- What's the first leading danger
that causes retirees to outlive their money?
This is the first of three in a series
where I'm gonna reveal the three biggest dangers
that cause most retirees to outlive their money.
So get ready.
I have been a financial strategist,
retirement planning specialist for nearly five decades
and these are the reasons,
the dangers that cause most people to not have enough money,
they outlive their money in retirement.
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So, I'm Doug Andrew,
and as I mentioned, I've been a financial strategist
and retirement planning specialist now
for about 40 and a half years.
And I've been helping a lot of people
to prepare for a comfortable retirement
so that they will not outlive their money
if they happen to live into their 90s,
even if they live to be 120.
The sad truth is most retirees outlive their money
within 10 to 15 years after retiring,
and then they are having to rely on social security,
welfare, charity, or their children for support,
which is unacceptable to me.
So, I'm going to reveal in this first episode
the number one danger
that causes most retirees to outlive their money.
I would recommend you watch the other two in this series
so that you'll understand all three dangers, okay?
So, I've often ask people
when they come to me at retirement,
because at retirement planning
is something totally different
than maybe what you did for retirement.
And they show me their IRAs or 401(k)s
like it's this sumptuous subway hoagie sandwich
depicted here on the left.
And when they're going to come, I tell them,
"Hey, would you bring your after tax
IRA, 401(k) statements with you?
Now, I predictably get a deer-in-the-headlight look
because I know they don't have those.
And so I go, "Well, I'll have to calculate those for you."
And they may come in maybe with a million dollar nest egg
and I go, "Well, I've got news for you.
That's not all your money."
See, Uncle Sam has been your partner for all these years
and will continue to be your partner
during your golden years,
and this is what it actually looks like.
This unappetizing sandwich over on the right,
because you don't really have a million
only about 650,000 of that is your money.
If you had a million dollar nest egg
and you thought you could pull out 10% a year
because you're hopefully gonna earn 10%,
most retirees don't earn that, but that's 100,000.
You pull out 100,000,
you have to pay taxes of about 35,000
between federal and state,
41 outta 50 states has a state income tax,
and you're only netting $65,000 to buy gas and groceries.
The fact of the matter is most people are not earning 10%.
If they were earning even 7.5%, they pull off 75,000,
they're only netting 50,000 in a 33% bracket,
and they think they can maybe live on that,
but you need to stay with me to the other two episodes
because the other two dangers gobble up
whatever they think they might be able to live on, okay?
But let's stay focused on this one.
Off times, I will use this metaphor,
if you were a farmer and you have the choice
of buying your seed in the springtime
and you didn't have to pay tax
on the price of the seed when you bought it,
you plant it, you cultivate it, you irrigate, you work hard
and in the fall of life you harvest your crops
and you sell them.
Now you need to pay tax on what you sell your harvest for.
That's your traditional IRA or 401(k).
You get a tax break on the seed money
and you agree to pay tax on the harvest when you retire.
Why are people duped into doing this?
Because they're told,
"Oh, you'll likely be in a lower tax bracket
when you retire."
Okay, let me just be honest with you.
Basically, the only people that I have seen
that are in fact in lower tax brackets when they retire
are those that didn't save very much money, okay?
If you're a saver and you save more than 6% of your income,
you save more like 15, 20, 25, or 30% of your income
so that you'll have the same lifestyle,
you will not be in a lower tax bracket.
Why?
Well, it's because a lot of people
are going down the highway of life, so to speak,
with one foot on the gas pedal
and the other foot on the brake pedal
and they don't know they're doing it.
They're trying to achieve this destination
we call financial independence.
The foot on the gas pedal
is putting money in these tax-deferred accounts.
The other foot on the brake pedal
is actually killing the tax deductions that you do have
so that when you are retired,
you are not on a lower bracket
because you paid off your house,
so you don't have those interest deductions anymore.
You're not contributing money to IRAs at 401(k)s,
you don't have those deductions.
Your kids are gone, or if they move back in as adults,
you can't deduct 'em anymore.
If you were a business owner,
you don't have those deductions anymore.
And because of irresponsible government spending
and the printing of money,
taxes have continually gone up.
And most Americans, when I ask audiences,
"How many of you think that taxes in the future
will really be lower?"
I get nothing but crickets.
"How many think they're gonna be the same?"
One or two hands go up.
But when I ask "How many think they're gonna be higher?"
A sea of hands goes up, and I always go,
"Well then why are you postponing tax
to some future perceived unknown advantage
and withdrawing your money down the road
when you're convinced you'll be in a higher bracket?"
