- Don't make Uncle Sam your partner.
In this educational episode,
I'm going to address why an IRA
or 401k is a horrible partnership with the government,
and what you can do that is far better.
(bright music)
So I'm Doug Andrew.
I've been a financial strategist
and retirement planning specialist now
for nearly five decades,
helping thousands of people optimize assets, minimize taxes,
and empower what I call their authentic wealth.
So helping people prepare for a comfortable retirement,
I have noticed that most Americans,
I feel are duped into putting pre-tax dollars
into traditional IRAs or 401ks,
and they don't even realize what they're doing.
They're sort of following the herd.
91% of Americans, in fact,
put money into tax deferred IRAs or 401ks.
And when I ask 'em why, they say,
"Well, because everybody's doing it,
and they told me I would likely be in a lower tax bracket
when I retire."
And then I tell them,
"Do you know that that has not really been true
or axiomatic now for more than 25 years?"
Most people who save money are not in lower tax brackets
when they retire.
And I have to reveal that it's really a partnership.
See, it's not a sole proprietorship.
An IRA or 401K is a partnership with the government,
Uncle Sam.
And so when people would oftentimes come to me
with their yet to be taxed IRAs or 401ks,
I would usually ask,
"Are you planning your retirement or Uncle Sam's?"
Because they would be sitting there,
looking at their nest egg,
and realizing, "That's not all my money.
I didn't think about that."
In fact, I can't believe how many Americans say,
"You mean I have to pay tax on these?"
Uh, yes.
Yeah, you got a tax break on the seed money.
But when you go to withdraw or harvest your money,
now you have to pay tax.
And they go, "Ooh, golly, I'm not in a lower bracket
and I save money.
I've been killing my deductions."
Yep, you were going down the highway
with one foot on the gas pedal
and the other foot on the brake pedal, is the way I put it.
So most people, they get rid of their deductions
because they pay off their house.
They don't have those mortgage interest deductions.
In retirement, you're not contributing money
to IRAs or 401ks.
You don't have those deductions anymore.
Your kids are gone.
Or if they're not gone,
if they move back in, you can't deduct them anymore.
Congress keeps raising taxes
because of irresponsible government spending
and the printing of money.
Inflation is a hidden tax.
If you're a business owner,
you don't have those deductions anymore.
So people find themselves in as high or higher tax brackets.
And this is what causes most people
to outlive their money, taxes, and inflation.
Now, I usually will create a little scenario like this
when I'm in front of a public seminar.
So would you go into a partnership
with somebody that said this,
"Hey, let's go into business together.
Here's the deal.
You do all the work and I'm going to get now 25%, 33%
of whatever you sell this business for down the road
because I'm your partner.
And so here's the deal.
If you try to take any distributions
or sell this business before the age of 59 and a half,
I'm going to require another 10%
on top of the 33% as your partner.
But if you do not sell the business
and start giving me my share by age 72,
I'm gonna penalize you 50% and get my 33%.
But you know what?
I reserve the right
that if down the road I feel like I'm more hard up than you,
I can change my percent that I get
when you get ready to liquidate the business.
I can change from 25% to 33%
or I can change it up to 40%, 50%, or 60%.
You're ready to agree?
Let's shake on that."
Would you go into a business partnership
with a partner like that?
And people go, "Absolutely not.
What are you talking about?"
I said, "I'm talking about your IRA or 401k."
I just described a traditional IRA or 401k.
And all of a sudden, you know,
the blood drains out of their face and they're like,
"Oh my heck, I never thought of it that way."
Yeah.
It's sort of like a partnership and they didn't realize it.
And so I would recommend not going into a partnership
with Uncle Sam where they have a permanent tax lien
on what you accumulate in your IRAs or 401ks
because you are gonna have a hard time getting out
of that trap.
I know 'cause I've helped many people get out
of that tax trap
and they have to perform what I call a strategic rollout.
Get the money out
and the taxes over and done with sooner than later.
Because what do most people get convinced to do?
Oh, if they don't need the money, stay in the partnership.
Keep deferring.
If you don't need the money until you're age 72
and then take out RMDs, required minimum distributions,
just give Uncle Sam the minimum
and they think they're saving tax.
