- If you don't use it, you'll lose it.
In this educational episode,
I'm going to address the question,
what does it mean by if you don't use it, you will lose it,
in regards to rolling money out, not over,
rolling money out of IRAs and 401ks,
into my favorite vehicle, for example,
a max-funded indexed universal life insurance contract,
so that you'll be grandfathered to be tax free
the rest of your life?
Get ready, you're gonna be blown away.
(upbeat music)
So I'm Doug Andrew,
and I've been helping people optimize assets
and minimize taxes now for nearly five decades.
And one of my favorite financial vehicles,
if you've watched any other episodes on this channel,
is a max-funded indexed universal life insurance contract
that is structured correctly and funded properly,
where you take the least amount of insurance
the IRS will let you get away
with under certain tax citations
in the Internal Revenue Code,
so that you can accumulate your money tax free,
and then be able to turn on tax-free income,
maybe from age 60 or 65 to age 120,
where every million dollars that you've accumulated
can generate a 10% payout without depleting principle,
100 grand a year of tax-free income.
I've helped many, many people achieve this.
So when we talk about getting money repositioned,
most people come to me,
usually within five years of retirement,
because they're beginning to realize,
"Man, I've gotta make some decisions here."
Smart people realize that Wall Street
was never designed to create predictable income,
and that's why the financial services industry
that has money in the market, they have this 4% rule.
They only want you to pull out 4% a year.
Now that's pretty pathetic.
I don't accumulate a million bucks
to have a measly 40,000 a year of income,
even, you know, before tax.
In a 25% bracket, I'm only netting 30,000
to buy gas and groceries,
prescriptions, and golf green fees, that's ridiculous.
Why does the financial services industry have that 4% rule?
It's because DALBAR says that if people
would just leave their money alone in the market,
which sometimes when you're retired, that makes you nervous,
you have a 2001, you have a 2008,
you have a COVID-19.
When the market loses 30 and 40%,
people get really nervous and they go,
"My million's down to 700 or 600,000.
Enough already, sell!"
And they sell low.
And then they wait, wait, wait,
till the market comes back up, and then they buy high.
DALBAR says the average person
with money in IRAs or 401ks in the market
is only earning 3.49%, 3.5%.
And so they say, "You know what?
Make somebody sign a waiver if they take out more than 4%,
because at 4% payout, they will slowly outlive,
they won't outlive their money,
but they'll slowly deplete their account,
but not before their LE, their life expectancy.
If they take out more than 4%,
we might get sued for them outliving their money.
We're not good fiduciaries."
That's called the 4% rule.
Now that is unacceptable to me.
So what I'm talking about is you have to reposition money
at retirement planning,
as something totally different
than what you did for retirement planning.
So when I educate audiences,
generally, I will introduce four different areas
where Americans may generate retirement income,
some from all four, but some from just two or three,
investment income, real estate income,
if they own rental properties,
guaranteed income,
but this is the most underutilized, the tax-free one,
so I have to educate 'em on that one.
It's the least understood and the most underutilized.
So what is the investment income?
This purple bucket is where 91% of Americans
are way too top heavy in their retirement savings
and yet to be taxed IRAs or 401ks.
They've been duped into thinking
they're gonna be in a lower tax bracket when they retire.
If you are a saver,
you will not be in a lower tax bracket when you retire.
It's usually because you are accumulating
money tax deferred, and then what happens?
You are killing your tax deductions
during your working years.
You pay off your mortgage,
you no longer have that deduction.
Your kids are gone, or if they move back in as adults,
you can't deduct 'em anymore as dependents.
In retirement, you're not contributing money
to IRAs or 401ks, you can't deduct that.
If you're a business owner,
you don't have those deductions anymore.
And guess what else happens?
Congress keeps spending money and so they raise taxes.
So most Americans, when I ask them,
"Do you think taxes in the future will likely be lower?"
I get nothing but crickets.
"How many think they're gonna be the same?"
One or two hands go up.
But when I say, "How many of you think that taxes
in the future will likely be higher?"
A sea of hands goes up every time.
And then, I ask,
"Well, then why are you continuing to defer,
and procrastinate, and grow your money to a bigger sum,
and then pull out money later
when you're convinced taxes will be higher
and it's on a larger sum of money?"
And they go, "Oh my heck, I gotta get out of this trap."
Yep, so that's my job.
I help them free themselves from this,
and I'll show you how.
