Hello again. In this episode, we are going to address the specific question. "Is a
Roth IRA or 401k the best way to save for retirement?" I like this question
because it tells me that you're thinking. Because 91% of Americans I think are
duped into putting money into traditional IRAs, 401Ks.
Only 9% rethink their thinking. So, I'm going to show you the big difference
here between these and you're going to get some insights that maybe you've
never had before. And we'll keep it as simple as possible to empower you to
make the best decision. But the quick answer in my opinion is, "No. It's not the
best way. It may be a good way or a better way than IRAs and 401Ks.
But it's not the best way. I will share with you what I think is absolutely the
best way to save for retirement.
So, I'm Doug Andrew. And I've been a retirement planning specialist for more
than 45 years. And I think it behooves us to get serious about socking away money
for our future. A lot of people don't learn how to set aside money live on
less than what they earn. And all too often, we don't even start saving until
our 30s or 40s. But a lot of people go to work at a company and the company has a
401k or they have the ability to sock away money in a defined contribution
plan. Now, that is... A 401K is a common defined contribution plan. Because when I
was young, a lot of people wanted to work for a big corporation like General
Motors and they had to define benefit pensions. So, if you were a schoolteacher,
most states have defined benefit pensions. They define your benefit. And so,
if you worked as a schoolteacher for 30 years, every year of service, you would
get 2% of your last best 5 years paychecks. So, let's say that you were
earning 5000 a month or 60,000 a year the last few years you taught school. So,
2% times 30 years is 60%. 60% of 5000 a month is
3,000 a month. And so the defined benefit would be 3,000 a month
and a lot of school teachers would get a cost of living increase. So, that's called
a defined benefit. You know what the benefit is. Well a lot of times, those
pensions were not managed very well. And so, a lot of these large corporations, if
they filed bankruptcy or what-have-you. Where they had their pensions being
managed we're not arms-length. And many times people lost their retirement
pension. The only real defined benefit pensions that we see a lot today now are
major corporations or the government. But that's called defined benefit. So, what
they did is they changed two defined tribution plans. So, when IRA of 401k
is where you define how much you want to sock away. So, in Section 401K of the
Internal Revenue Code, we have rules similar to IRAs. You have section 403
B, section 457. These sections of the code allow different people with different
employment situations working for government is a 457. A 403 B is mainly
for schoolteachers. 401Ks or to cover the gamut. What you do is usually set aside
money into a tax deferred account and you have the choice of either paying the
tax on the seed money or putting in tax-deductible or tax a free
contribution. Its prior or pre-tax contributions. That's a traditional IRA
or 401K. The questions are well golly which is better. And in this episode what
I want you to understand that if you put money in a traditional IRA or 401K, you
are putting in pre-tax dollars and accumulates tax deferred. But when you go
to take it out now you agree to pay the tax. And people are often shocked with
the amount of taxes they paid. You know that even schoolteachers will usually
pay back every dime they saved in tax in the first 2 or 3 years of
retirement. And they pay it back again and again and again. By the time they
finally check out and pass away, many of them that I would see would pay back 10,
12, 15 times the taxes they saved over 30 years on the seed money in the first 2
or 3 years of retirement. And then every time every 2 or 3 years they
paid it back again and again and again. I would obviously pick them were you
planning your retirement or Uncle Sam's. So, the Roth was a step in the right
direction I feel. Because if you think taxes are going to be higher in the
future, I can prove to you mathematically that if you put in after-tax dollars
into a Roth and it accumulates tax-free and if in that interim. Taxes have gone
up usually a is 33% better than a traditional IRA
401k with the same amount of money. In another episode, I'm going to show you
the math behind this. Now, I like to have my cake and eat it too. And so, I like to
put in pre-tax money if I can. But I do it by using indirect deductions. I use
$107 as the contribution but never at the expense of giving up
tax-free money on the back end. That's what a Roth does but you're having to
fund it with after-tax dollars. So, my favorite vehicle which I call the laser
fund. Do you fund it with after-tax dollars but many times I get the same
deduction. There's somebody putting money into an IRA or 401k might get but I do
it indirectly through other ways by being savvy with my money and my tax
planning. So, why am I so passionate about this? Because I've seen a lot of people
who work so hard to earn their money. Like probably you're doing or have. And
then I see that money you rode it away with taxes in retirement when they
thought they were going to be in a lower bracket. Or if they chose a Roth which
only about 10% of people do, they realize "Well, golly. My money's in the
market. Is subject to volatility or inflation. I'm not earning a rate of
return equal or greater than the rate of inflation." If you were rowing upstream at
the rate of 1 or 2 or 3 or 4 miles an hour but the current of inflation is
coming down at 7 or 8, you're going backwards. Many many years ago, I decided
not only did I want to empower many advisers. I've trained over 3000
financial advisor CPAs and tax attorneys. I've written 11 books. We were very
blessed. My second book is my all-time bestseller was called missed fortune 101.
But the next year my book last-chance millionaire was talking to about 78
million baby boomers. Who were going to be taxed to death. They were going to
outlive their money because of these problems of taxes
and inflation and market volatility. And we were so blessed it became a New
York Times and Wall Street Journal number one bestseller. We had over 3,000
CPAs and tax attorneys pay 6,000 bucks to come through and learn these
tax strategies that I teach in these episodes. And what's better than even a
Roth IRA or 401K? Far better and why? Time Warner, Warner business books was my
publisher at the time and they estimated there were over 50,000 advisors buying
my books in bulk on Amazon by the case. And sometimes passing them out like
loose cannons tearing out certain chapters I just just read these. And then
they would say, "But give me your money, I'm going to do something different." And
they were buttering up a really safe system that I explained in all of my
books. And so that's why I decided, "You know what? I'm going to let all my
professional licenses go." And I did that December 30th of 2005. I let them all
expire to become a consumer advocate for you. To help you understand and teach you
in language that if I had a license. I'm not allowed.
That's not compliant. I can't tell you in the language you need to understand. So,
why do I do this? It's to empower you I want to teach you true principles
because once you learn this, you can govern your own family bank and do far
better. And you'll be able to recognize if a CPA or an adviser knows what
they're doing. So, I would strongly recommend that you learn what my
favorite vehicle is. I call it the laser fund. It's far better than a Roth. It has
the 2 benefits of a Roth. You take after-tax money and it accumulates
tax-free. That's under Section 72 e of the Internal Revenue Code which has been
around since before the code. That's the current section. But I can access my
money tax-free. Like a Roth but when I die in Section 101 A, it blossoms and
transfers tax-free. If I die right now, every million and my laser fund blossoms
to two and a half million. There's not a Roth around that'll do that. I have to
comply with tech for different and tamra tax citations to do that. And so, that's
why I wrote this book. It's called the laser fund.
And if you click down here, you can get a free copy of the laser fund. In fact,
laserfund.com, you discover the shipping and handling. The reason why I
like this book is for everybody because this portion is about 200 pages
comprising 14 chapters with all kinds of charts and graphs and explanations of
what those terms mean. But you flip the book over and this has
12 chapters with 62 Chicken Soup for the financial soul stories of people that we
have actually helped to be able to move them from just good savings to better?
No, to the best. And why the laser fund will knock the socks off of any
Roth IRA or 401k you could ever show me. And I want you to learn why and how.