2 million dollars can pay out $200,000 a year
of income. In this episode, I'm going to address the question that
you wouldn't believe how many times is asked. "How to invest 2 million dollars
for retirement?" Well, the answer is similar
to how can I invest a million or 5 million or 20 million or recently a
billionaire asked me, "How can I invest 400 million dollars
to have tax-free income?" So, get ready. I'm going to
show you the power behind creating predictable rates of return
that can give you 10 payouts tax-free for as long as you live.
Hi, I'm Doug Andrew. I'm in my radio studio right now.
I have broadcast a radio show every single week for the last 12
years. It's called 3-dimensional wealth radio.
And that is also the name of my YouTube channel. 3-Dimensional Wealth.
See, 3 dimensions has to do with the financial dimension where I've helped
people for 46 plus years optimize their financial assets, minimize
taxes and not outlive their money in retirement.
But also there's two other dimensions that have to do with the wisdom
and the experiences you gain in life and
how to leave behind your heritage and how to fish instead of dumping fish to
your kids and grandkids laps. And this is actually a concern for many
people that have several million dollars
because they don't want to ruin their children.
So, whenever people come to me and ask, "Golly, Doug.
How to invest 2 million or 5 million or 10 million? A huge lump sum
for retirement?" Usually i'm impressed because they have that much money.
And it's not because they need that money to generate income but they would
like to have the ability, the option to be able to take
income out and not deplete that nest egg. And so,
many times when i find out their goal and where the money came from, maybe a
settlement, maybe the sell of a business, I have counseled many dentists who sold
their dental practice for 2 million dollars. Or
one time I had a jewelry store owner that sold his jewelry stores
for 2 million dollars several years ago. It can be
an electrician. Many a chiropractor did the same thing. Hey, I have
I have a couple of million dollars. So, what advice
did I give all of these people when they asked the question?
Well, first of all i wanted to know is this your
main or sole source for income in retirement? Or is this sort of on top
of what you already accumulated? Now, many times they'd say, "Oh, no. This is
like bonus money. I don't need the money right now but I
want it liquid and safe. That's pretty nice to have an extra
couple of million that you really don't need.
But I don't want them to lose that." They don't want to lose it either.
That's why they came. Because they know that I'm very passionate about
preserving principle, safety of that principle. They don't want
to lose this 2 million. Many people came across a lump sum like
that from an inheritance where they've been going
along and they were responsible and accountable. And they saved
2, 3, 4, 5 million in their accounts.
Maybe IRAs and 401Ks. But then all of a sudden they inherited
2 million or more. And they would come and say, "Golly, Doug. Where can i
invest this 2 million in retirement?" So, whether you need the money
for income immediately or not or whether you want to
preserve it so if you did need it in your lifetime,
or you want to pass it on to your children, you want to maximize what you
leave behind, i know the answer where to put it
regardless of which of those goals you have
for a lump sum like 2 million dollars. You want to hear
the answer? If the 2 million in this example is a lump sum, a windfall
or a settlement or something like that, an inheritance. And they tell me they
don't need the money, I go, "Well, I could show you how to safely set aside that
2 million so it will double about every 7 years.
Probably at the worst return I've ever achieved it would double every 10 years.
Does that sound pretty good?" They go, "Well, what rate of return is that?"
"Well, rule of 72. If it doubles every 7.2 years that's a 10%
rate of return." "Really? You can do that?" And I said, "Well, Ii can't guarantee it but
I've averaged 10.07 for the last 25 years by putting money into a max-funded,
tax-advantaged indexed universal life insurance
contract if it's structured correctly. Where you take the least amount of death
benefit allowed under the IRS guidelines and you
put in the most allowed. In this case 2 million dollars."
So, you're taking the least amount of insurance you can get away with.
If you were 60-years old, the least amount of insurance to accommodate 2
million would be 5 million of insurance. If you're 70 years old, the least amount
of insurance for 2 million might be just over 3 million.
Because the objective isn't to get a bunch of
insurance. It's to get the least amount of insurance
the IRS will let you get away with and put in the most they will allow.
In this case the most would be 2 million, in this example.
That's called the GSP. It stands for guideline single premium.
Very few advisors understand this terminology that's why it's critical you
go to somebody who understands how to do what i'm
talking about. So, when you do that, then the money will grow very safely at
internal rates of return of 7 to 10 percent. Bery
uh predictable based upon some of the worst periods
since the great depression like 2000 to 2010.
I averaged 7.23% just using indexing.
By adding rebalancing, I was able to earn over 10%.
So, your money can double every 7 to 10 years. 2 million will grow to 4 million,
to 8 million, to 16 million every 7 to 10 years.
Now, if the person said, "You know what? I want this uh two million dollars to
generate income for me within 5 years from now."
I go, "Okay, great." So, then i comply with a tax citation called
Tamra. Tamra is an acronym that stands for the technical and miscellaneous
revenue act of 1988. This is a
strategy that we're the number 1 experts on this part of the tax code
in America. We teach very savvy, sophisticated CPAs and tax
attorneys about TEFRA, DEFRA and TAMRA and section
72 E, 7702 and 101 A of the internal revenue
code. This is where money inside of a properly
structured insurance contract will accumulate tax-free and allow you
to access or take tax-free income when you comply.
