- I've never owned an IRA or 401k or a Roth and never will.
I'm Doug Andrew.
In this episode, I'm going to answer the question
which is better, a traditional IRA
or 401k or a Roth IRA or 401k.
Well, I'm going to show you
neither 'cause I've never owned them and I never will.
My favorite vehicle is a max-funded IUL,
it blows the other options out of the water.
I'm going to explain why.
(cheerful music)
So I'm Doug Andrew.
I've been a financial strategist
and retirement planning specialist now
for north of 48 and a half years,
helping people optimize assets, minimize taxes,
and prepare for a comfortable retirement
so that they will not outlive their money.
What causes most Americans to outlive their money?
Three big dangers; taxes, inflation and market volatility.
So I eliminate those dangers
by using one of my favorite financial instruments.
It's called a max-funded index universal life
but it must be structured correctly and funded properly,
then it will be deemed a LASER fund.
LASER is an acronym that stands for
liquid assets safely earning returns.
In fact, my 11th book is by far my all time best seller,
it's flying off of our warehouse shelves.
I'm gonna gift you a copy of this book at the end.
It's 300 pages of charts, graphs, and explanations.
So stay with me to the end of this video episode.
So let me show you why I have such strong feelings
about IRAs and 401ks or Roths
and why I will never own one of them
because they are so inferior
to a property structured max-funded index universal life
which would be a LASER fund.
For years in my various books
I have sort of used a metaphor of a million dollar dash.
So let's say that you are running a dash
to hit across a finish line, to cross the finish line
with a million dollars net, a million bucks net after tax.
I say net because in an IRA of 401k,
that's only tax deferred.
You're gonna need a million and a half
before tax to net a million after tax.
So we're talking about a million net.
So many times I ask people
you've gotta get clear on where you are right now
and then get clarity on where you wanting to go.
So then we have to address, how were you gonna get there?
Now there are five different ways to cross this finish line
of financial independence
that I have on this little drawing right here.
So let's talk about these five different scenarios
because most Americans
I think get duped into putting their money
into traditional IRAs or 401ks invested in the market.
And when they hit retirement,
I go what are you thinking here?
Wall street was never designed to create predictable income.
It's very hard for an asset manager
to ever show you an illustration of predictable cash flow
coming out of the stock market
mutual fund portfolio or whatever.
In fact, usually they're forbidden
from showing any more than 4% payouts,
'cause the average return for most retirees is only 3.49%
with their money in the market.
And that's pretty pathetic.
I'd rather get eight, nine, 10% payouts
on a million dollar nest egg,
not 4% and then have to pay tax on that.
So a lot of times we look at these tax deferred IRAs
or 401ks thinking we're gonna be in a lower tax bracket
and we get there and we're not.
We've been going down the highway
so to speak with one foot on the gas pedal
and the other foot on the brake pedal
and we didn't know we were doing that.
We're deferring and deferring.
And the other foot on the brake pedal
is we're getting rid of our only tax deductions.
We pay off our house.
The kids are then gone later on.
And so even if they move back in,
you can't deduct them anymore.
If you're a business owner
you don't have those deductions anymore.
And so we find ourself in as higher, higher tax brackets
and Congress because of irresponsible government spending
in the printing of money, taxes have been going up.
So the old adage,
oh, you'll likely be in the lower tax bracket.
It has not been true
or actually amatic now for more than 30 years
but still I can't believe 91% of Americans are duped
into putting money into tax deferred accounts.
But only this portion is your money,
the rest belongs to the government.
It's the best savings bond
the government ever came up with for themselves.
And so deferred taxes just mean increased taxes.
And if your advisor is telling you to continue to defer
and postpone and procrastinate until you're age 72
if you don't need the money and then take out RMDs,
required minimum distributions,
you need to search on this channel
because that's the worst advice
for most people is to take out RMDs.
You may be minimizing tax in a given year
but you are compounding the tax over the long run.
When you add it all up to your life expectancy,
to your spouse's life expectancy
and then leaving behind anything to your children
they have to pay tax on it now within 10 years,
they can't leave it until they retire necessarily.
And so what I prefer is to accumulate my money tax free.
I want 100% of my money to be totally income tax free
when I retire.
And there's only one vehicle really
that does that effectively in the internal revenue code
and that's a max-funded indexed insurance contract
that's structured correctly and funded properly.
