Put 60% of your eggs in safe tax free baskets. In this episode,
I'm going to address the question, how to diversify investments at retirement? Get ready, you're going
to learn some things that most people do not consider especially retirees until it's too late.
So, my name's Doug Andrew and I've been a retirement planning specialist for more
than four and a half decades and during that time period I've helped thousands of people prepare for
a comfortable retirement to hopefully not outlive their money. And in doing that, I've helped many
many people reposition their assets that ofttimes they accumulated planning for retirement and at
retirement what you maybe did for your retirement planning is not the same thing you should do at
retirement. And so I'm going to show you how many times I would reposition their money especially
out of tax-deferred IRAs and 401ks into something that was going to be far better it was going to be
tax-free and help them not outlive their money and oft times I increased their net spendable
income by double triple and even quadruple what they were getting from their IRAs and 401ks
and they would say, "Where have you been?", I wish I could have corrected these mistakes
years ago. Well, I don't want you to be kicking yourself because you didn't learn about this.
So get ready, I'm going to share with you some of the basic places most retirees have money
at retirement and where I think they have too much in some of them and how they have to reposition
or rebalance their portfolio. So, here we go. Here on the screen I show four common incomes or
accumulation buckets or vehicles that many people draw from during retirement. Now, some draw from one
two some just three or maybe all four of these. But let me describe them first of all to you.
So, there's a lot of people that would come to me and they were way too top-heavy in
traditional IRAs and 401ks yet to be taxed money in tax-deferred IRAs or 401ks invested
in the market and I would go, "What are you thinking? You should have no more than 30%
of your money in the market in yet to be taxed vehicles at retirement", and they went, "Wow". I
know a lot of people that just keep their money in their IRAs or 401ks the rest of their life.
Their CPA told them to do that and I go, "Well, that CPA is very myopic very short-sighted. That's not
saving them tax in the long run." So let's look at these four different areas that people draw from
in retirement. This purple area in this northwest quadrant would be investment income
yet to be taxed as of 401ks invest in the market. Some people own real estate and they
love the rental income that comes from the rental real estate properties but many times
at retirement, they're sort of sick and tired of being a landlord but they're sort of stuck.
Because they've been doing 1031 exchanges for years going from the frying pan and the fire
and they're sort of sick and tired of taking out the trash and fixing toilets and evicting tenants.
But they feel like they're stuck and so they have their real estate income but they're
not happy. Then we have people who have a lot of money into investments that are very conservative
because they have a very low risk tolerance and so they have money in their pensions profit sharing
plans maybe annuities or maybe they're just relying on social security. That would be this
southwestern quadrant but over here this is my favorite and it's the most misunderstood
and least utilized it's what I call the tax-free income bucket and you're going to see I recommend
that you have between 40-60% of your income in that one. It's not even showing up on your 1040
tax return. So let's dive a little bit deeper into each of these buckets I call them or baskets where
people put their money. So again, this one up here is where so many people would come to me at
retirement and they were way too top-heavy in yet to be taxed IRAs or 401ks invested in the market.
If you don't understand this you need to learn sooner than later that wall street was never
built or intended for you to sell or liquidate your stocks, your mutual funds. If you ask people
on wall street, when is the best time to sell? They will say, "Never...", wall street was never
designed to be able to create predictable cash flow on the back end. It was designed to hopefully
grow your money over time even though it's like a person with a yo-yo hopefully walking up some
stairs where your money grows over time even though it goes up and down up and down in value
because of the volatile stock market. But it was never designed to create predictable income
streams and that's why the financial services industry if your money is in yet to be taxed
IRAs & 401ks in the market. They usually recommend you take out no more than four percent a year.
