Planning For A Secure Financial Future

Planning for a
Secure Financial Future

Protection Wealth Accumulation Retirement Planning Estate Planning Business Planning

PROTECTION WEALTH ACCUMULATION RETIREMENT PLANNING ESTATE PLANNING BUSINESS PLANNING SELECTIVE BENEFITS

PROTECTION WEALTH ACCUMULATION RETIREMENT PLANNING ESTATE PLANNING BUSINESS PLANNING

Our objective is to help business owners, professionals, high-net-worth individuals and their
families begin preparing for a secure financial future. Together, we will go through a financial
discovery process – a step-by-step approach to personal and business planning designed to
help you identify and focus on your unique goals and objectives.

This process is designed to help you:
Q Identify your current financial situation;
Q Determine your financial objectives;
Q Understand the options available to you; and
Q Develop and implement a plan that addresses your unique needs.

Working together, and, when appropriate, with your other financial advisors (for example, your
CPA or attorney), we will help you select products and programs that are best suited to your individual
situation.

The five areas of planning in which we specialize include:
Q Protection
Using various types of insurance contracts to protect the people who depend on you – your
family and business associates – should you die prematurely, become disabled, or suffer a
long-term illness.
Q Wealth Accumulation
Developing financial programs with your long-term savings goals as a guide.
Q Retirement Planning
Using current tax law plus a variety of products and programs to help ensure a comfortable
lifestyle during retirement.
Q Estate Planning
Preserving what you've worked hard to build over the years with programs that help you plan for
the eventual distribution of your assets in a tax-efficient manner.
Q Business Planning
Designing programs that help you pass your business, intact, to the next generation or to your
associates should you retire, become disabled or die prematurely; as well as incentive and benefit
plans for key employees.

With proper planning today, you can help achieve tomorrow’s dreams.

1


You’ve worked hard to get where you are.
Now it’s time to protect what you’ve built – for yourself and for the
people who depend on you.
Will your current assets be sufficient to cover any unforeseen
contingencies?
Even substantial assets can be wiped out quickly.

Q A medical emergency results in premature death, leaving your family without adequate income.
Q A long-term illness quickly drains a lifetime
of savings.
What would your family have to
Q An injury or accident makes returning to work give up to cover unpaid expenses?
impossible.
Q Mortgage payments
No one likes to think about dying too soon, suffering a Q College savings
long-term illness or becoming disabled. Q Child care
However, if you haven’t planned for these possibilities, Q Taxes
you, and the people who depend on you, could find Q Monthly bills
yourselves in a devastating financial situation. For Q Food and clothing
example:
Q Car payment
Q If your income suddenly stopped, how long Q Retirement savings
could your family go on meeting its monthly
obligations? What would happen after that?
Q If you died leaving expensive, unpaid medical
bills, where would the money come from to pay
them? Would your family have to liquidate assets?

2

Life’s Responsibilities

Three of the most effective and affordable ways to address these concerns
are life, disability, and long-term care insurance.
Q Life insurance can provide an income tax-free, lump sum payment that can be used to settle debts,
or provide a monthly income stream for your family.
Q Disability insurance provides a monthly income to make up for lost wages should an accident,
sickness or injury prevent you from working at your regular occupation. Benefits are generally
received income tax-free.
Q Long-term care insurance provides a monthly benefit to help offset the cost of nursing home or
in-home care should you become unable to perform certain “activities of daily living” such as eating,
dressing, bathing, toileting and transferring.
What are your chances of becoming
disabled?
Do you own personal life insurance?
Q How much? Q Over 51 million Americans are
Q How did you arrive at this amount? classified as disabled, representing
18 percent of the population.
Q Are your premiums level or do they increase?
U.S. Census Bureau, Public Information Office,
Q Does your policy build cash value that can be November 2008
used to meet lifetime needs?
Q The average long-term disability
absence lasts 2.5 years.
Do you own disability or long-term Commissioner's Individual Disability Table A
care insurance?
Q Over 6.8 million workers are
Q How much is the monthly benefit payment? receiving Social Security Disability
Q When do benefits become payable? benefits, almost half are under age
Q How long does the benefit payment last? 50.
Social Security Administration, Fact Sheet
Q Do you know how your policy defines “disability”
January 31, 2007
and/or which “activities of daily living”
are covered?