And all of a sudden they go,
"Golly, we haven't thought of that before."
Well, apparently their advisor didn't either
because when people would come to me,
I would ask them, "Golly,
are you you planning your retirement or Uncle Sam's?"
Because IRAs and 401(k)s are the best savings bond
the government ever came up with for themselves.
And the government's gonna be your partner forever,
and then they continue to, say, defer until you're age 72
and then take RMDs, Required Minimum Distributions,
which I think is the worst advice for most retirees.
If they don't need the money,
why would you want to continue to defer
and compound or increase the tax?
In fact, in 2009, it was interesting,
this was the cover story on TIME Magazine,
"Why it's time to retire the 401(k)
And do something better instead."
Now, why did they come out with that article?
See, the year before in 2008,
for the second time in a decade,
most Americans who had money in tax-deferred IRAs or 401(k)s
invested in the market
lost 40% for the second time in a decade.
The first time was 2001 to 2003,
took four years to make back what they lost.
In 2008, they lost 40% again,
it took four more years to 2012 to make back what they lost,
and so, Stephen Gandel,
who was the author of this article, said,
"The 401(k) is a financial flop,
a rotten repository for our retirement reserves, okay?
It's a miserable failure."
He was pointing to market volatility
during the golden years.
That's actually the third danger, okay?
The first is taxes.
The big reason most people don't have enough money
is because they thought they were gonna be
in a lower tax bracket,
and that has not been true or axiomatic
for over three decades now, okay?
And so, what I get upset about
is I teach advanced continuing education
to CPAs and tax attorneys,
and when they learn this, they finally admit,
yes, in the long haul,
if you keep deferring till age 72 and then take RMDs,
over the long haul, you are compounding the tax,
you're actually increasing the taxes.
But see, they look at things short term
and they are only trying to satisfy you
and make you happy when you say,
"Well, how can I avoid paying any more taxes
than possible this year?"
"Oh, then don't take any money out of your IRAs or 401(k)s.
You don't need to until you're age 72.
And if you're over age 72 we'll just take the RMD
and you'll only pay this much in tax."
So, years ago, I developed a software program
that showed people the darkness of the night
if they did that and how much they would pay in tax
if they strung it out over their life expectancy
and their spouse's life expectancy
and then transferred down the balance to their kids,
and now kids have to pay tax
on inherited IRAs or 401(k)s within 10 years.
So most savvy CPAs and tax attorneys will admit
money left behind in an IRA or 401(k)
is probably the worst place to leave it when you die.
And so, sometimes,
with this cartoon I had my cartoonists create,
here's the accountant telling the taxpayer
who's falling out of an airplane
on a free fall with no parachute,
"Oh, did I tell you about the parachute?"
Yeah, they don't wanna take the time
to help clients understand that it may behoove them
to bite the bullet and pay taxes now
so that they can enjoy tax-free later, okay?
And so, you must be aware if you've been tuned in,
Biden, there's not a political agenda,
but politicians because of irresponsible government spending
and the printing of money,
they have an agenda when they spend double
and now nearly quadruple what they bring in.
They bring in about 3.2 trillion net
and they've been spending now
over 9 trillion with their new packages.
If you spent three times more than what you made,
how long could you do that
before you'd have to file bankruptcy?
What does the government do? They raise taxes, okay?
And so, they're gonna increase income taxes
directly or indirectly.
They're gonna reduce 401(k) tax benefits
for the high income earners.
They have already increased the capital gain tax rates
and Biden wants to increase that
clear up to double if he can get his way.
The estate tax,
they wanna increase from about 40% up to 67%.
This is the inheritance tax
because they love taxing people that are six feet under
'cause they can't complain about it.
The corporate rate from 21 to 28%, for example,
that's a 33% increase
over what corporations have been paying,
and the government says,
"Well that's who should pay the tax."
Well, corporations only operate sometimes
on 2 or 3% profit margins.
They have to lay off people,
they have to raise the price of goods and services,
and so that causes inflation
which is a hidden tax, an indirect tax, right?
So it doesn't do any good to raise minimum wages
to 15 or $20 an hour when that gets gobbled up
at the gas pump or the hamburger stand.
They wanna do away with the IRA to Roth Rollovers.
I don't know why.
Healthcare initiative, student loan debt forgiveness.
Where's that money gonna come from?
That has to come from the people who are earning the money
and have to pay additional tax
to pay for the student loans that now are being forgiven.
Folks, if you can't see the writing on the wall,
taxes will be higher.
