- This retiree quadrupled his income.
By the end of this video episode,
you will understand how a real estate landlord
saved $250,000 of tax on his IRAs
and quadrupled his income.
Get ready, this is gonna blow you away.
(upbeat bright music)
So I'm Doug Andrew.
I've been a financial strategist
and retirement planning specialist now
for nearly five decades.
Helping thousands of people in America
optimize their assets,
minimize taxes, and empower
what I call their authentic wealth.
In doing this,
many people will see the light
and understand how to perform
what I call a strategic roll out on their IRAs and 401ks.
Why, because unfortunately,
most Americans follow the herd
and they put their money into tax deferred, IRAs, or 401ks,
because they were told to do that at their employer,
and participate in the company 401k.
They were told that they would likely be
in a lower tax bracket when they retired,
and so they just sort of put their head in the sand
and assumed that that would be the case.
Well, I have discovered over 48 and a half years,
that most savers,
those people who do save for retirement
to maintain the same lifestyle they had
while they were earning,
they hit retirement,
and they're shocked because,
and they are not in a lower tax bracket.
Why, well, first of all,
they accumulated a pretty good nest egg.
And while they were doing that,
they were going down the highway
with one foot on the gas pedal
and the other foot on the brake pedal.
And they didn't know they were doing it.
What I mean by that is they were putting money
into tax deferred accounts,
which is the foot on the gas, they thought,
but the other foot was on the brake pedal
because they were actually killing the deductions
that they had by paying off their house
later on in retirement.
The kids are gone so you can't deduct them anymore.
In retirement, you don't contribute money to IRAs or 401k
so you don't have those deductions anymore.
If you're a business owner,
you don't have those deductions anymore.
And congress keeps raising taxes
because of irresponsible government spending,
and the printing of money, and on and on.
And so the root awakening is what we call the tax trap.
People who save realized,
"Oh my heck, I'm not gonna be in a lower tax bracket.
Why did I do this?"
It would've been better to have used a Roth approach,
but only 9% of Americans sort of understand that
and set aside money in Roths.
Now, if you've watched very many of my educational episodes
or read any of my books,
I've never owned an IRA or 401k and I never will.
And I've never owned a Roth IRA or 401k, never will.
Why, because my favorite vehicle
which I call the LASER fund,
which is the title of a book
I wanna gift you at the end of this episode,
it has the two benefits of a Roth,
meaning I can accumulate my money tax-free,
I can access the money tax-free.
I can get tax-free income.
But I have four additional benefits in a LASER fund
that a Roth will never offer,
so why would I mess around with a Roth?
And you'll learn what those benefits are
when you study the book I'm gonna gift you
at the end of this episode.
But let's get back to this story,
and it will help illustrate my point.
So we teach educational seminars.
I've been doing this for years,
and I had a very savvy real estate investor.
He was a landlord.
He owned several rental homes and duplexes.
Had done very well for himself,
and he came to one of our educational sessions,
and he came in for a consultation.
And he had also sucked away money into 401ks,
and he had rolled those over into IRAs,
being told by his advisor,
"Oh, if you don't need that money in your IRAs,
continue to defer until your age 70 and a half.
Now it's age 72,
but back when I met him, it was age 70 and a half.
And he was now at that age,
and he came to this educational seminar
because his wife had just died,
and he was beginning to realize,
"Wow, I'm in a pretty high tax bracket.
Is there a better way?"
And he had been taking his positive cash flow
on his rental properties
and been plowing it against the mortgages
trying to pay off his rental properties,
thinking that was the smartest thing to do.
And he continued to defer in his IRAs,
But now he was age 70 and a half,
he had to start accessing money to avoid a 50% penalty.
Yup, if you don't start taking out money out of those IRAs
by the time you're 70 and a half, now it's age 72,
the government will still tax you,
plus they will penalize you 50% on top of the tax
if you don't withdraw it.
And so that is sort of
at the required minimum distribution, RMD.
Why do they do that?
Because the government's been planning on that tax revenue,
and so they'll penalize you 50%.
If you're supposed to withdraw 50,000 and you don't,
the penalty's 25,000 that year
on top of the tax on the 50,000,
which could be as much as 30 or 40%,
depending upon which state you live in.
They're gonna just totally penalize you
and tax you to almost to death
if you don't start taking out the money, okay?
So he was at that age, 70 and a half,
and so his advisor did what most advisors do.
He said, "You know what?"
His name was Bill,
"Bill, take out the RMD."
Now, his money was in the market.
How much money did he have in his IRAs?
600,000 in the market.
And he realized that this advisor
was the same old, same old follow the herd,
you know, just hang in there, the market always comes back.
He had witnessed that $600,000 in his IRAs,
due to the market volatility,
dropped down to under 400,000 in the previous six years
because of the market crash, especially in 2008.
And it took several years for that 400,000
to come back to 600,000 again.
And he knew it was probably gonna happen again.
And he was fed up with,
you know, oh, the market will always come back.
So he was intrigued when he came to our educational seminar
to learn about indexed universal life,
how you can accumulate access and transfer your money
totally income tax-free,
but how you can use indexing
so that when the market goes down,
you don't lose when the market crashes.
You may not make much of anything,
but you don't lose.