Proper planning today will help
you protect yourself, your family and
the things that are important to you.

3

WEALTH ACCUMULATION RETIREMENT PLANNING ESTATE PLANNING BUSINESS PLANNING PROTECTION

Accumulating wealth, no matter when you start, requires:
Q A long-term investment strategy;
Q A commitment to seeing that strategy through; and
Q An understanding of your tolerance for risk.

As you go through various stages in your life, your ability to set money aside will fluctuate. This fluctuation
must be factored in to any long-term accumulation strategy you develop.

People today are retiring earlier and living longer. Where the concern was once accumulating sufficient
assets, it is now making sure those assets last a lifetime.

But you likely have other asset accumulation concerns too, including:

Q Helping children afford college costs;
Q Taking advantage of the equity markets without undue risk of loss; and
Q Wondering whether Social Security will still be there when it’s time for you to begin collecting.

The bottom line…
You need an effective plan for setting money aside for the future. A plan that is consistent with your
investment objectives, time horizon and comfort level, and will not jeopardize your current lifestyle.

The cost of waiting
$50,000 goal in 10 years

$1921

Monthly Contributions

$887

$545
$376
$276

T T T T T

Today Wait 2 Years Wait 4 Years Wait 6 Years Wait 8 Years

Assuming 8.00% return. This chart is illustrative of the time value of money and does not represent any
specific investment. Actual results may be more or less than those shown.

4

Life’s Priorities

The solution:
Save early and often, and practice solid investment management with asset allocation.

Asset allocation simply means you “allocate” your assets among a variety of investment classes to help
protect against market ups and downs.

Investment funds can be allocated among a number of accumulation vehicles, including:

Q Fixed annuities, which pay a guaranteed rate of return and accumulate income tax-deferred.
Q Variable annuities, which allow you to choose how your money is invested according to your risk
tolerance. Variable annuities also accumulate income tax-deferred. For an additional cost,
living benefit riders can also be added to provide
guaranteed accumulation and/or withdrawal Asset Allocation Alternatives
benefits. A variable annuity is a long-term
financial retirement vehicle, subject to market
fluctuations and may lose value.
CDs Money
Q Mutual funds, which allow you to accumulate Market
money according to your investment risk
Life Insurance Stocks
tolerance. Most mutual fund families offer a
Cash Value
range of conservative, moderate and aggressive
investment choices.
Mutual Bonds
Q Life insurance cash values, which accumulate Funds
income tax-deferred and can be used to help pay
for such things as college costs or to supplement Annuities

retirement income.
Please note: Certain limitations may apply to
withdrawals. Policy loans and withdrawals will
Of course, within annuities and mutual
reduce the death benefit and cash values, and
funds you can further allocate among
may be taxable under certain circumstances.
types of investments, including fixed-
Q Stocks, bonds, money market funds, etc.
income investments or equities.
Where are you saving money?
Are you paying income taxes on your earnings?
Would you like to earn more?

The right plan can help protect against market fluctuations
and may result in greater wealth over the long term. 5

RETIREMENT PLANNING ESTATE PLANNING BUSINESS PLANNING PROTECTION WEALTH ACCUMULATION

One of the biggest concerns facing Americans today is retirement.
Unfortunately…
Q Many company-sponsored, company-paid pension plans, long the staple of many Americans’
retirement incomes, are quickly being replaced by qualified retirement plans funded by employee
contributions.
Q According to current assumptions made by the Social Security Board of Trustees, annual benefits
paid to retirees will exceed payroll tax revenues beginning in 2017. By 2041, they predict the Social
Security Trust Fund will have been fully spent, resulting in ongoing reductions in benefits for future
retirees. (Source: 2005 OASDI Trustees Report)
How much would you have to start saving
For many people, the answer will be today on a monthly basis in order to have
self-funded retirement plans such as: saved $1 million at age 65?
Q IRAs Age Assuming 6% Assuming 8%
Q Employer-sponsored 401(k) and 403(b) Plans annual growth annual growth

Q Fixed and variable annuities 30 $699 $437
Q Life insurance cash values 40 $1,436 $1,060

Most of us list financial security at retirement among our 50 $3,421 $2,900
highest priorities, yet only a few of us take adequate steps This hypothetical chart is illustrative and is not representa-
to prepare for it. tive of past or future results. Actual results may be more or
less than those shown.
The typical 45-year-old married couple in the United States
today will only have a portion of what they’ll need at
retirement to maintain their existing lifestyle.