Now for years, I've been using this example
of this million dollar dash
with five different savings alternatives.
One would be like crawling around the racetrack.
The other would be like walking.
The other one would be jogging
with the wind at the back of the beginning of the race.
One would be jogging with the wind
at the back of the end of the race.
I would rather sprint.
So let's talk about these
in relation to four different phases of retirement planning.
We have the contribution phase.
This is where you're going through your life earning money
and you're contributing money to your future retirement.
It overlaps the accumulation phase,
but someday you're gonna take distributions or withdrawals.
And too many people go
into withdrawal when they hit that phase
because they start paying more tax
than they ever thought they would.
And then at the end of the day, when you die
you're going to transfer it to your spouse or your children.
So those are the four phases of retirement planning.
So let's look at these five alternatives.
The first would be like crawling around the racetrack.
It's the worst way to save
and yet the most common way Americans save.
This is in taxed as earned investments.
This is banks, credit unions, regular mutual funds
where every year you have to report
on your 1040 tax return
the interest of the dividends that you made.
And so you are actually funding those investments
with after tax dollars, you have to pay tax every year
on your tax return and any gains when you sell the stocks
or whatever, or the mutual fund shares, you have to pay tax.
And when you die, it transfers it,
it can also be subject to tax as it transfers.
So it's read in all four of those phases.
So people say, well, golly, I think I'm gonna take my money
and put it into a tax deferred account, like an annuity.
Well, okay, so you're taking after tax money
you're putting it into a deferred annuity, let's say
but then when you start taking out the money
you have to pay tax and it's taxed LIFO.
To simplify this, if you put in $500,000 into an annuity
and you immediately annuitized it,
let's say the annuity was paying 10%.
Most don't do that.
But on 500,000, that would be 50,000 a year.
Well, the IRS said that 50,000 a year is your interest.
The last money you're earning your interest
is the first money coming out.
That's called LIFO last in first out.
And so only if you deplete the basis you put in there
do you get that out without paying tax?
'Cause you already paid tax.
That was after tax money you put into the annuity.
You only would get one green circle.
So it's like walking around the racetrack.
Now let me illustrate this using some math.
If we were to look at a dollar doubling every period
for 20 periods.
If a dollar double to two, four, eight, 16, 32 in 20 periods
a dollar would be worth 1,000,048,000,
only if it's tax free.
If you take that dollar doubling to $2
and you're in a 25% tax bracket, you pay 25 cents in tax.
You only have a buck 75,
that buck 75 doubles to $3 the next year,
you pay tax on that, you only have $3 to 6 cents.
So in a 25% tax bracket, instead of having a million,
you would have 72007.2% of a million.
In a 33% bracket, you'd only have 27,000.
People are shocked when I show them this,
you would only have 2.7% of what you could have had
if you weren't paying tax as you go.
And this is the most common way people save
and they wonder why they can never make ends meet.
Well, what about people who have IRAs and 401ks?
They thump themselves on the chest and say,
no, mine's taxed a deferred.
I end up with a million.
Well, that's not all your money.
That's only the front nine of an 18 hole golf game of life.
Let's look at the back nine, your retirement years.
I often ask people if you were a farmer
and you had the choice of buying your seed in the springtime
and you didn't have to pay tax on the price of the seed.
But later on when you sold your harvest in the fall,
after irrigating, cultivating and working hard
now you agree to pay tax on what you sell your harvest for.
That's a traditional IRA or 401k.
You get a tax break on the seed money
but you agree to pay tax during your harvest years,
your retirement years.
Now smart people realize, no that's not smart
if taxes go up, I would rather pay tax on the seed
and enjoy the harvest without tax.
And then people go, oh, you're talking about a Roth.
Well, a Roth is a step in the right direction
but I've told you I've never owned a Roth.
I'll explain why.
So instead of these, if you put money
in a traditional IRA or 401k,
you're able to put in pre-tax dollars
or tax deductible contributions into an IRA
and they accumulate tax deferred.
But then during the harvest
you agree to pay tax and during the transfer.
So you get two green circles,
which is better than maybe one green circle,
but this isn't gonna cut it.
I would rather have at least three green circles.
So yeah, you could do a Roth
and you take after tax money and you accumulate it tax free.
