- The miracle solution.
In this episode, I'm going to address
what would you call something
that allows you to accumulate access
and transfer your money totally income tax free?
Well, many people say a miracle
and I'll explain why and what it is in this episode.
Get ready.
(upbeat music)
So I'm Doug Andrew, I've been a financial strategist
and a retirement planning specialist now
for north of 48 years,
helping people optimize their financial assets,
minimize taxes, and empower their authentic wealth.
My favorite vehicle, bar none,
for people to accumulate their money totally tax free,
and then later on for retirement or whatever goals,
they can access that money
totally income tax free.
And when they ultimately die,
anything they leave behind blossomed,
increases in value, and transfers income tax free.
Now it's what I call The LASER Fund.
LASER is an acronym that stands for liquid assets
safely earning returns.
And I talk about that in this episode, this channel,
and in a book that I'm gonna give to you
at the end of this episode called "The LASER Fund."
LASER's an acronym that stands for liquid assets
safely earning returns.
Now, the reason why I call my favorite vehicle
The LASER Fund is because it passes the liquidity test,
the safety test, and rate of return test with flying colors,
and it has tax advantages.
So that's why I love it for serious cash.
So I'm gonna start out and simply ask you a question
that I ask many audiences
when I go out and speak and teach,
which I've done now for north of 48 years,
I've spoken over 90,000 hours in my life.
And many times I will say something like this to an audience
of anywhere from 100 people to 2,000 people.
Okay, what would you call something that you put money into
and it grows at a nice rate of return,
averaging seven to 10%, totally tax free,
and it stays tax free as it grows?
And when you access money,
it does not have any penalties and it does not trigger tax,
and you can access money at any time in an emergency
with an electronic funds transfer,
a phone call if you need to.
But every million dollars that it grows to
because averaging, you know, 9.6%
which is what I've averaged over the last 40 years,
that means your money would double
about every seven and half years.
So this vehicle,
if you started out with $500,000
would double to a million in seven and half years,
and then to two million in another seven and a half,
and then to four million in another seven and a half,
and to eight million in another seven and a half,
we've had many people do that.
So what would you call something
that doubles your money every seven and a half years
totally tax free?
And let's say you have a million
or maybe you have eight million now,
and every million bucks can generate 80,000
to $100,000 a year of tax free cash flow income
that doesn't show up anywhere on your 1040 tax return.
The IRS knows you're receiving it,
and it is not even worth auditing
because it's been tax free for over a century
in the Internal Revenue Code.
And at the end of the day,
if you left behind a million or eight million,
that would blossom, maybe double,
a million would double to two million,
eight million would double to 16 million maybe,
and transfer totally income tax free to your spouse,
your kids, your grandkids at church or charity.
What would you call that?
Now after that big, long question, predictably,
there's always two or three people that yell out, a miracle.
Yeah.
And so hence I call The LASER Fund, the miracle solution.
Sometimes people say, well, it would be a godsend
in this topsy-turvy world where so many retirees
have been saving for their entire lifetime,
and then they outlive their money due to three big dangers.
What are the three big dangers?
Taxes, inflation, and market volatility.
The LASER Fund is the miracle solution
because it accumulates your money tax free.
Okay.
And so taxes don't affect you
and you can take it out tax free.
And when you die, it blossoms and transfers tax free
but it also outpaces inflation
because you link your returns to the things that inflate.
So I've always earned personally,
a rate of return of at least five and a half percent greater
than the inflation rate at the time.
And this has happened through many periods
where inflation hit as much as 15%
like in the year 2021,
many clients on their LASER Funds gained 25%,
even 61% tax free.
They stayed ahead of inflation,
and then market volatility
because you use indexing,
your money is not invested at risk in the market.
You get to participate when the market goes up,
but you do not lose one dime
if the market crashes due to that market downturn
because your money is not at risk in the market.
So when people go, what?
This sounds too good to be true,
it sounds like a miracle.
That's why we call it the miracle solution.
So let me explain basically how it works and what it does.
And you can read more about it.
I'm gonna gift you a copy of "The LASER Fund" book,
a 300-page bestselling book.
You don't have to pay 20 bucks for it,
I will gift you a copy at the end of this episode.
So long story short, back in a 1980,
EF Hutton who was a brokerage firm,
they were the brainchild
behind the emergence of max funded insurance contracts.
And what they basically did is they said, hey,
instead of having our clients invest money
in the volatile stock market,
where even if they could earn 12%,
which most people don't really earn,
most Americans only earn about 9% if they bought and held.
And most Americans don't even do that.
They buy and sell at the wrong times,
but at 9%, you're not netting nine,
you're only netting about 6%,
sooner or later after paying tax.
In an IRA or 401k, if you had a million bucks saved
and you're earning 9%, you pull out 90,000 a year
'cause you don't wanna deplete your principle,
you're not netting 90,000 to buy gas and groceries,
you're only netting 60.