Tamara says you can throw in 2 million bucks in one fell swoop into a
maximum funded insurance contract and it will grow tax-deferred at those
rates of return. But if you want tax-free income that
tells me, "Hmm, okay. So, instead of maximizing what you leave
behind.... In other words you put in 2 million and
you don't need the money. And when you die you want it to leave
behind 5 million. You don't have to worry about Tamara." You
put in 2 million and when you die, it leaves behind 5
million. And you can tap into income but it would
be taxable income. So, if you wanted to maximize what you
left behind and you put in 2 million dollars, you
don't have to worry about Tamra. The minimum death benefit is 5 million.
So when you die, you're leaving behind 5 million
totally income tax-free. But if you want to preserve the right to
have tax-free income, then you want to comply with
Tamra. That means 2 million would allow you to
fund it in 4 years in one day with
approximately 20% a year. What's 20%
of 2 million? It's 400 000. So, you create a plan
to take 400,000 of the 2 million every year and put it into the insurance
contract. The first day of the first year, you put
in the first 400,000. The remaining uh million six hundred
thousand, we we find a place to temporarily uh keep
it so that it's safe. And there when we transfer the next
$400,000 on the first day of the second
year. You do that for 4 years and 1 day
and now you've got 400 000 in there 5 times. That's 2 million.
Now, after 4 years and 1 day, 2 million
dollars can easily generate $200,000
a year of tax-free income because 10% payouts are
extremely common with people that we've been
helping for more than 45 years. Especially with indexed
universal life insurance contracts. So, the concept here is
if you want it to grow tax-free, it's the same
answer. You just structure it maybe differently. If you want to maximize what
you leave behind when you die, you don't have to worry about compliance
with Tamra. If you want to grandfather yourself to
be able to tap into it totally income tax-free, you comply with Tamra
by funding it over 4 years in one day. But if you're wondering what to do with
a lump sum like 2 million bucks, I would make sure it is
grandfathered to be tax-free. Not only as it accumulates but if you
want income to be tax free, you make sure it
complies with Tamra. If you want to maximize what you leave
behind when you die, then you take more death benefit and you
make sure that when you pass away based upon your life
expectancy, that 2 million can leave behind 5, 6 or 7
million. So, let me connect the dots by sharing an actual story with a client
with you right now. After teaching a seminar, a gentleman who
was aged 70 ½ came to me and he had 500,000
which was a lot of money years ago. But this man was had a net worth
well in excess of 5 million. And I was talking about strategic rollouts where i
tell people to get money out of your IRAs or
401Ks over a 5-year period. And so, 500,000 would mean that we would
transfer 100,000 a year out of his IRAs
each year for 5 years. And then he would have his 500,000
that could double every 7 to 10 years.
And then a 500,000 could generate 50,000 a year of tax free income.
He said, "Doug, I don't need this money. But I know i have to start withdrawing
it. I'm going to be penalized 50 by the IRS. I will never be in a lower
tax bracket. I want to pull out the whole 500,000 in
one fell swoop." In a 40-percent bracket, he had done the math.
"I will pay 200,000 in tax. I want to take the net of 300,000
in one lump sum and maximize what I leave behind because I don't need the
money. I don't need the income." He said, "I could
spend 4 times what I need to live on and never outlive
my money." What a great blessing that was. So, in
that case, knowing that he did not need it for
income, we took 300,000 and we didn't maximum
fund to contract. I calculated his life expectancy
and we were able to get 1.5 million of insurance.
Sure enough because of his health, he died in less than 10 years.
The 300,000 which was only what it was worth after tax in his IRAs
left behind 1.5 million tax free. Once he told me his goal, he wanted to
maximize what he left behind, I could have taken his 300,000 and
only had about 600,000 of insurance if he wanted income.
He wanted to maximize what he left behind so I didn't have to comply with
Tamra. And i got 1.5 million for his
heirs (which they were grateful for) by taking the money out of his IRAs which
he already decided to do. 300,000 blossom to
a million and a half dollars about a year later totally tax-free. You
analyze what is it that is the greatest objective when you have a lump sum
and taking all things into consideration. The best solution,
the miracle solution in almost every case
is a maximum-funded, tax-advantaged insurance contract.
So, if you want to learn more about what that is and how it works
and make sure that you structure one correctly with the right
advisor that knows what they're doing, I would recommend you read this book.
This is my 11th book. It's a bestseller. It retails for $20. But I want to
gift one of these to you absolutely free. So, to claim your free copy,
go to laserfund.org. L-A-S-E-R, fund, ".com". You simply pay $5.95 shipping and
handling. I'll pay for the book, you pay for the shipping. You'll have options to
get an audio version if you want. There's also video master
classes. Once you get educated, I can point
you to somebody who knows how to do it correctly if you would like.
There's a chapter in this book that talks about all of the
questions you should ask an advisor. And if they can't answer those questions,
you'll know they don't understand how to do it correctly. Empower yourself.
You will learn more by reading this book. The 99%
of financial advisors know about what I just talked about.