You don't need pie in the sky rates of return. In this episode,
I'm going to address the question. What rate of return is reasonable to safely become
wealthy? Get ready, because it's not about getting rich quick it's being slow and methodical
and safe. So, put on your seatbelt. I'm going to take you on a ride that will
give you insights into opportunities that probably you didn't know existed before.
So, my name's Doug Andrew and I've been blessed in my career now of 48 years
to help thousands of people prepare for long-term goals such as retirement. But it could also be
goals for saving for college, for their children, their grandchildren, working capital for business,
money to have on hand for managing real estate. It could be emergency funds. Bar none my favorite
vehicle that helps people accumulate their money safely tax-free and then allows them to access
the money tax-free and they don't have to wait till they're 59 and a half or anything like that.
But when they ultimately pass away it blossoms and transfers income tax free
is what I affectionately call the laser fund. Now, laser is an acronym that I've used for
years that stands for liquid assets safely earning returns. Now, in this episode, I'm talking about
earning predictable rates of return and they don't have to be pie in the sky. That's not the secret
to wealth accumulation it's setting money aside consistently at nice conservative rates of return
tax-free. On this very channel, off times I will address these key elements of prudent investing
and the number one key element of prudent investing is liquidity. A lot of people put it like
third or fourth down the list. No, the ability to access your money when you need it is number one.
Number two is safety, safety of the institution where you have your money and safety of your
principal. Whatever you set aside you don't want to lose and in any year you make money
you want that money you just made to become newly protected principal. A lot of advisors
don't know how to do that. This episode talks about rate of return which is third down the list.
Everybody wants the highest return, right? But usually, if you want high returns you're
going to incur what? High risk. We want the highest return at the lowest risk. Well, I have the perfect
vehicle for you and it's how to earn predictable rates of return that are tax-free. Because if
you've ever done the math. If I could earn a 10 tax free rate of return that would be the equivalent
of earning a 15% tax-deferred rate of return and an IRA 401k. Because if I earn 15
and at the end of the day sooner or later I have to pay tax on that 33% between federal and state
tax which most people during retirement they pay back a third to the government. You didn't
net fifteen percent you netted ten and then off times with fees you're only netting nine. You
have your money in the market and sometimes you earn 12 percent but you're really only
netting 8 after paying a third of it in tax. I would rather more conservatively safely
earn a 10 percent tax-free return than have to earn 15 or 16 percent to net 10%
after-tax. Because if you're going after a 16% year after year average rate of return you're taking
unnecessary risks. So, how can you earn 10% average returns tax-free? I'm going to share that next.
So, folks, many times people don't understand how to do simple math calculations using what is called
the rule of 72. Now, if you know what it is don't don't tune out. I want you to revisit this because
there's some aspects of the rule of 72 people don't think about. The rule of 72 is generally
used when people earn a certain interest rate and they divide that interest rate into the number 72.
So let's say that you're earning 8 percent 8 into 72 means your money will double every
9 years. So if you started out with 125,000 the 125,000 will double to 250,000 in what? 9 years
if you're earning 8 percent. If you're earning 9 percent it'll double in 8years. If you're
earning 10 percent it doubles in 7.2 years. If you're earning 9.6 percent it
doubles in 7 and a half years. So, you take the interest rate and divide it into 72 and that tells
you how fast your money will double. Well, did you know the reciprocal of that equation is also true.
Sometimes people say, "Well, I bought a piece of real estate for $50,000 or
100,000", and I sold it later and doubled my money. I'm not impressed until I know what?
How long did they hold on to that before they sold it for that gain and did they leverage? Now, let's
keep it simple, leverage means did you use other people's money OPM or did you use all your own
money? So let's say you paid cash for it. So if they say, "Well, I held on to that property for 10 years
and sold it and doubled my money", I'm not very impressed because you take 10 years divide that
into 72 and that means the appreciation on the real estate was only 7.2 percent.
It's not bad but it's typical, okay. That does not impress me. Now, let's use it with inflation.
Are you ready? If inflation averaged five percent and you retired age 65 and one of you, you or your
spouse lived age 95, 30 years. What would you be able to live on if you could get by on $6,000
a month today with inflation at five percent. How much would you need a month to buy the
same gallons of gas and loaves of bread 30 years from today. Now, people go, "How can you do that?",
and I go, "Well, I thought you understood the rule of 72.", 5% divided into the number 72
means the cost of living will double every 14.4 years. Let's just round it to 15 years.
So, you're going to need 12,000 a month to buy the same gallons of gas loads of bread haircuts that
you bought for 6,000 a month just 15 years earlier. You're going to need 24,000 a month in 30 years
double again to buy the same gallons of gas and loaves of bread. This is what causes a
lot of people to outlive their money. Because they're not earning a rate of return equal to
or greater than the inflation rate. You need to link your returns to the things that inflate
or you're going backwards. You're rolling upstream at the at a rate of mile per hour of interest and
the current of inflation is coming down greater than that. Do you know inflation real inflation is
double-digit? As of the recording of this episode in 2021 the consumer price index is what they
measure every year and actually every month based upon a basket of goods and services. But
clear back in the 1980s they changed the apples to apples comparison because the government did not
want to have to pay retirees social security increases equal to the true rate of inflation.