No, you are paying for the rest of your life,
your spouse's life
and when you leave behind anything to your children.
If you do the math,
and I have a software program that shows this,
most people are flabbergasted
with the amount of tax they will pay
if they follow the herd, defer until age 72, and take RMDs.
That's the worst advice for most Americans.
And so I convinced them,
no, you gotta get the money out
and the taxes over and done with sooner than later.
You need to get out of this tax trap
and move into something that's gonna be tax free
from now on.
I prefer what is called a laser fund,
a max-funded indexed universal life insurance contract.
Because at the end of the day, when you die,
it will blossom, transfer tax-free,
and reimburse you for the taxes
that you paid during the rollout
but you'll increase your net spendable income by 50%, 100%.
Some people even double, triple, and quadruple.
We've had many, many people go from after tax income
out of IRAs or 401ks of 16,000 a year up to income
of 50, 60, 75,000 a year with the same $750,000 nest egg.
We have done it, you know, hundreds of times for people.
So when I'm talking about this,
people would come in to me and I'd say,
"You know, I want you
to bring into the first appointment your after-tax IRA
or 401K statements."
And they go, "After-tax statements?"
I knew they didn't have them.
I go, "Oh, I'll have to calculate those."
And then they're shocked
when I show them their million dollar nest egg
in their IRAs of 401ks is not all their money.
Only about, you know, 670,000 of it is their money.
The rest belongs to their partner, their hidden partner.
So this is why many times in periods in American history,
like after 2008 when Americans lost up to 40%
on the average in their IRAs or 401ks.
This is why a Time magazine came out with a cover story,
"Why It's Time to Retire the 401K"
and what you can do instead.
The author of this article was Steven Gandel
and he said, "Yeah,
the IRAs or 401ks are a rotten repository,
a financial flop for our retirement reserves."
Now he was talking about the market volatility
where so many Americans,
for the second time from 2000 to 2010,
watched a 40% loss.
A million dollar nest egg went down to $600,000,
two times in that decade.
And it took until 2012 to just make back what they lost.
People using my favorite vehicle, the laser fund,
they didn't lose when the market went down.
They didn't make much of anything, but they didn't lose.
And most of them ended up with double to triple the amount
of money at the end of that 12-year period
instead of just getting back to break even.
Their million dollars that they had in the year 2000
was worth 2.5 to 3 million in 2012
when most people who have their money in IRAs or 401ks
in the market were barely back
to the million dollars they started with 12 years earlier.
Do you wanna learn how to do this?
Well, I can show you how to learn about this strategy
and why you shouldn't have Uncle Sam as your partner.
This is again called "The Laser Fund"
and this book has been flying off of our warehouse shelves.
I want to gift you a copy.
It's 300 pages, but it's actually two books in one.
It retails for $20 on Amazon.
You don't need to pay that.
I'll gift you a free copy, but let me explain the book.
It's actually two books.
This side is for the left brain learner,
and if you like charts and graphs and percentages examples.
This side is 14 chapters, about 200 pages.
If you're more of a right brain learner,
you learn by stories and examples,
there's 62 actual stories
of how the laser fund is the superior financial vehicle,
not only for retirement
but for college funding for your kids and grandkids,
real estate management,
your business working capital,
emergency funds,
if you're a schoolteacher, police officer, firefighter,
better than taking the survivor benefit when you retire.
And so this is a laser fund.
This will show you how to diversify
and create the foundation for a tax-free retirement.
How do you get your free copy?
Simply go to laserfund, L-A-S-E-R fund.com
or click on the link below.
You contribute a nominal amount towards the shipping
and handling.
I cover the rest of that cost and I pay for the book.
I'll fire out a hard copy to you.
When you're in there,
check out if you like to listen and learn, watch and learn.
There's also educational webinars we teach
on a regular basis.
They're free.
You can even schedule an appointment
to talk with an IUL specialist
that will create some illustrations
to show you how a properly structured laser fund
can help you avoid having Uncle Sam as your partner
and accumulate access and transfer your money
totally income tax-free.
(bright music)