- This retiree transferred five times the value of his IRA.
By the end of this episode,
you will understand how to maximize what you leave behind
in your IRAs or 401Ks when you finally pass away.
(upbeat music)
So, I'm Doug Andrew and I've been a financial strategist
and retirement planning specialist now,
for north of 48 years.
And I'm very passionate
about helping people optimize their assets
and minimize taxes
and empower what I call their authentic wealth.
I've been primarily viewed
as a retirement planning specialist now
for all of those nearly five decades
and people have been very grateful
and I'm very grateful for the receptivity of people
who come to learn how to optimize their assets
but minimize taxes.
So, I'm also referred to as a tax strategist
and many times I'm probably guilty
of putting my blinders on,
just focusing on what usually is one of the best solutions
for probably 90% of people who come to me at retirement.
So, a lot of times what you did for your retirement planning
is something totally different
than maybe what you do at retirement.
Because most Americans put money
into traditional IRAs or 401Ks, invest it in the market,
which may be fine during their accumulation years
but then you can't believe how many people
end up at retirement and if they were savers,
they find a rude awakening,
that they are not in a lower tax bracket
because Congress keeps raising taxes.
And many times, they've been deferring, deferring
and accumulating money if they are a saver
and that they've been killing their deductions
along the way.
Most people in retirement,
maybe they've paid off their house.
They don't have those interest deductions anymore.
Or if they were a business owner,
they don't have those deductions anymore.
The children are gone or if they move back in as adults,
you can't deduct 'em anymore.
And Congress continues to raise taxes and so forth,
so most people are not in lower tax brackets.
They're no longer contributing money to IRAs and 401Ks.
And so, they often find themselves
in what I call a, "Tax trap."
Now, if you've watched very many of my educational videos
on this 3 Dimensional Wealth channel,
you probably know that one of my favorite financial vehicles
that allows people to accumulate money, totally tax-free,
not just tax deferred and then be able to access your money
or create tax-free income during your golden years,
during your retirement.
That when you really look at it and analyze it correctly,
it knocks the socks off of most IRAs and 401Ks
that are only tax deferred.
Now, one of the reasons why I like to accumulate access
and also transfer money tax-free
because at the end of the day,
if you die with money left in IRAs or 401Ks,
the IRS now wants you,
when you leave it behind to non-spousal heirs,
to have your children pay tax on that within 10 years.
See, the government wants that money taxed sooner than later
because it was a savings bond for them.
A lot of people don't realize that.
And so, one of the big advantages
of my favorite vehicle,
a max-funded index universal life insurance contract,
structured correctly and funded properly by the way.
And when it is done properly,
it merits being called what I refer to as, "The lASER Fund."
LASER is an acronym that stands for,
"Liquid Asset Safely Earning Returns."
And so, what am I doing with that money,
that serious cash that I've accumulated?
I wanna make sure it passes the key elements
of a prudent investment.
Number one, liquidity.
I want to be able to access my money when I need it.
And I would rather do that without triggering tax
or incurring 10% penalty
or whatever, imposed by the IRS.
I want to have safety, not only safety of the institution
but safety of my principles,
so that when the stock market goes down,
I wanna be protected.
I don't wanna lose.
I wanna get outta the market.
But unfortunately, many people have their IRAs
or 401Ks invested in the market
and I think that's the worst place to have your money.
Wall Street was not built to create predictable income.
And so, that's why Dalbar,
who studies investor behavior says,
"If your money is in yet-to-be-taxed IRAs
or 401Ks invested in the market,
they recommend that advisors only illustrate a 4% payout."
Meaning that if you had a million dollar nest egg
they only want you to pull out 40,000 a year
and you're gonna have to pay tax on that 40,000.
Even in a 25% bracket, you're paying 10,000 in tax,
you're only netting 3% or 30,000 on your million.
I think that's pretty pathetic.
And so, the reason why the LASER fund
is one of my favorite vehicles
is because your money's liquid, it's safe.
It's out of the market
but you get to participate when the market goes up
by using a strategy called indexing.
But when the market crashes or goes down,
which the market goes down at least three
out of 10 years in any given decade,
sometimes five out of those 10 years,
like during the Great Recession.
But I want to have my money
not be subject to that market volatility anymore
and I also want to have my money be tax advantaged.
So, my solution, many times for people,
is to do a strategic rollout.
Now, in my various books, I have one here
that's flying off of our warehouse shelf, "The LASER Fund,"
I talk about this strategy
which I call a strategic rollout.
What is that?
That's where people strategically do a rollout,
usually over a five year period,
from the money they have trapped in these IRAs and 401Ks,
403Bs, tax sheltered annuities, 457s,
these are all qualified plans.
And many times they get duped
into not only putting money into those
but stringing the money out
until they're aged 70 1/2, is the age
you used to have to start withdrawing the money
to avoid a 50% penalty on what you should have withdrawn.
Now, the age is age 72.
And so, then the advice is,
"Well if you don't need the money, take RMDs.
Required minimum distributions."
Thinking you're saving tax in the long run,
which you're not.
You may be saving tax or reducing tax in a given tax year
but if you keep postponing
and deferring or procrastinating until age 72
and then you take out required minimum distributions,
I have illustrated for years with software that I developed,
that's not really saving tax.
In fact, it's compounding
and increasing the tax when you continue to defer
and take out RMDs.
So, I think it's the worst advice for most Americans.
But my brain thinks that everybody
ought to reposition that money
over a five year period,
get the taxes over and done with sooner than later
and reposition the net after-tax money
out of their IRAs or 401Ks in today's lower tax rates
because most people think
that taxes in the future will be higher.