You can access it tax free
but it won't blossom and transfer tax free.
The only thing Roths do are they accumulate money tax free
and you can access money tax free.
My favorite instrument,
which is a max-funded tax advantaged 101a alternative.
It's what I call a LASER fund, an indexed universal life.
I fund it with after tax dollars directly,
it accumulates tax free under section 72E of the code.
I can access the money anytime,
I don't have to wait till I'm 59 and a half,
totally income tax free.
And at the end of the day when I die, I'm 70 right now.
If I died tomorrow, every million in my MFTA
a would blossom to two million
and transfer tax free to my wife.
There's not a Roth around that will do that.
But see, Roths only allow you to put
in a certain dollar amount
or certain percent of your income.
With an MFTA,
I can design one to put in 300,000 bucks in a year.
Every year, you can't do that in a Roth.
If you make too much money, you can't even qualify.
I don't have to put in 300,000
I can put in 30,000 and make up the other 270,000
anytime I want.
If you don't use the room in a given tax year with a Roth,
you lose it forever.
If I put in 300,000 into a LASER fund and four days later,
I need 200,000 back.
I can access that, there's no 10% penalty by the IRS
or I don't have to pay tax.
You can't do that with a Roth.
You have to wait five years, until you're age 72
or 59 and a half in order to access money.
I don't want those strings attached.
I get to use indexing with a LASER fund.
I get to participate when the market goes up
and not lose when it goes down.
I've averaged 9.6% rates of return.
Most Roths are only averaging
around three and a half in the market.
But at the end of the day,
Roths don't blossom as I indicated.
So why would I mess around with a Roth
when I can have the two benefits of a Roth
and four additional benefits that I just explained, right?
And people say, well, how much does that cost?
And I go, well, nothing is free
but it doesn't cost me anything.
That death benefit that doubles my account when I die,
that's coming along for the ride.
It's not free, but I'm not paying for it.
It's being paid for, with a minuscule portion of money
that would otherwise go out the window in unnecessary tax.
Are you ready for one more?
Now three green circles is incredible.
It knocks the socks off of two
but I don't want any restrictions.
That's why I use a max-funded indexed insurance contract
instead of a Roth 'cause I wanna have three green circles
with as much money as I want to save.
But in my books I do talk about
how you can sort of use your smarts
to not kill tax deductions
or resurrect tax deductions that you did kill
if your own rental properties or what have you.
These are tax strategies because I'm a tax strategist.
And so many times I'm able to indirectly
keep a lot of my tax deductions
so that I get some tax advantages on the contribution phase,
but never at the expense of giving up tax free
on the back end.
But I can many times get four green circles.
But if you only get three green circles,
you're gonna be so much better off,
50, 100% even double or triple having your money
in a traditional IRA or 401k.
But if you wanna learn about really how to strategize
you can go from three, even to four green circles
with a lot of your money.
I don't have time to explain that in this episode
but here's how you can learn more.
Read my books.
I have been blessed in my life to have 13 best sellers.
Now here's one I wanted to give you.
It's called "The LASER Fund" and it's a 300 page book.
This side, the white side is for left brain learners.
It has 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.
How to sprint around that racetrack.
Instead of just jogging, see, regular IRA
or 401k would be like jogging with the wind of the back.
At the beginning of the race,
you get a tax break on the seat.
If you use a Roth, that's like jogging
with the wind on the back at the end of the race,
you get tax free harvest.
I wanna sprint.
If you wanna learn how to sprint, get this book.
And if you learn more by stories,
you flip it over and this is a hundred pages,
12 chapters with 62 actual client stories.
If you wanna use both your right brain and left brain
you can read both, but I wanna gift you a copy.
And if you go to this site or click on the link below
you contribute a nominal amount towards the shipping
and handling, I'll cover the rest of that cost
and I will pay for the book.
I'll fire out a hard copy to you
and there's also options there.
If you also want to listen
and learn or watch and learn, there's also information
about educational webinars that we teach.
You can even schedule an appointment online
to talk to an IUL specialist, to see how this may apply
in your particular set of circumstances.
If you wanna see this and there's no cost or obligation
if you decide to do that.
But this is really about you and your brighter future,
don't be crawling, walking or even jogging
toward the finish line of financial independence.
I want you to sprint.
(cheerful music)