Sometimes people own real estate but it's interesting,
they're sick and tired of being landlords ofttimes,
fixing the toilets, and taking out the trash,
and evicting tenants.
And so when I show them that they can sell those
and pay the capital gain tax,
and put it into a portfolio of laser funds,
they're shocked when the laser funds
generate as much or more income than their rental properties
and they don't have to manage those anymore.
They're blown away.
Some people like guaranteed income,
and it's social security,
or maybe a defined benefit pension
if they were a school teacher,
police officer, or firefighter.
Sometimes people like to make sure
that if they run out of money,
they will never run out of income,
and so they might use an annuity.
But these are for people who have low-risk tolerance.
But the most underutilized is the tax-free bucket.
And most people are not interested in municipal bonds,
because they're low yielding, always have been.
But a lot of municipalities now are filing bankruptcy,
so you don't wanna go there.
Roths are a step in the right direction from IRAs or 401ks.
If you've watched very many of my videos,
you'll know that I've never owned an IRA or 401k.
Yep, never will.
But I've never owned a Roth IRA or 401k, never will.
Because a maximum-funded tax advantage insurance contract
structured correctly and funded properly,
which I deem a laser fund,
that stands for liquid asset safely earning returns,
will knock the socks off of a Roth.
Why would I mess around with a Roth?
Roths only have two benefits,
your money accumulates tax free,
you can take it out tax free,
you fund it with after-tax dollars.
Well, a laser fund has had those benefits for 108 years
in the Internal Revenue Code.
Roths have only been around since 1997.
But if you make too much money,
you can't even participate in a Roth.
So a lot of savvy CPAs and tax attorneys
refer to the laser fund as the rich person's Roth.
I snicker 'cause you don't have to be rich to have one,
but people who make too much money
can't even participate in a Roth.
But, basically, in a laser fund I can structure it
to accommodate 30,000 a year, 300,000.
You can't do that with a Roth.
I don't have to put in 30,000.
I can put in 30,000.
The other 270,000 I can make up any time
I want in the future.
If I don't use the room, I never lose it
with an insurance contract.
If I put in 300,000 and I need 200,000 back
for an opportunity in my business,
I can do that in 30 days, in six months, in a year.
There's no 10% penalty.
There's no tax.
I can use indexing and participate when the market goes up,
and not lose when the market goes down.
And, at the end of the day,
Roths don't blossom when you die.
I'm 70, if I died tomorrow in an accident,
every million I would have in my laser funds
would blossom to about 2 million
and transfer tax free to my wife, my kids,
my grandkids, a church or a charity.
There's not a Roth around that'll do that.
It's totally tax free when it transfers,
but it blossoms, it increases in value.
People say, "How much does that cost?"
Doesn't cost me anything.
It's not free, but it's not costing me anything.
It's being paid for with a minuscule portion of money
that most people shell out in unnecessary tax
when they put their head in the sand
and leave their money in IRAs or 401ks.
So this often necessitates getting money
out of the purple bucket down to the green bucket.
Now we have some people that want 100% of their income
to not even show up on the front page
of their 1040 tax return,
and so they do a strategic rollout over five years.
Yeah, we have a couple in California,
they had 6 million when they came to our educational course.
And in five years, they did a strategic rollout,
they pulled out 6 million bucks.
They didn't need the money,
they just wanted to get the taxes
over and done with at today's lower rates.
They paid 2 million in taxes, 33% bracket,
they were never gonna be in that low of a bracket again.
And they paid 2 million in tax,
4 million went into the green bucket.
And that IUL contract,
that 4 million doubled to 8 million in 7 1/2 years.
They now have 8 million tax free generating 800,000 a year.
They only need 300,000 to live on.
But they went from the highest tax bracket
to a 0% tax bracket in five years.
Sometimes we have couples
who we get 40%,
60% of their income off of their 1040 tax return.
Another couple, they had 2.6 million in IRAs or 401ks
that at a 6% payout would generate 160,000 a year.
It was all gonna show up on the front page
of their 1040 tax return on top of the 40,000 a year
they were getting from the wife's
school teacher pension, 200,000.
I said, "Well, I see one big problem.
It's all showing up on the front page
of your 1040 tax return."
They said that, "You mean there's another way?"
And I go, "Yeah."
And so they learned about strategic rollouts,
and in five years I got 120,000 of that 200,000
off of their 1040 tax return.
The IRS knows they're receiving the other 120,000,
but in a 33% tax bracket,
I saved them 40 grand a year the rest of their life,
and that's if taxes stay the same.