And so, they finally get it.
Even though they don't like to pay tax,
they realize it's better to just bite the bullet
and pay the tax,
get it over and done with sooner than later.
But take the net after tax
and comply with the Internal Revenue Code
by putting it strategically
into a max funded index universal life insurance contract,
a LASER fund and you have to spread it out over five years
to comply with IRS guidelines
if you want to then have tax-free income
or grandfather yourself to have tax-free income.
So, for example, I've helped many people
reposition a net of $500,000 into LASER funds
and at a 10% payout
because you can take out between 8 to 10%
without depleting principle when you do it the smart way.
And so, $500,000 of cash inside of a LASER fund
or portfolio of LASER funds,
can generate 40 to 50,000 a year of tax-free income.
The IRS will know you're receiving it
but it's tax-free.
It's been protected that way for over 108 years
in the Internal Revenue Code.
So, many times, this is what people will come in
to do a strategic rollout
because they want to live on that income.
Well, let me tell you,
that there was an individual
that gave me a wake-up call
because not everybody is concerned
about having their money in IRAs or 401Ks,
have to be used for your living expenses.
So, this gentleman came to one of my educational seminars
and I was talking about the negative impact of taxes
if you keep deferring, procrastinating
and taking out RMDs and he could see it immediately.
He was very savvy and he was worth 5 or $6 million,
had a lot of real estate properties and what have you
and he had $500,000, at that point, in his IRAs.
And so, after coming to the seminar,
he scheduled an appointment with me
and he came in and of course, I'm thinking,
"Okay, we're gonna wanna do a roll out,
maybe $100,000 a year for five years,
get the taxes over and done with,
take the net and put it into a portfolio of LASER funds
to generate tax-free income,
like we did for most clients."
He came in and he said, "Doug, I get it.
I get it.
I am never gonna be in a lower tax bracket."
He was in a 40% tax bracket between federal and state tax.
He said, "Doug, I'm never gonna be in a lower bracket
and I don't need this money.
So, thank you for educating me
and giving me a wake-up call.
You know what I've decided to do?
I'm gonna take out all 500,000 in one fell swoop
because I think Congress is gonna raise taxes
sooner than later
and I'm already in the highest bracket
and it's just gonna get higher.
I'm gonna bite the bullet, pay 40% on 500,000 in my IRAs
and take it out in one fell swoop."
I go, "Are you sure?"
He goes, "Yeah, I'm never gonna be in a lower bracket."
So, he said, "I have a net of 300,000 out of that 500,000
and rather than worry about generating tax-free income
'cause I've got all these rental properties,
I don't need this money.
So, I know you like to take the least amount of insurance
the IRS will let you get away with
under the IRS guidelines on these max funded IUL policies."
Take the least amount of insurance and at his age,
at age 70 1/2, yeah I could have gotten away
with about 500,000 of death benefit
for his 300,000 to maximize what that 300,000
pays out tax-free, earning great rates of return.
He said, "Doug, I don't care about that.
I want the greatest amount of life insurance
that a one time payment of $300,000
will pay up for the next 12 years.
I think my life expectancy, at best, is 12 years.
And if I live longer than that,
I've got the money to keep the policy enforced.
How much life insurance
can I get for 300,000 in one fell swoop?"
And I said, "Well, it'll create a MEC."
M-E-C, that's a modified endowment contract
which simply means the money, the 300,000,
grows tax deferred just like his IRAs did.
If he went to access money,
he would have to pay tax on that, just like an IRA.
But when he dies, it will transfer income tax free.
What was the amount of life insurance?
We were able to get $1,500,000 of life insurance.
Guess what happened?
The end result, we put in $300,000 one time.
It paid up a $1 1/2 million policy for about 12 years
and he would've put in more money had he lived longer.
He didn't.
He passed away within 10 years
and his family received, his wife had already passed away,
his family received $1.5 million income tax free
within three weeks after he passed away.
They were far better off in their family bank,
is what we call it,
to be able to fund college for the grandchildren
and family vacations with a purpose and so forth,
if you've read any of my books.
They ended up with 1 1/2 million tax-free,
instead of getting $500,000 taxable out of his IRAs.
And because of the market,
I don't think that 500,000 would've grown very much
in the time period before he passed away
because his advisor was very inept,
not very savvy on how to protect himself
from the market volatility.
So, that is an example
of how we were able to maximize what he left behind.
Five times the value of his net after tax IRAs
or 401ks of 300,000.
He left behind 1.5 million.
Now, if this is intriguing you, I wanna gift you a copy
of my most recent bestselling book.
It's called, "The LASER fund."
I'll pay for the book
but I need you to contribute a nominal amount
towards the shipping and handling.
This is the 300 page book
and it has over 62 stories like that one in this book
of how we've helped people optimize assets
and minimize taxes.
This is actually two books in one.
This side is about 200 pages,
14 chapters with all the charts
and graphs and explanations of how to diversify
and create the foundation for a tax-free retirement.
If you learn more by stories,
you flip it over and read this one.
This is about 100 pages, 12 chapters
with 62 chicken soup for the financial soul stories.
If you wanna use your right brain
and your left brain, you can read both of these
but this is how you can claim your free copy.
Simply click on the link below
or go to laserfund, L-A-S-E-Rfund.com.
You contribute a nominal amount
towards the shipping and handling.
I'll cover the rest of that
and I will pay for the book and fire out a hard copy to you.
There's also options there
if you wanna listen and learn, watch it and learn
or if you want to attend
one of our online virtual educational webinars
but this is about you and your brighter future.
(upbeat music)