And so Hutton said, hey, we could earn 11 and net 10
instead of trying to earn nine and net six,
or even earn 12 and only net eight after tax.
And so they said,
let's look at the multi-trillion dollar insurance industry
as the backbone of America
and the backbone of the world.
They're the best money managers ever.
This is where governments go to for help,
and let's have our clients
take the least amount of insurance
the IRS will let us get away with
on a permanent life insurance policy
and put in the most money
the IRS allows as fast as they allow.
And this thing will turn into a tax free cash cow
for living benefits, not just death benefits,
it's called life insurance.
Let's use it for life.
Okay.
Now what they did is they introduced that,
I had clients back in 1980,
I had over 3,000 clients in 13 Western states
that I had been helping with term insurance
and investing the difference in mutual funds.
And all of a sudden I said, wow, this is by term,
invest the difference on steroids 'cause it's tax free.
Yep.
We were earning between 11 3/4 and 15.5%
on our universal life policies.
That's what Hutton called it.
It wasn't whole life
that's built on a chassis primarily for death benefit.
It wasn't just term,
it was a permanent life insurance policy
but it was universally applicable,
you could minimum fund it or you could maximum fund it.
Now my clients,
they were looking for a repository
to accumulate their money tax free.
They wanted the least amount of insurance
they could get away with
and put in the most money the IRS allows.
So it would turn into this tax free cash cow.
And so I had clients in 1980 put in let's say $500,000.
They were earning between 11 and 15,
let's just round it down to 11.
They were earning 11 and netting 10% cash on cash.
Now what's the 1%, it's not tax,
it's the cost of the insurance
that the IRS had had to be there
in order for it to be tax free,
but they could earn 11 and net 10.
So they did that.
And on $500,000,
they were pulling out 50 grand a year tax free.
And frankly they've been doing it ever since.
Now people could put in a big lump sum in 1980
but the IRS went to Hutton and said, what are you doing?
We think you're overstepping bounds.
We think that this should be taxed over
in the investment portion of the Internal Revenue Code.
They went to court, EF Hutton won.
They weren't doing anything wrong.
But then the IRS went to Congress
and said we have to change the definition of tax free
under these three sections of the code
because Hutton said in Section 72e as it's known today,
money inside of a permanent life insurance policy
with interest in dividends grows tax free.
If you want to access that money while you're alive,
you can do so without triggering tax
if you do it the right way under Section 7702.
And when you ultimately die,
anything left in there will blossom
and transfer out tax free under Section 101a
in the form of life insurance, death benefit proceeds.
Nothing else in the Internal Revenue Code does that.
So what the IRS told Congress
is we gotta change the definition.
In 1982, they attempted that with a tax citation
called the Tax Equity and Fiscal Responsibility Act
that spells the acronym TEFRA.
They didn't know what they were doing.
And so two years later they had to redefine it
under the Deficit Reduction Act.
These two were called TEFRA and DEFRA
and they dictate the minimum amount of insurance
that has to be attached to the account
in order for it to not violate
the tax free nature of insurance.
If you violate TEFRA and DEFRA,
it moves over to the investment section of the code
and it's gonna be taxed sooner or later,
and it usually is gonna be subject to market volatility.
Okay, we don't want that.
So TEFRA and DEFRA dictate the minimum amount of insurance
but it gave parity,
meaning it didn't matter
if you were a 22-year-old athletic marathon running female,
a 60-year-old, or a 78-year-old.
We had a 78-year-old friend of our family
who had three blocked arteries,
adult onset diabetes, a prostate cancer episode,
six sisters predeceased him, and three brothers.
And he took out one of these
and even though he was rated and he was 79-years-old,
he was able to earn 11 and net 10
because the amount of insurance required
under TEFRA and DEFRA goes down the older you are
and the more unhealthy you are.
And if you're totally uninsurable,
you can own one on your spouse or your kids,
that's called a surrogate insured.
The owner is usually the insured, but doesn't have to be
but the owner gets all the tax free accumulation
and tax free income.
That's TEFRA and DEFRA.
Then from 1984 to 1988,
there was a massive exodus of money leaving the banks
and the brokerage firms because these were safer.
They paid higher interest, they were tax free,
they couldn't compete.
They didn't wanna kill these
because this is where banks and credit unions
put 30 to 40% of their tier one assets
for liquidity and safety,
so they didn't wanna hurt that,
but they wanted to slow the flow of money
leaving their institutions over to these.
So under the Technical and Miscellaneous Revenue Act
of 1988, June 21st,
you could no longer put in a one fell swoop of 500,000
and immediately start taking like 50,000 a year
of tax free income.
I'm just using 500,000 as an example.
You could do that but it would only grow tax deferred.
And if you died, it would blossom and transfer tax free.
But if you wanted to turn on tax free income,
it was no longer tax free.
It was taxable (indistinct),
like an annuity, but better than an annuity
because annuities don't blossom when you die.
