Return on investments should be 7 to 10 percent tax-free.
In this episode, I'm going to address the question,
"What return on investment should I expect
in retirement?" I've been asked that question many many times.
When I tell you that it should be 7 to 10 percent tax free,
people go, "What's tax-free?" Well, you're about to
learn how to create predictable rates of return totally tax-free
in that 7 to 10 percent range which is more than double
what most firms provide for their retirees
when they try to project retirement income.
So, I'm Doug Andrew. I've been a retirement planning specialist for more
than 46 years and I've helped many many
thousands of people who come to educational events, live
seminars, webinars. I've written 11 books. I've
helped people empower their authentic wealth,
optimize assets, minimize unnecessary taxes. And so,
in educating people for now 80,000 hours of my life, I've been asked this
question many many times. "What return on investment should i
expect during retirement?" Well, that depends. Where do you have your
money? If it's sitting in a bank or a credit
union, hello? It's going to be pretty pathetic. 1 or 2
percent. And people say, "Well, I think it's safe there."
Safe from the negative impact of inflation?
No. I mean, you're earning 1% and inflation is 5 or 6 percent.
You're going backwards financially. When people say,
"What rate of return can I expect?" It's a function of
well the industry calls it risk tolerance.
What is your risk tolerance? If you want high returns,
you're going to have to incur higher risks, correct?
So, the higher return, the higher the risk. And then you could lose money especially
during market crashes. The fact of the matter is Dalbar who
studies investor behavior says that people who have their
money in the market in retirement... Which is
really the worst thing you could do. I can't believe how many people are way
too top heavy with money in the market when they retire. And I'm going, "What are
you thinking?" So, I usually advise them to get the
money out. At least in a 5-year period maybe a
10-year period and get it out of that market volatility.
I would say that no more than 30% of your retirement income
should come from money that's in the market. My favorite vehicle is tax-free.
You link your return to the market but your money's not at risk in the market.
And that's where i earn predictable rates of return between 7 and 10
percent. I'll explain that. Which means every million dollars can
generate 70 to 100 thousand a year of tax-free income without
depleting your million dollar nest egg. it will go on as long as you live,
okay? Not very many investments can do that.
Money in the market... According to Dalbar, people
only average about 3.49%. Now, if you bought and held, you might
earn 9. 9.14 to be exact if you
take any 20-year period since the great depression and you took
the average. But you're not netting 9, if you have 9% in a
tax-deferred IRA, 401K, you're only netting
6% in a 33% bracket. Most people are only earning 3.5
because they're buying and they're selling at the wrong times.
Most people when they see the market lose 10, 20,
30, finally it starts to hit 40% percent loss.
And it's done that several times in the last 20 years. They go,
"Enough already." And they pull their money out. They sell low.
And then they wait, wait, wait, wait, wait until it's up here and then they buy
high. No. And that's why the average investor
return for a retiree is only 3.49%. That's why Dalbar says, "Golly, that's
pretty pathetic." And the financial services industry says,
"You know what? If their money is in the market, don't illustrate any more than
4% payout." On a million dollars, that's 40 grand a
year. But that's not what you're netting. You got to pay tax.
Even in 25% tax bracket. You pull out 40,000 out of an IRA, 401K,
you're going to pay 10,000 or more in taxes. You're only netting 30,000.
Most advisors charge you 1% asset management.
On a million bucks, that's 10 grand. Subtract that out of that 4%,
now, you're only netting 2%. That's pretty pathetic.
I mean, I don't save a million dollars to have a measly 20,000
net to buy gas and groceries, prescriptions, golf green fees in
retirement. I would rather earn 11 and net 10 which
is what I've done for the last 25 years using indexed universal life insurance
contracts where i take the least amount of death
benefit that the irs allows and I put in the most money as fast as the
IRS allows and it turns into this tax-free cash cow
that I have earned 11 netting 10. Now, some years
I've earned 25 and netted 24. 16, netted 15.
Some years, I don't make any money but conservatively, I have averaged between
7 to 10 percent. But the last... About 27 years now,
I've averaged 11.17 because I use indexing and i use rebalancing.
I want you to search on this channel for YouTubes that I
record and teach you about those 2 strategies.
But I would recommend that you take money out of the market to where
you might earn 3.5% and
move your rate of return up to 7, 8, 9
10 percent and turn it into tax-free by doing a strategic rollout. If it's in an
IRA or 401K, get the money out, the tax is over and done with.
Reposition it into something that's going to be tax-free from now
on. You eliminate the dangers of taxes. You have inflation work for you instead
of against you because you're linking your returns to the things that inflate.
If inflation's 10, I've earned 15.5 or more. If
inflation goes to 20, I earn 25 or more. So, you're linking your
returns to the things that inflate so it doesn't hurt you, it helps you.
But you want to earn predictable rates of return that historically have beaten
inflation and it's tax free and you're not subject to the market volatility.
When the market goes down, you go, you almost cheer. Go.
When the market goes up, you get to participate. So,
let me share with you an actual example of how powerful this can be.
So, let me give you an example of a couple that came to me
and they were pretty proud of themselves. They had accumulated
2.5 to 3 million dollars in their IRAs and 401Ks. But they were
yet to be taxed. And they were trying to assume that they
would earn maybe 6 or 7, maybe 8 percent.
