A million dollars can generate $100,000 a year
of tax-free income even if you live to be 120.
In this episode, I'm going to answer the question,
"How long will a million dollars last in retirement?" I've been asked that question
numerous times. You're going to understand the difference between
traditional investments where a million bucks would probably run out in 11 years
and where you could put that money and have it
last as long as you do if you live to be 120.
Hi, my name's Aoug Andrew. I've been a
financial strategist, a retirement planning
specialist for more than 46 years. And so, I've helped people optimize their
financial assets and accumulate a nest egg
so that they will not outlive their money no matter
what taxes do. If inflation goes double-digit
and if the market is volatile because I make my clients immune
from taxes inflation and market volatility. So, when people ask,
"How long will a million dollars last?" Well,
the answer is for most Americans, about 11 years before it's gone. And this
is truly what has happened in history. Let
me give you an example of why. See, if people save throughout their
lifetime and they have a million bucks. In today's day and age, a lot of
Americans say, "Well, golly. I need about
$100,000 a year to buy gas and groceries, prescriptions, golf
green fees and so forth." Even if they say, "You know what, Doug? I'm
very frugal. I think I can get by on fifty thousand dollars a year on top of
social security." Well, not for long. Because inflation
usually will double the cost of living especially on things like prescription,
drugs and so forth and retirement, health care.
It will usually double the cost of living every 7 to 10 years.
So, in seven years or as soon as 10 years, 50,000 a year will not cut it anymore.
You're going to need $100,000.
Twice as much to buy the same gallons of gas loaves of bread prescriptions golf
green fees that 50,000 used to buy just
7 to 10 years earlier than that. It doubles every 7
to 10 years. So, in 15 to 20 years, you're going to
need double that. You're going to need 200,000 to buy what 50,000 years to buy.
So, you need to have a strategy where you link your returns to the things that
inflate. Otherwise you have to keep taking out more money
and that causes you to outlive your money. Because people can't
just keep tightening their belt and cutting their lifestyle in half
every 7 to 10 years. What's the other negative impact?
Taxes. See, most people didn't realize they have to pay
tax on their traditional IRAs and 401Ks when they retire.
And they thought they were going to be in a lower bracket and they're not.
And so, in order to net $100,000 in a 33%
bracket... Because most retirees pay about a third in tax between federal and state
tax on their IRAs and 401Ks as the money
comes out. So, in order to net a hundred thousand,
they have to pull out 50% more. And you go, "Wait a minute.
Wait a minute, in a 33% bracket, don't you just pull out
33% more?" Nope. In a 33% bracket you have to pull
out 50% more. What's 50% of 100,000?
50,000. You have to pull out 150,000,
pay tax of a third (What's a third of 150? 50)
to net 100,000. They never did the math.
If you have to pull out 150,000 and if you're a million bucks is earning 10%
which very few Americans are earning. But
let's just say you could. You have to pull out 150,000
to net 100,000 even if you're earning 10%.
Your million bucks will be gone, drained
dry in 11 years. What's better? I put my serious cash
into a portfolio of maximum-funded insurance contracts that are designed to
have the highest net internal rate of return.
It is the brainchild of EF Hutton clear back in 1980.
It's where you're putting in the most money the IRS
allows. It's where you're putting in the most money the IRS allows as fast as
they allow. And you're taking the least amount of insurance the IRS will let you
get away with under certain tax laws. I know this has been my favorite vehicle.
It's where I have actually earned net rates of return of
6, 7, 8, 9, 10 percent average
for the last 40 years. It was first introduced
in 1980 by EF Hutton. They were not an insurance company. Since indexing came
out in 1997, I've actually by using indexing and
rebalancing, I've averaged more like 10.07%.
So, in actuality, a million dollars can net me $100,000 a
year without depleting principle. And it's 100% tax free.
It's not a loophole. It's been tax-free since 1913 in the
internal revenue code. The IRS says, "If you do this,
it will be totally tax-free." So what does that mean?
Here's a person with a max-funded insurance contract portfolio with a
million bucks in it earning 10%. Here's somebody earning 10%
in a tax-deferred IRA, 401K account. They both have a million dollars in them.
This one drains dry because you have to pull out 150,000
to net 100. It's gone in 11 years. It's been drained dry.
This one you only have to pull out 100,000 to net
100,000. So, because it's tax-free,
how much do you have left in 11 years when this one
is out of money? You still have your million.
And it will keep generating $100,000 a year
for another 20 years. Now, most baby boomer couples,
one of you will make it to age 96. So let's say you retired age 65 with with
an IRA 401K earning 10%. You're out of money by age 76. And you're
relying for the next 20 years on social security, welfare, your children
for support? Who wants that? Over here, you're still getting $100,000
a year of tax-free income for another 20 years. One of you
will make it to age 96 according to statistics. That's 20
more years of 100 grand. That's 2 million dollars more than the
same amount of money in an IRA, 401K that is subject to tax. But you still
have your million. So, it's actually a 3 million dollar
better retirement strategy than this one. Let me ask you this: What would you
prefer? This one or one that has 3 million dollars
more benefit in it? I think I know the answer. This is
a max-funded insurance contract. And they've been around for over 100
years grandfathered in the internal revenue
code. So, when people ask me, "Golly, how long will a million dollars
last?" I go, "Well, where is it invested?" If it's invested in IRAs and
401Ks and it's still subject to tax when you
withdraw it, if it's invested in the market where
most people have their retirement funds, I go, "Well,
you're going to be lucky to have enough money for about 10 or 11 years
and that's if you're earning 10%." The sad fact is
most Americans are only earning about 3.5%
with their money in the market because they're buying and selling at the wrong
times. And this is actual statistics based upon DalBar
studies of retirees. The average retiree is only earning about 3.49%
on their money in the market. So, folks if your money is there
and IRAs or 401Ks in the market, good luck. You're not going to last
very long on that income or you're going to have
to drastically change your lifestyle. If you want to maintain a rate of return
and income double or even triple, sometimes
quadruple the amount that most people realize net after tax and fees
IRAs and 401Ks, I would look at maximum-funded indexed universal life
insurance contracts. And every million can generate 80 thousand. 90
thousand, 1000 thousand dollars a year of tax free income without
depleting principle even if you lived 40 years or more in
retirement. If you went from age 65 to age 120,
55 years of 100 grand and you still have your million dollar nest egg.
That's the power behind having your money positioned into something
that is immune from taxes because it's tax-free.
Inflation helps you instead of hinders you. And
you are not subject to market volatility. You get to participate when the markets
go up. But your money's not at risk in the
market. So, when the markets go down you don't lose.
If this is intriguing you, I would ask that you study more about it.
I've written 11 books so far. This is my last best seller.
It's called the laser fund. This is a 300 page book on how to diversify
and create the foundation for a tax-free retirement. Max-funded IUL is what i call
The Laser Fund because laser means liquid asset safely
earning returns. And this passes the liquidity
safety and rate of return test with flying colors and is tax free
to boot. This is actually 2 books in 1.
One is comprised of 14 chapters, about 200 pages with all kinds of charts and
graphs and explanations. If you learn by stories, flip it over.
Read this one. This is 100 pages 12 chapters with 62 actual client stories.
If you want to use both your right brain and left brain to learn, read both books.
But here's the deal: It retails for $20. I'll gift you it
for free. You can claim your free copy by going to this website.
Laserfund.com. (L-A-S-E-R) Laserfund.com. You contribute $5.95
towards the shipping and handling and I will pay for the book.
You contribute that towards shipping and handling and you can begin to learn how
to make your million bucks last as long
as you do even if you live to be 120 years old.