Choose the right tools now to prepare for the comfortable
6
retirement you expect and deserve.

Life’s Goals

Will Social Security be enough?
Assuming Social Security is still solvent when you retire, it may only pay a small percentage no more than
about one-third of your pre-retirement income. For example:

Individual Age 50

Pre-retirement Estimated Yearly Social % of current
Income Security benefit at income
age 66

$100,000 $27,024 27%

$50,000 $18,960 38%

Source: Social Security Benefits Calculator, 2009 figures. Assumes no increases in prices or earnings.

Q Are you counting on Social Security to help you afford retirement?
Q Could you maintain your current lifestyle at this level of income?
Q From where will the balance of what you need to live on come?
Q If the funds aren’t there, what will you have to give up?

With proper planning now, you can begin accumulating assets to supplement your retirement income and
potentially stretch those funds out over your expected lifetime.

Plan for your retirement:
Q You may want to consider opening an IRA. Then, defer as much as you can into it. Are you
self-employed? Look into a Simplified Employee Pension (SEP) plan, SIMPLE IRA or installing a
401(k) plan.
Q Exercise restraint. Once you’ve put money away, leave it alone. The Government imposes strict
penalties on money you take out of tax-favored retirement plans, in addition to making you pay
income taxes on it.
Q Learn all you can. With 401(k) and other self-funded plans, you determine how your money is
invested. By applying some basic investment strategies, you’ll have a better shot at achieving
your retirement goals and objectives.

7

ESTATE PLANNING BUSINESS PLANNING PROTECTION WEALTH ACCUMULATION RETIREMENT PLANNING

Most of us are pretty good about taking care of our present needs and protecting the things
swe value. But surprisingly, many of us never take time to address what could be our biggest
financial questions.

How would you answer these questions?

Q Who will receive your estate?
Q Will you owe federal or state death taxes and, if so, how much will you owe?
Q Where will the money come from to pay these taxes and other settlement costs?
Q If cash and other liquid assets available to your heirs are insufficient to pay the taxes and
costs, will they have to liquidate your estate?

Without proper planning, estate taxes could consume a substantial portion of everything
you own.

Proper estate planning now can help you reduce the amount of taxes your estate will owe, as well
as allow you to plan for how the assets you’ve accumulated over your lifetime will be distributed.

8

Life’s Achievements

The most common estate planning tools include:
Q Wills, which are a legal declaration of how you want your assets to be distributed when you die.
Q Trusts, which transfer property to your beneficiaries with several tax and non-tax advantages.
Q Charitable giving, which enables you to distribute a portion of your assets to selected organizations,
thus reducing the amount of taxes you owe.
Q Life insurance, which provides the cash your family needs to maintain its lifestyle and the liquidity
needed to pay estate taxes and settlement costs.

Do you know what your estate is worth?
Have you planned for the orderly disposition of your estate?

Find out more about strategies to help reduce taxes, transfer
assets to heirs quickly and privately, and preserve what you
have spent a lifetime building.

How large is your current estate?

What is the:
Value of your home? ________________________________________

Value of any savings accounts, including stocks,
bonds, retirement accounts, CDs, annuities or mutual funds? ________________________________________

Total face amount of any life insurance policies? ________________________________________

Value of your possessions, including jewelry, artwork,
home furnishings, etc? ________________________________________

Value of your share of a business or professional practice? ________________________________________

Value of anticipated inheritance? ________________________________________

Now ask yourself:
Which of the above would you want your family to liquidate in order to pay
your federal and state taxes and estate settlement costs?

9

BUSINESS PLANNING PROTECTION WEALTH ACCUMULATION RETIREMENT PLANNING ESTATE PLANNING

You know the importance of delivering a good product or service and standing behind it.

You also know the importance of keeping the books balanced, hiring qualified employees,
beating the competition and meeting ever-increasing customer service expectations.

But until you address the issues of retirement planning, business continuation and rewarding
and retaining key employees, everything else could be in jeopardy.

