RMDs do not save you tax. In this episode, I'm going to
address the question. Why does taking RMDs cost more in tax? A lot of times
financial advisors, tax advisors, do not calculate this. They are myopic. Learn why.
So, my name's Doug Andrew and I've helped people prepare for a comfortable retirement by optimizing
their financial assets and minimizing taxes and I've been doing this now for more than 47 years.
I really think that a lot of Americans get duped into putting their savings into traditional IRAs
and 401ks. Thinking they are going to be in a lower tax bracket when they retire. But that has not been
true nor axiomatic now for more than 30 years. People are not in lower tax brackets if they save
very much of a respectable retirement nest egg. Very few people find themselves in a lower bracket.
Now, these two things are certain. Money will never be worth more than it is today because inflation
constantly erodes away the purchasing power of those dollars and your current tax bracket
is likely the lowest bracket you will ever be in. Now, let's just shoot straight here. When I go
around America and I speak to audiences and I ask them okay, "How many of you think in the long run
future taxes will be lower?", I get nothing but crickets. "How many think they're going to be the
same?", one or two hands go up. I said, "How many of you are convinced taxes, in the long run, will likely be
higher?", and a sea of hands goes up and it's because of irresponsible government spending. The printing
of money and on and on and on. They can see the writing on the wall. As of the recording of this
episode the IRS collects between three and a half four trillion dollars a year in taxes and this
is the Biden administration and what we're talking about here is a tax increase and spending that is
triple to quadruple that. If you were making a 100,000 a year and you constantly kept
spending 3 or 4 hundred thousand a year what would eventually happen? You'd have to
file bankruptcy. Unless something changes we are in trouble in this country. The fact of the matter
is taxes will likely be higher in the future. So why do we continue to accumulate and defer tax
to some future perceived unknown advantage until it grows to this big nest egg and then withdraw
that money down the road when we're convinced taxes will be higher? That doesn't make sense.
So people sometimes go, "Oh, then you're promoting a Roth", well let me shoot straight with you here.
I've never owned an IRA or 401k never will. But 91% of Americans are duped into putting pre-tax
dollars into IRAs or 401ks for the tax benefit of the present. Without really calculating
how much they're going to pay down the road. It's sort of like a farmer who can either buy seed in
the springtime and they get a tax break when they pay for their seed and they plant it they kill the
bait they irrigate and everything and then later on in the fall when they harvest their crops.
Now they have to pay tax on what they sell their harvest for. That's a traditional IRA & 401k. What
if you could just pay tax on the price of the seed in the springtime and later on in the fall you
could sell your harvest without paying tax? That's a Roth approach it's a step in the right direction.
But I've never owned a Roth IRA 401k and never will. You'll understand why as you stay with me
here. By the way, if this is intriguing you. You want to share this episode with somebody. I click
on like and subscribe. I post an in-depth answer to financial question almost on a daily basis. I don't
want you to miss out. I have over 500 educational videos on this very channel. but stay with me to
the end because I want to gift you a free copy of my most recent 300 page best-selling book
to empower you on doing something better. Than being duped into putting money into these tax
deferred vehicles and then taking RMDs which is the question I'm addressing in this episode.
So, what do most tax advisors financial planners tell you to do when you hit age 59 and a half
and you can access the money without a 10% penalty? What do they tell you to do? Most
financial advisors whether you're retiring or not. Even though you can access money in an IRA 401k
a 457 without a 10 penalty now and by the way 457 you can do that if you leave your
employer before age 59 and a half. They say, "Well, if you don't need the money continue to defer and
stretch it out until you're aged 72." Now, that sort of sounds on the surface pretty reasonable.
Why would you take out the money and then pay tax because you're going to pay more in tax this year.
The reason why I call it myopic is because most cpas most tax people only are looking at a
given year. It's short-sighted. They're saying, "Well, if you want to save tax this year then keep
your income down and don't take anything out of that 401k prematurely just keep deferring." Now,
defer is also a synonym for procrastinating. You want to keep putting it off. When has procrastinating
things turned out good for you? It hasn't for me. So if the accountant said, "Why don't you continue
to procrastinate paying the tax until you're in a higher bracket later and then you'll pay more
down the road?". Now, if they actually said it that way you'd go, "What? That doesn't sound reasonable."
Because they're only looking at a given tax year. This is what prompted me years ago to develop
a software program. So, years ago, I developed a software that basically showed the people that
came to me the darkness of the night so to speak. If they kept money in their 401ks and their IRAs
passed age 59 and a half and kept deferring until age 70 and a half. That's the age that you
used to have to start taking out money now it's age 72 and then if they took out RMDs required
minimum distributions and I would compare that. Because if they deferred usually from age 59 and
a half to age 70-72 their balances might double again tax-deferred and then they start taking out
the required minimum. If they don't need the money thinking that saving tax may be in a given year. But
my software would show them the darkness of the night when you added up all the taxes you pay
until you string it out to your life expectancy and your spouse's life expectancy and they were
flabbergasted with how much? They would pay in tax by stringing it out. They continue to be in
partnership with Uncle Sam and they say, "Well, why do they tell you to do stretch IRAs and put
it off on CNBC?", and I would go, "Who's funding CNBC?", government revenuers. Why would they want to kill a
partnership where they can continue to get a third or more of everything you will ever earn
the rest of your life and your spouse's lifetime and into your children inheriting that IRA 401k.