He would not have lost one dime of his 600,000
down to 400,000.
It would've stayed at 600,000,
and he would've started making money again in 2009
like many of our clients did,
who locked in gains of 16% the first 90 days in 2009
after not losing a penny in 2008.
So he was really intrigued with that.
So he came in and he says,
"You know, Doug, I have this 600,000 in IRAs,
and my advisor is very adamant
that I start taking out just RMDs now."
I said, "Well, how much is that this year?"
And it was 24,000.
I go, "Okay, so you withdraw that required minimum
thinking you're saving tax?"
He goes, "Well, that's what he says."
I go, "Oh, well, let me show you,
that's a fallacy.
24,000, and you're in a 33%
combining federal and estate income tax bracket.
You pull out 24,000 and you're only netting 16,000.
You have to pay 8,000, a third in tax.
So you're netting 16,000
to buy gas, groceries, prescriptions, and golf green fees."
And he said, "Yeah, I don't even need that,
but that's pretty pathetic."
I go, "Yeah, that is really ridiculous."
You're netting 16,000,
and next year you're gonna have to pull out
a little bit more,
and a little bit more every year.
And he thinks he's saving you tax by stringing it up.
I said, "Here's how much you'll pay in tax
if you string it out."
And he was flabbergasted.
He would end up paying taxes
well over a half a million dollars or more
by following his advisor's advice
by stringing it out and taking RMDs
out to his life expectancy.
I said, "Let me show you a strategic roll out.
So the first phase of a strategic roll out
is where we illustrate,
just, let's get the money out like in five years
and get the taxes over and done with sooner than later.
And just take the net after tax
and put it into a portfolio of IUL policies.
LASER funds are what I call them, okay?"
And so simply put,
I said, "I'm gonna show you how to pull out 150,000 a year."
He was earning eight and a quarter percent,
I said, "Okay, let's assume eight and a quarter percent.
If we pull out 150,000 a year, times five years,
that's 750,000.
So your 600,000 is gonna be growing
while we're getting it out.
And so we're actually gonna roll out a total of 750,000
over five years,
150,000 a year.
And let's just bite the bullet and pay 50,000
on the 150,000 annual withdrawal in tax."
He's like, "Ugh!"
I go, "You're gonna pay it sooner or later."
He goes, "I know, I get it, I get it."
So he pulls out 150,000 a year,
pays a third, 50,000 in tax,
he nets a 100,000.
He puts a net of 100,000 after tax
into his IUL policies.
He took out two to diversify.
So at the end of that five years,
he had 500,000 in his IUL policies, okay?
Instead of a 750,000 in his IRAs.
Now, he actually had a little bit more than 500,000,
'cause it's growing too,
but let's just keep it simple.
500,000 in the IUL policies.
Because they were earning between eight to 10%,
he was able to withdraw now 40,000, at 8%, tax-free.
Some years, he earned over 10%, that's 50,000,
totally tax-free.
How much more is 40,000 or 50,000 tax-free
than a net of 16,000 after tax on RMDs?
It was two and a half
to three times the income,
and it was tax-free.
And if he happened to die,
that 500,000 left behind 1, 250,000 tax-free
it was by far better.
But do you wanna hear,
as Paul Harvey would say,
the rest of the story?
What did we really do?
I'm a tax strategist.
He's a real estate investor.
I said, "Bill, you've been killing your tax deductions
by paying these off."
I said, "Do you understand how money works?
You could refinance these rental homes
and these rental properties right now
at 6% tax deductible interest.
You can deduct the interest on your tax returns
on these properties, Schedule E or your LLCs,
whatever you're doing here.
And you borrow at 6%,
which is a net cost of four,
you're earning eight or more.
How much more is eight than four?
It's 100% more."
He got it.
We resurrected tax deductions
on his multiple rental properties,
which offset the $50,000 of tax liability
on his IRA roll out.
In five years, we offset all of the tax.
He ended up with 750,000 out of his IRAs or 401ks tax-free
because we resurrected deductions.
You got it?
Okay, 750,000 in his IUL portfolio,
generates at 8% or 10% between 60,000 to 75,000 a year
of tax-free income.
How much more is that?
At 9%, he quadrupled his net spendable income.
He was netting 16,000.
Now, he's getting around 64,000 average a year tax-free.
64,000 is four times 16,000.
He is so glad he came to an educational seminar,
and set up some LASER funds to quadruple his income.
And we saved him a quarter of $1 million
of unnecessary tax.
We simply redirected it to his own retirement.
Now, if this is going over your head, that's okay.
If it's resonating with you
and you wanna learn,
I wanna gift you a copy of this book
so you can learn about this story and many others like it.
This is called "The LASER Fund."
It's my 11th book.
It's been flying off of our warehouse shelves.
I wanna gift you a copy.
You don't have to pay retail of 20 bucks on Amazon.
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.
You put some skin in the game,
I will pay for the book.
I'll fire out a hard copy to you.
There's also options there
if you like to listen and learn,
watch and learn.
But check out some of the online educational webinars.
And you can also talk to an IUL specialist,
if you would like,
at no obligation or charge to you,
to see how setting up a LASER fund
may be the best solution for your retirement
and how you can do a strategic roll out
and save yourself a ton of unnecessary tax.
(upbeat bright music)