Now, there are only three types of income
Americans pay income tax on ever since 1986 Tax Reform,
the second term of Reagan,
the 1986 Tax Reform Act said that,
from that point forward,
there's only three types of income
Americans have to pay tax on
on the front page of their 1040 tax return.
Earned income which would be salaries and wages.
Passive income, rent or lease income.
And portfolio income
which would be like interest or dividends, okay?
Now, if you have income in retirement
that is not deemed one of these three,
there's nowhere on a tax return to put it.
Did you know that?
It's tax-free.
The IRS will know you're receiving it
but it's not worth auditing
because if it's not one of these three types of income,
you don't pay tax.
My favorite vehicle
which I call the LASER Fund, is tax-free,
it's been a sacred tax-free cash cow
in the internal revenue code for 108 years.
But if I cut to the chase,
when you take income,
a million dollar nest egg can generate 100,000 a year
of tax-free income from age 65 to age 120,
and it's tax-free
because it's not one of these three types of income.
We have many, many thousands of clients
who have tax-free income.
The IRS knows they're receiving it,
but it's not even worth auditing
because it's never been taxable, okay?
And so, when I go through and teach,
we talk about how so many retirees
might have up to four different resources
for retirement investment income,
maybe real estate properties,
maybe guaranteed income from a pension
if you taught school as a school teacher or whatever,
or this one, tax-free.
This is the most underutilized and is my favorite one.
So, if you watch more videos on this channel,
you'll see that most people
at retirement are way too top-heavy
and yet to be taxed IRAs or 401(k)s, this purple bucket.
Some people have real estate,
but I wouldn't rely on more than 30% of your income
coming from real estate,
and a lot of people are sick and tired of being landlords,
fixing toilets, and taking out the trash,
and evicting tenants,
and they want to rely on income
that doesn't rely on the apartments being fully occupied.
But they don't know how to get out of that trap
because of the long-term capital gains,
we solve that for a lot of people.
Some people like guaranteed income
but here's the most underutilized,
and my favorite, is what I call
a maximum funded tax-advantaged insurance contract.
Structured correctly and funded properly,
it is what I call a LASER Fund
and that stands for Liquid Assets Safely Earning Returns.
So, a strategic rollout is where we get money out of this,
your IRAs and 401(k)s,
you get the taxes over and done with sooner than later
and you reposition it down here into the green bucket.
If you wanna learn more about how to do that,
and you should have no more
than 30% in that bucket at retirement, in my opinion,
no more than 30% should come from real estate
if you own rental properties.
Between zero and 80% could come in from a guaranteed source,
but I would recommend 40 to 60% of your retirement income
not even show up on the front page of your 1040 tax return
because it's not deemed earned,
passive, or portfolio income.
Does that sound good?
So these two things are certain,
the money will never be worth more than it is today.
So watch the next episode.
And your current tax bracket
will likely be the lowest bracket you will ever be in.
So get the taxes over and done with sooner than later.
So, the first, number one of three biggest dangers
that cause most retirees to outlive their money
is rising taxes.
What I'm suggesting here to solve that
is to seize the opportunity to reposition retirement
money to tax-free vehicles.
I would recommend the LASER Fund via a strategic rollout.
So, how can you learn more about this?
I want to gift you a copy
of my most recent bestselling book.
It's been flying off of our warehouse shelves.
We just updated it,
and 12,000 copies just came off the press
and I'm sending out several hundred every single week.
I don't want you to miss out.
Here's how you claim your free copy.
You simply go to laserfund.com,
L-A-S-E-R fund.com or click on the link below.
You contribute a nominal amount
towards the shipping and handling.
Little bit of skin in the game is what I require.
I'll cover the rest of that and I'll pay for the book.
I'll fire out a hard copy to you
which is actually two books in one.
This side is 200 pages,
14 chapters with all the charts and graphs
if you're a left-brain learner.
If you're more of a right-brain learner,
you learn by stories,
you flip the book over and read this one.
This is about a hundred pages,
12 chapters with 62 actual client stories
of how the LASER Fund is the dream solution
for all kinds of goals, not just retirement,
and why it knocks the socks off of most IRAs and 401(k)s.
So this is about you, your brighter future.
I want you to learn off of this channel
how you can save, like many people have,
a quarter of a million, even 1 million
and $2 million of unnecessary tax on IRAs and 401(k)s.
Be sure and learn and engage when you're in there.
We teach webinars.
You can even pick the brain of a top IUL specialist
to be able to learn more about how this may help you
in your particular set of circumstances.
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