Which most savvy cpas and tax attorneys say, "The worst place to leave your money when you die is
in an IRA & 401k for your kids to inherit", and people go, "Really?", yeah you'll understand when you read my
book that I want to gift you at the end of this episode. So, what happens you reach age 72
and now the government has been counting on the tax revenue. They actually budget planning on how
many people are going to turn age 72 because they must start taking money out of an IRA 401k
a qualified plan based upon your life expectancy. So let's say you had a million-dollar nest egg.
You have a life expectancy let's say of 20 years. You have to take out 1/20th of the million or 50,000.
If you don't there's a 50% penalty on top of the tax. Because you have to pay tax. Why? Because the
government wants that money out and taxed they've been waiting for that tax revenue. If you do not
take out the required minimum there's a 50% penalty. So what do most people get duped into doing?
Taking out just the minimum. If you don't need the money why would you take out more than you have
to because you're going to pay more in tax. Well, what if i were to reword it. Well, you can take out
the minimum and continue to postpone and delay and procrastinate and you'll actually pay more in tax
by taking out the minimum. Would you like to just get the taxes over and done with in today's lower
tax rates? Well, what should I do with it I don't need it. You don't have to spend it. You reposition
the after-tax money into something that's going to be tax-free from now on and probably earn a
higher rate of return and at the end of the day when you pass away it blossoms and transfers tax
rate increases in value and reimburses your spouse, your kids, for all the tax that you
paid in most cases. People go, "I've never heard of this before", yeah, it's called a strategic rollout.
So I said strategic rollout not a rollover. A rollover is like going from the frying pan
into the fire so to speak. That's taking money out of a 401k and putting it into an
IRA and continuing to delay the inevitable until you're age 72 and then taking RMDs
I can prove to you mathematically that usually will cost you far more in tax over the long haul.
So, I would help many people strategically roll the money out starting at age 59 and a
half by age 64 and a half they would have their money out of there. If they had a half a million
in their IRAs or 401ks. We might pull out a hundred grand a year for five years. I've had people with
a million dollars in their IRAs or 401ks and we pull out 200 grand a year. We get the taxes
over and done with sooner than later and then take the net after-tax money and put it into a maximum
funded indexed insurance contract that will allow them to accumulate the money tax-free at
7, 10 percent and greater rates of return but it's totally tax-free and every million can generate
80,000, 90,000, 100,000 a year of tax-free income for as long as they live.
They do that using my favorite instrument called the laser fund. Now, what's that? The laser fund is
the only vehicle that I'm aware of in the internal revenue code that allows you to accumulate your
money totally tax-free under section 72(e). You can access your money tax-free and you don't
have to wait till you're 59 and a half. It's not a qualified plan. You can access your money tax-free
for as long as you live and when you ultimately die anything left in there blossoms and increases
in value and transfers income-tax-free. I'm 69 if I died tomorrow every million would blossom to
about two and a half million and transfer tax free. There's not an IRA 401k that'll do that.
Now, I want to gift you a copy of my most recent 300 page best-selling book that will explain this
laser fund. But let me just tell you two quick little examples of what it does. I had a husband
and wife two school teachers years ago that came and their advisor at age 59 and a half said, "Oh,
continue to defer. They had 250,000 in their 403b's. Okay, conservatively that 250,000 would have
doubled to 500,000 by age 70 and a half which is the age they had to start taking RMDs back then.
I calculated and showed them that if they strung that out they would pay a minimum of a quarter
of a million dollars of unnecessary tax. They went, "Hmm we never thought of it this way."
We did a strategic rollout. We basically took out 60 grand a year for five years and got the taxes over
and done with. Because it was still growing and so they got 300,000 out the tax is over with and we
reposition that into a portfolio of laser funds. We save them over a quarter of a million dollars
in taxes. Now they're enjoying double the income on that half a million dollars and it's totally
tax-free and when they die it blossoms and leaves behind about four times as much as their IRAs 403bs
and the various accounts we're going to do for their children their posterity. I had another
real estate guru he had 600,000 accumulated based upon his tax advisor taking the four percent
rule about 24,000 a year out. He was going to pay taxes of 8,000 a year netting 16,000.
In five years, we saved him three-quarters of a million dollars tax 750 grand in tax. He now
has quadrupled the income. He is experiencing between 60,000 a year and some years 75,000 a
year of tax-free income versus the 24,000 before tax income out of his 401ks. You can do this.
So, I want to gift you a free copy. Here's how to claim your free copy. Go to laserfund.com...
Click on the link below. Contribute a nominal amount towards the shipping and handling.
I'll cover the rest of that cost and I'll fire out a hard copy to you. This is two books in one.
This white side is 200 pages with all the charts and graphs and explanations.
If you learn by stories you flip it over and read this hundred pages and it has all kinds
of client stories and examples of how you can do this instead of being duped into taking RMDs.
Worst advice I've ever heard and it actually costs you more and money and you'll learn why in
this book. Now, there's also options there to listen and learn watch and learn but claim your free copy
and there's also some information there to be able to learn from webinars or on this very
channel. I have 500 plus educational videos that will help empower you on how the laser fund works
and this is where I've earned average rates of return between 7 to 10 and even higher.
For not only myself but for thousands of people that learned how to employ the laser fund.