By the time you go to their life expectancy
for the husband and wife,
I saved them over $1 million of unnecessary tax.
We do that all the time.
So I would recommend no more than 30% of your money
be in this bucket when you retire.
No more than 30% comes from real estate,
'cause we're gonna have real estate crashes.
And somewhere between zero, maybe up to 80%,
in the guaranteed bucket based upon your risk tolerance.
But I would recommend that 40 to 60% of your income,
at a minimum, not even show up on the front page
of your 1040 tax return.
Again, the IRS will know you're receiving it,
but it'll be totally tax free.
So when we talk about if you don't use the room,
you'll lose it,
let me give you an example.
I'm gonna use the tax year of 2023,
which is the year I'm recording this,
and compare it to 2022.
This is for an individual.
And so the Trump tax cuts are gonna expire
at the end of 2025 if Congress does nothing.
But see, if an individual
is making over 44,000 up to 95,000,
they have $50,000 of room there that they will pay only 22%.
So if they make 50 grand a year,
they have another 45,000 of room
that they could pull money out of an IRA or 401k,
especially, if they're over the age of 59 1/2,
and only pay 22%.
They'll likely never be in that low of a bracket again.
If you don't use it, you'll lose it, okay?
You didn't have that much room before,
but if you make over 95,000 up to 182,
let's say you make 100 grand,
well, you have about 70,
excuse me, 81,000 of room
to get money out of your IRAs or 401ks
and you'll never pay higher than 24%.
See that is what I'm talking about.
If you don't use that room, you'll lose it,
because the next year you can't retroactively
go back and file an amended return and withdraw money.
Too late, if you don't use the room, you'll lose it, okay?
And it's actually more room than in 2022.
A married couple filing in a joint tax return,
if they make over 89,000 up to 190,000,
they have 100,000 of room,
whatever room they've got there based upon their income.
If they were making 100 grand,
they have about 90,000 of room.
If you make over 190 to 364,
that's 173,000 of room.
If you don't use it, you'll lose it.
If you, as a couple, make 200 grand,
you could pull out on top of that another 163,000
and never pay higher than 24%.
Get it over and done with at 24, why?
'Cause that's gonna go to 28
at the end of 2025.
So what I'm talking about here,
if you don't use the room, you'll lose it,
what does that mean?
Well, the 12% tax bracket's gonna move to 15 automatically
if Congress does nothing at the end of 2025, okay?
The 22% bracket will move to 25.
The 24 moves to 28, this is where most people are at.
The 32 moves to 33.
The 37 moves to 39.
So let's take this tax bracket,
and sometimes people say, "Well, that's only 4% more."
No, no, no, no, okay?
If after 2025,
you pay $28 on every 100 bucks instead of 24,
okay, that's $4.
How much more is $4
of the original $24, okay?
It is 16.66% more money.
You are paying now $28 instead of $24.
If you calculate that,
you're paying out 16.66%
more in taxes out of your pocket.
And if you don't use that room,
you are automatically
gonna have nearly a 17% increase
in what you pay in taxes.
If you wanna avoid that,
don't miss using the room or you will lose it.
Take advantage of this.
So if you wanna explore the strategic rollouts
and talk to a professional that will help you analyze,
with your current income and the tax brackets,
how to make sure you use the room before you lose it,
I would strongly recommend
you claim a free copy of this book.
Now it's my 11th book,
it's been flying off of our warehouse shelves.
It's called "The Laser Fund:
How to Diversify and Create the Foundation
for a Tax-Free Retirement."
Strategic rollouts are explained in here,
and all of those four buckets that I talked about.
if you go to Amazon, this is 20 bucks,
plus you pay shipping and handling, maybe a total of $30.
If you do that, thank you.
But I will gift you a copy free, I'll pay for the book.
You simply go to laserfund.com,
or click on the link below,
and 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 via Priority Mail.
And while you're in there claiming your free copy,
you can check out the audio and video versions
if you like to listen and learn or watch and learn.
Check out the educational webinars we do on a regular basis,
they're free, they're no charge.
You can even schedule an appointment,
fill in your name on an appointment slot
with an IUL professional that I oversee and trained,
so that they can do some illustrations for you.
If you wanna see how an IUL policy
can be structured correctly and how it may help you
in your particular set of circumstances,
and they can do a rollout example for you
if you've got money trapped in IRAs and 401ks.
So take advantage of this,
This is not about me,
this is about you and your brighter future.
(upbeat music)