So they change the way they report inflation from apples to oranges comparisons. What this means is
the government can compare filet mignon steak the price of it last year to hamburger this year if
they choose. This is the change they made so when they report that inflation is 4 or 5percent
it's really like 10, 11, or 12%. You divide that into 72 and the cost of living doubles every 6 years.
Just go to the gas pump. Just look at food just go to a drive-in. All of these things are going up in
price far more than the consumer price index says they are at 5 or 6 percent. That's why because
the cpi is calculated differently. So when we're talking about rate of return you want to have
safe rate of returns that are linked to the things that inflate. So you stay ahead of inflation.
Now when I say this a lot of people go, "How do you do that?", I've always earned a rate of return
that's at least five and a half percent greater than the inflation rate at the time. Now, I don't
know if I'll always be able to do that but in the 1980s when inflation was over 10 I was earning 15
and a half. Because I'm linking my returns to the things that inflate. I'm able to outpace inflation.
It's amazing to me as a financial strategist how many financial planners do not understand how to
do this for their clients. Why is this important and how can you create safe predictable rates
of return that will outpace inflation. I'll give you a hint next. If this is intriguing you and you
can think of somebody who ought to watch this episode be sure and share this video with them,
post a comment, click like. But I would invite you to subscribe, it's free. Why? Because I post
an in-depth answer to a financial question like this almost on a daily basis. So, click the bell
so you'll be notified every time I do and then at the end of this episode, I want to gift you a
copy of my most recent best-selling 300 page book called the laser fund how to diversify
and create the foundation for a tax-free retirement. Now, when I talk about diversification
I like to diversify into superior vehicles not inferior ones. I don't want to have some
of my money in a bank or credit union earning a pathetic one percent or less when I can increase
the safety and the rate of return by putting my money into the places where the bank puts some
of your money to increase the liquidity safety and rate of return. So I like to diversify into
my portfolio of laser funds and I would recommend that at least 40 to 60 percent of your retirement assets
be in laser funds before you actually retire. But you can do it after if you need to.
Now, in a nutshell, my money inside of a laser fund accumulates tax-free. I can access it tax-free.
You will learn and see examples where every million dollars
that you save can generate 80, 90, 100,000 a year of tax-free income without depleting the principal.
You're able to earn rates of return equal to or greater than the inflation rate of the time and I
have averaged very conservatively 7.23 percent in the worst decade since the great depression.
If I just sat there and didn't do anything but put it into a diversified portfolio and walked away
for 12 years the average return was 7.23 tax-free when most Americans went 12 years with no gain at
the end of the day. A million dollars in the year 2000 came back barely to a million again by 2012.
Many people using the laser fund had doubled or tripled their money tax free a million
had grown to two, two and a half three million. Now, you can tweak your rate of returns by rebalancing.
S,o I've moved my returns up to 10.07 I'm actually earning 11.17 and I'm netting 10. That one percent
is not tax it's the cost of the insurance that the IRS says has to be there in order to qualify
to be tax-free. But it's really not a cost it's money that would otherwise go out the window an
unnecessary income tax. But it's actually a benefit. Because if I died right now I'm 69.
If I died in an accident every million I would have in my portfolio of laser funds would blossom
to about two and a half million and transfer tax free to my wife, my kids, my grandkids, at church, to
charity, and there's not an IRA or 401k around that will do that and people always ask, "Well,
how much does that cost?", well, nothing's free. But it didn't cost me anything. It's being paid for
with a minuscule portion of money that would otherwise go out the window in unnecessary tax.
But these rates of return are not pie in the sky. Now here's the beautiful thing, I diversify
by using maybe 1, 2, 3, 4, 5, different indexing strategies. I put some on me some of my
wife. I put some with this company or this company. I use different linking index strategies. Why?
Because you want to seize opportunities when you hook up with a specialist that
knows what they're doing. For example, my two sons who are co-authors with me
on this book I'm going to gift you. In March of 2020 during the Covid19 pandemic when the
market lost 30 percent. They told their clients link to a one-year point-to-point with no cap.
You'll learn what that means when you read this. What did it actually benefit them their accounts
were credited 61.33% a year later in march of 2021. We had a client that had about
850,000 in March of 2020 one year later he had a million 385,000. He made over half a million
61.33% tax-free using the laser fund. You want to seize those opportunities. Some people say
I thought you said you don't need pie in the sky rates of return. No, you don't need to. But that was
like a no-brainer. This is where you can make sure your cash will be there and you will not outlive
your money. Folks, here's how you can learn more about this subject. Go to laser fund laserfund.com
laser is an acronym again that stands for liquid asset safely earning returns. But in this book
it's 300 pages charts graphs and explanations and 62 actual client stories. But you see these
four pillars here. They stand for liquidity safety rate of return and tax benefits and any investment
that you could propose to me you can go through and analyze on a scale of one to ten
if they pass liquidity, safety, rate of return test, and the tax benefits. Most investments only score
about 18 to 22 points out of a possible 40. My favorite vehicle the laser fund scores 35 out of
40 nothing else comes close. If you want to learn how to diversify and create the foundation for a
tax-free retirement and have liquidity safety and unpredictable rates of return tax-free study this.
Go to laserfund.com there's also options there to listen and learn watch and learn and join
us for educational webinars which we hold on a regular basis. So here is to your brighter future.