Now that's pretty pathetic. If you have a million dollar nest egg they only want you to pull out
$40,000 a year you'll have to pay tax on that even in a 25% bracket you're only netting three percent
or 30,000 a year that's pretty ridiculous to me. In fact, it's unacceptable and so you're going
to see here that I recommended many people do a strategic rollout out of here that no more than 30%
of your money should be in this bucket at retirement. But so many people 80, 90, 100% of
their money was in this one. The other category up here in the northeast quadrant is the real estate
bucket and it could be your home. You can do a reverse mortgage on your house and so forth
it could be rental properties. But like I said earlier I've noticed a lot of people don't want
to be a landlord anymore and they're sort of stuck because they've been doing 1031 exchanges delaying
the inevitable and now they're stuck because they wanted to leave that behind to their kids so their
kids can inherit it without with a step up in basis on long-term capital gains and it looks like
tax revenuers are looking at doing away with a step up in basis on long-term capital gains. That's
another subject you can search this very channel to learn more about that. This blue bucket
many times people just don't want to manage the real estate they hire a real estate manager
and you can't believe the horror stories that I've heard where these managers embezzle money and so
forth and people just throw up their arms. Well, I would recommend that no more than 30% of your money
ought to be in the real estate bucket. Now before I show you the last two buckets here the other two
quadrants. If this is already resonating with you I would recommend that you share this video with
somebody else who want to hear this information. Subscribe to this channel it's free and click the
little bell because you'll be notified every time I post a new educational video which I do almost
on a daily basis. But stay with me to the end because I want to gift you a copy of my most
recent 300 page best-selling book called the laser fund and this will empower you on how to
diversify and create the foundation for a tax-free retirement which is the green bucket. I'm going to
get to here in just a moment. Now, the yellower orange bucket here is what I call the guaranteed
bucket and I would recommend anywhere from zero percent up to maybe eighty percent of your income
could come out of this bucket depending upon your risk tolerance. For the super super super
conservative people they just want to rely on social security or maybe their school teacher
pension out of this bucket. Sometimes people will consider an annuity. I've never owned an
annuity I doubt I ever will. Annuities are okay they're only tax-deferred and when you take out
income it's taxable, LIFO, last in first out. Meaning, if I put a half a million dollars into an annuity
and if I was earning 10 percent that would be 50,000 a year of interest. If I pulled out the
50,000 it's 100% taxable because the last money I'm earning the interest is the first money
coming out. That's called LIFO tax treatment and so this is usually only good for people who maybe
uh don't care about being rich. They just want to be guaranteed they'll never be poor and so you can
get annuities that will guarantee you an income that will last as long as you do if you live to be
120. But the rates of return are not all that great in the long run. I can do far better over here in
this bucket which I call the tax-free bucket. So the green bucket is my favorite bucket it's
called the tax free bucket and there's generally three different types of vehicles in that bucket.
One could be municipal bonds. Now, a lot of people are not buying municipal bonds because a lot
of municipalities are filing bankruptcy. They're not as solid as they used to be and they're low
yielding. I've always earned in my laser funds that's my tax-free bucket that I like to use.
I've always earned rates of return two or three percentage points higher than municipal bonds at
any given point in time. Now, a lot of times people think well a Roth would qualify there. Well,
yeah, a Roth is a step in the right direction. I've never owned an IRA or 401k never will but
I've never owned a Roth IRA 401k and I never will. I have episodes on this channel that talk about
the laser fund has the two benefits that Roths have plus four additional benefits the Roths will
never have. Why would I own a Roth when I can have the benefits of Roth and four additional benefits
that knocks the socks off of a Roth IRA 401k. You can learn about that on this very channel. But
my favorite vehicle over here is what I call an MFTA max-funded tax-advantaged insurance contract.
I like to use index universal life where you take the least amount of death benefit the IRS will
let you get away with because you're designing it for living benefits to use during your lifetime in
retirement for tax-free income and you're trying to put the most money the IRS allows as fast as
the IRS allows and it turns into a tax-free cash cow. This is where not only I have been able to
earn rates of return averaging between 7 to 10 percent conservatively for more than 40 years.
But especially since 1997 using indexed universal life I have earned net internal rates of return
of 7-10% sometimes 16, 25, 30, 61.33% and higher by using indexed universal life. There are naysayers
out there that go, "I've never seen one do that", watch my other episodes
and you'll see actual statements of people who are being credited and earning 25, 30, 61%
right now on their index universal life policies. How their policies grow from
850,000 to a 1,370,000 In one single
year totally tax-free using this green bucket. So, with the laser fund, I wanna gift you a copy of
my most recent best-selling book to help you understand this even. Better but this is what
I would normally do for many people that would come to me at retirement. I would say you ought
to consider a strategic rollout. Now, this is not a rollover. A rollover is like going from the frying
pan into the fire. See, a rollover is like taking money in a 401k and rolling it over to an IRA
and most people get duped into postponing and delaying that until they're 872 and then they have
to start taking money out of their IRAs or 401ks or else what happens? There's a 50% penalty by the
IRS on top of the tax. If you turn 72 and your life expectancy let's say is 20 years to make it simple
and you have a million-dollar nest egg in IRAs & 401ks. You must pull out 120th that year
or 50 grand and be subject to tax. If you don't the IRS will penalize you 25,000 50 of the 50 on top
of the tax. They want that money out in tax before you die so they can tax you again when you do die.