And I go, "Hmm, not if you're like most retirees. But I
would not leave it in those IRAs or 401Ks and take out
required minimum distributions." That's the
advice they were given by their CPA. I said, "No, let's do a strategic
roll-out." Not a rollover. A roll-out. So, we took 5 years and we got the
money out of those IRAs and 401Ks and we got
the taxes over and done with sooner than later.
It was a little bit painful but I said, "You will like this, you will see."
I felt like Sam-I-Am and green eggs and ham.
"You will like this, you will see. Oh no, we don't want to." But then at the end, they
were going, "Thank you, Sam-I-Am. We like these green eggs and ham." Because
here's what happened: When i first met them, their portfolio
looked like it was going to generate about 200,000
a year of income. And they were proud of that and they should have been.
I said, "Well, the biggest problem that I see is that all of that 200,000
of annual income is showing up on your 1040 annual tax
return."
They said, "Well, is there another way?" I go, "Yes." "Well we weren't aware of it."
I said, "Yeah. Usually, I'm curing people's tax
disease at retirement." So, I showed him a 5-year plan
where we got the money out of those accounts.
Not all of it. I couldn't do all of it." But they had probably 40,000 coming in
from the wife's uh school teaching pension, a
little bit of social security. We didn't count that in here. But the problem was
about 120,000 of it was in yet-to-be
-taxed IRAs and 401Ks in the market. And I said this: "That's
dangerous." So, it took 5 years but we got uh 60%
of their money rolled out from yet to be taxed IRAs and 401Ks. We got the taxes
over and done with in today's lower rates
rather than thinking the future tax rates are going to be lower.
Hello? No. Even though it was painful, when we
got the money repositioned, we were able to earn
some very good rates of return during the roll-out process. So, we ended up with
2 million net after tax and everything. And the money that we made we ended up
with 2 million dollars that had already had the taxes taken care of.
And we took them from one of the highest tax brackets down to a zero percent tax
bracket in 5 years. That's why they were saying "Thank you.
Thank you, Sam-I-Am. Yeah, I like these tax-free green eggs and ham."
Now, in their case, I wasn't able to take 100% of their income to a
zero percent tax bracket but on 60% of their money. See,
I would recommend that 40 to 60 percent of your money be in
in what i call a tax free bucket. That's not municipal bonds. That's not
Roths. My favorite vehicle is called The Laser
Fund. It's what many savvy CPAs and tax attorneys call the Rich Man's Roth.
It has the 2 benefits of a roth you accumulate your money tax-free and you
can take it out tax-free. But 4 additional benefits that Roths
will never have. I explain these benefits and advantages
in other YouTube videos on this channel. The
point is this: I was able to reposition 2 million
dollars net after tax. That 2 million dollars
now is earning a tax-free rate of return
usually at worst 10-year periods since the great
depression. 7.23%. But the average the last 25 years
has been 10.07. What's 10 on 2 million? 200 grand
tax-free. Now, I was able to take at least 60%
of their income off of their 1040 tax return.
Now, don't get me wrong. The IRS knows they're receiving this 200,000 but
they know it's tax free. The IRS knows everything. It's not even
worth auditing because it's been grandfathered as a sacred
cow in the internal revenue code for over a hundred years.
The point is this: We were able to move 60 of their retirement income
off of their 1040 tax return. And we saved them an additional million
dollars over the next 20 years by taking that money off of their tax return.
If they had left it in their IRAs and 401Ks, they would have paid tax
every year on that money. And at the end of 20 years, they would have paid an
additional million dollars of unnecessary tax.
This is something we do all the time. If you want to learn if this makes sense
for you, let me show you how you can learn more
and get enlightened. You can earn 8%
tax-free but actually take out 10% in an index universal life. In other
words, every million, if it's earning 8%, that's
80,000 a year. And people say, "Wait a minute. If you're only earning
80,000, how can you take out 100,000
and never deplete your principle?" That's because of the magic
of how we teach people to use indexed universal life and take out your money
the smart way. We have people all the time. Every
million dollars generates a hundred thousand dollars a year of
cash flow without depleting principal. Even if they're only earning 8%.
Now, people say, "How can you do that?" It's
explained in my 11th book I call The Laser Fund. I
call it max-funded index universal life. The laser fund. Laser means liquidity
safety predictable rates of return, L-S-R.
Liquidity safety rate of return. And I prefer tax-free. This is a
300-page book. This has helped many, many people save
500,000, a million two. You'll read stories in
here of how we have helped people save money in taxes in excess of a
million dollars in retirement versus leaving it in their
IRAs and 401Ks and paying unnecessary tax the rest of
their lives. So, the book is yours for free. I'll pay
for the book. You pay $5.95 shipping and handling.
Here's how you claim your free copy. You go to laserfund
L-A-S-E-R, laserfund.com. Pay $5.95 shipping and handling.
I'll pay for the book. I'll fire it out to you. There's audio and video training.
There also if you like to listen and learn or watch and learn.
You can learn by charts and graphs. You flip the book over and there's 62 actual
client stories similar to the ones I've shared
with you briefly. And this will empower you to be able to
approach retirement the best way and not outlive
your money.
bye