer clients better access to financial security with more savings and retirement planning options. It also enables insurance carriers to continue delivering valuable products during extended periods of low interest rates.

What it means for your clients

Higher maximum premiums

•   Changes to Section 7702 increase the maximum premiums for life insurance qualification testing — meaning better long-term cash value accumulation potential on maximum-funded premium case designs

•   Changes to Section 7702A increase the maximum premiums for modified endowment contract (MEC) status testing — allowing more premium to be paid into a policy without triggering a MEC

Greater cash value growth potential

•   Higher premiums have the potential to generate additional tax-advantaged cash value

•   Choosing a lower death benefit with lower charges can also increase the policy’s cash value internal rate of return (IRR) 

Moving forward

These changes apply to policies issued on or after January 1, 2021. We’re currently mapping out the adjustments that’ll need to be made to our administrative systems and illustration software as a result — guided by our mission to take extraordinary care of clients and to make things as simple as possible.

I’ll be in touch soon with more details on implementation dates and transition rules.

Best,

Jeff

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FOR INSURANCE OR FINANCIAL PROFESSIONAL USE — NOT FOR DISTRIBUTION TO THE PUBLIC

This material is not a recommendation to buy, sell, hold or roll over any asset, adopt an investment strategy, retain a specific investment manager or use a particular account type. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. Investors should discuss their specific situation with their financial professional.

Indexed universal life insurance policies are not stock market investments, do not directly participate in any stock or equity investments and do not receive dividends or capital gains participation. Past performance of an index is not an indicator of future crediting rates.

Products are issued by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, Columbus, Ohio.

Nationwide and the Nationwide N and Eagle are service marks of Nationwide Mutual Insurance Company and/or its affiliates, unless otherwise disclosed. © 2021 Nationwide

LAE-1583AO (02/21)