In this episode, we are going to answer the question, "How can I save paying tax
on RMD's. RMD's are Required Minimum Distributions. You can't believe how many
Americans are told to do required minimum distributions. The worst advice
I've ever heard. Here's how we saved a couple 1.2 million of unnecessary tax.
In this episode, you're going to learn how I as a financial strategist tax
minimization specialist for 47 years have helped many people. But this
particular couple had really saved a lot of money in their IRA's and 401K's.
They were both physicians. When they came in, I realized that they had between 5
to 6 million dollars in yet to be taxed IRA's, 401K's,
their pension plans and so forth that they had with their SEPs. And so they had
been duped like many people in my opinion to sock away money thinking they
were going to be in a lower tax bracket when they retired and lo and behold they
were not. And so, they were in his higher higher tax bracket as they ever were in
during their earning years. And they actually came in and said, "You know, I
don't know how this happened." I'm going, "Well, you were so busy being physicians."
One was an orthopedic surgeon. The other one was a pediatrician. They're busy
doing what they do best. And so, they just followed the herd and socked away money
in these traditional qualified accounts. "We'll deal with tax down the road." Well
they could see that coming. And they heard a lot of my videos. They watch them,
they read articles. One in particular Mr. Tax to-the-max versus Missus I've-a-lot-
more. And they said, "Well, can you help us?" Now, what's interesting is when they
first came in, I told them a story before looking at their situation. I said, "You
know.." I had a gentleman that came years ago. And when he came through the seminar,
he had $500,000 trapped in his IRAs. And he was 70 and a half and he knew he had
to start taking out RMD's out of his. And as his accountant said, "Oh, yeah. Just
take out the required minimum distribution." And I said, "You know what,
you're in the highest bracket and you will never be in a lower bracket." He was
like in a 40% bracket. And he went home and he thought about. And he said, "Why
should I even do this over a 5-year period?" He actually came back and said,
"I've done the math, Doug. I'm going to take out my whole 500,000
and pay tax of 40%. Because I'll never get away with paying less than
that rate." I go, "That's 200,000." Because I know. He pulled out
500,000. He came in with the net of 300 thousand after paying the
tax of $200,000. He said, "No, I don't need this money. I want
you to put it into a Laser Fund to maximize what I leave behind." And he
brought in one of his sons. He says, "I'm more interested in leaving behind more
money to my family than 500,000 in a yet-to-be-taxed IRA.
Because now under the rules, if he died and he had already had one stroke, I
think. If he left behind that 500,000, his children have to
liquidate that amount within 10 years and pay the tax.
We took the net of 300,000 and we insured him with his
insurance policy for a million and a half. He died a few years later. We ended
up paying tax-free to his family 1.5 million dollars tax-free. Do you think
the kids like that better than getting 500,000 and his volatile
in the market IRA's that they would have been lucky to have netted maybe 300
or 350 thousand? We ended up nearly 5 times-ing what he left behind. So, when
these 2 physicians came in, here's what I told them: So, when I analyzed this
couple situation, I said, "You know what? If you continue to postpone and take out
RMD's, you're going to probably end up paying over
4 million dollars in tax at a minimum. You're going to pay 2.4 million in tax if
you can use all kinds of strategies keep your real estate mortgaged and so forth."
I said, "That's more than you need to pay." Now, here's the kicker:
When they shared what I was telling them to with their CPA, the accountant... And
this is not the only time this has happened. The accountant said, "They can
afford to pay 2.4 million in tax. They have 6 million. But I've never
asked anybody, if you could half of that, "Would you like to do that?
If you could save 10%?" Everybody says, "Sure." I couldn't believe it. You wouldn't
believe how many times accountants will say, "They can afford to pay the tax." Well,
they don't need to. This is what we did: Over a 5-year period, we started to do
a strategic rollout. And we're actually doing it even more years 6/7/8
years because they're earning such good rates of return on their Laser Fund
portfolios. We are transferring money out of their IRA's. We're paying the tax, we're
taking the net and putting it into the tax-free Laser Fund, a portfolio between
him and his wife. And that grows tax-free. When they go to take income out of those
and that will be totally tax-free. And when they ultimately pass away, it
blossoms in value and reimburses them many-fold the tax they paid getting out.
So, their family is not out anything. At the end of the day, they're actually
ahead of the game like the little story that I told. Well, during the time that we
were taking it out, we paid the tax, put the net in. They've been earning great
rates of return. Some years way beyond 10% because they use the indexing
strategy that I teach in my various books and other episodes. And as we've
been getting that out, I've been encouraging them to keep their tax
deductions as high as possible. They're savvy. Even refinancing their properties
or their home or their rental properties. And keeping the mortgage deductions as
high as possible to offset some of the tax. Now, some people you probably watched
maybe these episodes that where we totally wiped out the tax. I couldn't do
that for them. But we reduced the tax from 2.4 million down to 1.2 million. We
save them half. Guess what? They were able to take 1.2 million. What could you do
with an extra 1.2 million? Now, some people say, "Well, golly. They have a lot of
money." So? 1.2 million in their insurance portfolio, that extra 1.2 million easily
generates a hundred thousand a year of tax-free cash flow in their family bank
for their children, their grandchildren, college education, humanitarian missions,
religious missions on down into perpetuity in what I call a family bank.
Why wouldn't you do that? When I give people the choice, they said, "Oh, I'd
rather keep the million in my family to the benefits that I want rather than
just rolling it over and paying into more tax in an IRA and stretching it out. And
the government uses my money for whatever they want to do. Most people
want to be their own fiduciary. They look out for their own best interest. This is
one of the stories in my book the Laser Fund. And if you watch this episode here,
this will tell you about this concept in general they're called strategic
rollouts. Not rollover. And I have several examples of how this works. But in the
book the Laser Fund, you'll have an opportunity watching this episode to get
a free copy sent to you. You just pay 5.95 shipping and handling.
It's over 300 pages. But there are 62 actual clients stories like this
one I just shared that will blow you away on how the Laser Fund is the dream
solution and one of my favorite strategies is the strategic rollout to
get the money out, get the taxes over and done with. Reposition tax-free and offset
the taxes by resurrecting deductions when you can do that.