So that's TEFRA, DEFRA, and TAMRA.
So we use a metaphor of a bucket.
I've been doing this for years, sophisticated people,
they have several of these buckets.
This is an index universal life policy
'cause in 1997 when interest rates started coming down,
they introduced indexed universal life
where the money stays safe in the insurance company
where you can learn on other videos on this channel,
and anytime you want,
you can link your return to an index like the S&P 500
or the Dow Jones.
But if the index, if the market goes up,
you might get credited 8%, 12%, 25%, 61%.
But if the market goes down, you guess wrong,
you do not lose one dime of what you started with
at the beginning of that year,
the interest on your money is what you relinquished.
And so you don't lose any of your principle.
And so that's an incredible strategy
but it means this, let's say you're a male age 60,
under TEFRA, DEFRA, and TAMRA,
this is what it means.
Your objective is to get the least amount of insurance
you can get away with.
And if you're age 60,
it's probably about double that, it's about a million.
Now you can buy way more than a million dollars
of life insurance protection for 500,000,
but that's not the objective.
You want the least amount of insurance
the IRS will let you get away with
under TEFRA and DEFRA at age 60,
and that's about double.
Now TAMRA says, well,
I can only put in about 20% a year,
about 100,000 the first year, second year,
third year, fourth year.
So it takes five years to get my 500,000 in.
If I violate that and I put it in all at once,
it's only tax deferred,
it will blossom to a million if I die,
okay, and that'll be tax free.
But if I wanna turn on tax free income
somewhere down the road, even in five years,
I have to spread it out, that's TAMRA.
Now here's something a lot of insurance agents
don't understand.
When I get my 500,000 in there, let's say,
the amount of insurance
the insurance company is charging me for
is the difference between my money
and the original death benefit of a million.
The net amount of risk
is only now half the original amount, 500,000
'cause 500,000 of that million is now my money.
This based on the average returns
I've earned 9.6% will double in seven and a half years.
When this doubles to a million,
now your cash equals the death benefit.
The spigot on the bucket
which is the cost of the insurance is getting smaller
as you get older.
You ever seen an insurance policy get cheaper
as you get older?
Then you haven't seen one structured this way.
It's actually not a cost,
it's watering a money tree that will blossom
at the end of the day when you die.
But if this doubles to a million
in seven and a half years,
in another seven and a half years,
it'll double to two million.
Well, under TEFRA and DEFRA, the death benefit
has to stay about five percentage points ahead of your cash.
So if you happen to die in the 15th year
from when you started 500,000,
you might leave behind 2,050,000
but the insurance company was only charging you
for 50,000 of insurance, not the other two million
'cause the other two million is your money.
You are self-insuring.
The cost of insurance is getting cheaper as you get older
because the amount you're paying for goes down,
even though you're getting older.
Now you ought to learn about how powerful this is.
It's like a five-story building,
if you were to build a five-story apartment building
or a commercial office,
and if the IRS said, hey, let me tell you,
if you'll only fill up one floor,
only lease out the first floor the first year,
and then the second floor
the first day of the second year,
you can lease out the second floor
and then the third floor in the third year,
fourth, and the fifth year,
the first day of the fifth year,
which is actually four years and one day later,
you can now fill up the entire building.
No vacancy.
All of your rental income on that property
will be tax free forever.
That sounds silly in a way,
but that's what they're talking about
with a max funded insurance contract.
I would do that to have tax free income forever.
So this is why we call it the miracle solution
because what else does this?
It accumulates tax free.
You can access money tax free.
You don't have to wait till you're 59 and a half.
It will earn rates of return averaging seven to 10%
based on actual history.
But some years more,
some years you might not earn anything,
but you won't lose because of indexing.
And when you die,
it blossoms and transfers income tax free.
People go, that's a miracle.
Yeah, every million can generate 100,000 a year
of tax free income.
If you wanna learn how and why,
claim your free copy of this book,
I want to gift you a free copy.
You claim it by going to laserfund.com, L-A-S-E-R fund.com.
You contribute a nominal amount
towards the shipping and handling.
You've gotta have some skin in the game.
I will cover the rest of that cost
and I will pay for the book.
You don't have to pay retail over 20 bucks.
I'll fire out a hard copy to you,
but while you're in there,
you can also see options to listen and learn,
watch and learn.
You can see some of the online educational events
like webinars, even live events,
and you can even engage and talk to a specialist
that can help you understand
how this may apply in your particular set of circumstances.
They will not bill you or invoice you for their time.
Is that fair enough?
So here's to your brighter future,
claim your free copy of "LASER Fund."
It's two books in one.
This side is the left brain side.
This side is the right brain side.
If you wanna use both your right brain and left brain,
stories and examples, and charts and graphs,
read both books, okay?
But this is about you and your brighter future.
I want you to employ the miracle solution.
(light upbeat music)