So this is the best savings bond the government ever came up with for themselves our tax deferred
IRAs of 401ks. A strategic rollout is where you're getting the money rolled out of this purple bucket
and you're doing that strategically usually over a five-year period down here to the green bucket.
Now, when you do that you're doing it strategically to where you're getting money out of here maybe
you have five hundred thousand in here and you wanna roll out a hundred grand a year over five
years down here to the green bucket. You do that strategically so that you'll be grandfathered to
have tax-free income the rest of your life. The point is you're trying to get taxes over and
done with sooner than later in today's lower tax bracket. See, your current tax bracket is likely the
lowest bracket you will ever be in. The only people that are in lower tax brackets when they retire
are those that didn't save very much okay and so you want to get the taxes over and done with.
Reposition that after-tax money into something that's going to be tax-free from now on. The reason
why I like the laser fund is not only because it knocks the socks off of these other types of
investments as far as how much you can put in. How you can access the money tax-free but at the end
of the day when you die anything left in the green bucket in a laser fund blossoms and increases in
value and transfers tax-free. I'm 69 right now if I died tomorrow in an accident every million
in my laser funds would blossom to about two and a half million and transfer tax-free to my heirs.
That reimburses many fold of what I would pay in tax by doing the strategic rollout. Now, if this
is intriguing you subscribe to this channel but the point is this I have had couples come to me
and they thump themselves on the chest and they go, "Hey Doug, we've saved several million dollars and
we calculate that between social security or our defined benefit pension with being a
school teacher for 30 years we have 40,000 of guaranteed income here for my spouse and
160,000 out of our IRAs and 401ks. That's a total of 200,000 of income and I would look at them and
say well yeah I see one problem. Well, what's that? It's all showing up on the front page of your 1040
tax return. You mean there's another way? I go yeah. See, you're paying 54,000 a year in tax do the math
you're going to pay through the nose. You're only netting 146,000 after tax to buy gas groceries
prescriptions and golf green fees. They say, "Well, I'm a red-blooded American I want to pay my fair
share of tax", well yeah but if I could show you how to redirect otherwise payable tax to causes you
support would you be interested? Yeah and so they would come and meet we'd do a strategic rollout.
At the end of five years actually four years in one day we would get 120,000 of that 200,000 of
income off of their 1040 tax return. Now the IRS knows they're receiving it they know everything.
But the bottom line is they were only paying tax on 80,000 the other 120,000 is tax-free.
The IRS knows it, it's not some loophole. They still have 200,000 of income but they're only paying
21,000 in tax. We saved them how much $32,400 a year in taxes over their life expectancy that's nearly
a million dollars eight hundred and ten thousand based upon their LE. Their net spendable income
is 178,000. I've never met anybody republican or democrat this is not a political decision
that didn't opt to save unnecessary tax. That is a strategic rollout that's how you diversify.
You want to have 40 to 60 of your income be in the green bucket what I call the laser fund
and diversify and only have 30 percent at the most in the purple bucket. IRAs & 401ks or the real
estate bucket and maybe nothing in the guaranteed bucket but your social security. That is smart
diversification. So here's how you can learn more. So I want to gift you a copy of my most recent 300
page best-selling book it's called the laser fund. You can go to laserfund.com... or just
click on the link below contribute a nominal amount towards the shipping and handling I'll
cover the rest of that cost. I'll fire out a copy for you, you also can listen and learn watch and
learn with other options there. But this is actually two books in one this side is about
200 pages 14 chapters with all the charts and graphs and explanations. If you're more of a
right brain learner, you learn by stories. You flip it over and you read the orange covered
side. It is 100 pages 12 chapters with 62 actual client stories. You will see these charts that
I've been referring to in this book. So, claim your free copy here is to your brighter future.