Did you know…
Q Only about one third of small businesses offer some kind of retirement saving program
to employees. Fewer than 10 percent offer nonqualified programs for the owners and
executives.
Q Life insurance is not a top priority for these businesses. Group life is the least common
employee benefit, only one third have business life insurance for such things as key
person coverage, and life insurance is next-to-last executive benefit the firms would
bring in.
Q Seven in 10 small business owners have thought about who would run the business in
their absence, but only 25 percent have formal retirement succession plans and only
35 percent have formal continuation plans in the event of their deaths.
Q Family-owned businesses are less prepared for future transition than nonfamily
businesses.
Q Just over half have personal IRAs, and fewer than 20 percent have annuities or pension
plans.

Source: Small Business Owners 2009. LIMRA Int’l, 2009 James O. Mitchel

Ask yourself…
Q What would happen to your business today if you suddenly weren’t here?
Q What would happen if you were disabled or if you simply decided to retire?
Q Would your business go on running smoothly without you, or would there be arguments
over who should make executive decisions?
Q Would your key people stay on, or would they begin looking for opportunities
elsewhere?
Q Would your best customers stay, or are you the reason they do business with you?

10

Life’s Commitments

What are your business concerns?
Good business planning is more than just ensuring the stability of your business should you die
or become disabled. It also includes using the business to reward yourself and your key people
while you are living.

By combining qualified retirement plans and selective benefit
plans, you can:
Q Set extra money aside for yourself;
Q Help your employees prepare for their own retirement; and
Q Reward and retain key employees

Proper planning today can help ensure a comfortable retirement tomorrow.

Do you know how these plans can reduce your current income taxes
and increase the amount you’ll have to spend during retirement?

Qualified Plans Non-Qualified Plans

Q Comply with specific Internal Revenue Q Minimal Internal Revenue requirements
requirement codes Q May favor owners and selected
Q Allow for income tax benefits employees
Q Must be provided to all eligible Q 401(k) Overlay
employees Q Executive Bonus and Restricted
Q 401(k) Bonus Plans
Q SIMPLE (Savings Incentive Match Plan Q Split Dollar
for Employees) Q Supplemental Executive Retirement
Q SEPS (Simplified Employee Pension) (SERP) and Deferred Compensation
11
Plans


Are there other areas of planning that you would like to discuss?
Of the areas reviewed, do any concern you more than the
others?
A secure financial future doesn’t just happen by accident.

It requires examining your current circumstances; identifying your goals and objectives;
developing a plan to achieve those goals and objectives; taking action to implement your plan;
and periodically reviewing your plan.

This guide has been prepared to help you begin preparing for a secure financial future and to
introduce you to the wide range of products and services offered by our organization.

At your convenience, we can work together to complete a financial analysis of your current
situation. This information will remain strictly confidential, and will provide us with a good
understanding of your present goals and your financial objectives moving into the future.

Together, we’ll help develop the steps you can begin tak-
ing immediately to help secure your financial future.

12

The Penn Mutual Family of Companies:
Q The Penn Mutual Life Insurance Company
Q The Penn Insurance and Annuity Company
Q Independence Capital Management, Inc.
Q Hornor, Townsend & Kent, Inc.
Q Penn Series Funds, Inc.
Q The Pennsylvania Trust Company
Q Janney Montgomery Scott LLC

Investors should consider the investment objectives, risks, charges, and expenses of a
variable insurance product carefully before investing. Please carefully read the
prospectuses for the relevant variable insurance product and its underlying investment
options, which contain this and other information about the product. You can obtain a
prospectus from your Penn Mutual financial professional or go to www.pennmutual.com.

Penn Mutual Variable products are principally offered through Hornor, Townsend & Kent,
Inc., (HTK), Registered Investment Advisor, Member FINRA/SIPC. HTK is a wholly owned
subsidiary of The Penn Mutual Life Insurance Company.
Please note: Any reference to the taxation of life insurance products in this material is
based on Penn Mutual’s understanding of current tax laws which are subject to change.
You should consult a qualified tax advisor regarding your own personal situation.
©2009 The Penn Mutual Life Insurance Company, Philadelphia, PA 19172
www.pennmutual.com

PM0374 6/09
A9JC-0608-14
FX2002-0115-0007

Planning For A Secure Financial Future

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