- If you don't use the room, you'll lose the room forever.
In this episode, I'm going to address why
you may want to take maximum IRA 401k distributions
in your current tax bracket
instead of taking the required minimum distributions
to get those taxes over and done with sooner than later.
Get ready. I'll explain why.
(upbeat electronic intro music)
So my name's Doug Andrew.
I've been a financial strategist
and actually a tax planning and retirement planning
specialist now for nearly five decades,
helping people optimize assets and minimize taxes.
So what am I talking about here?
Many times I have had people come to me
and they tell me that their advisor, their CPA,
their tax attorney, or their financial planner
has been telling them, well listen,
if you don't need the money out of your IRAs or 401ks yet,
keep deferring until you're 70 and a half now it's age 72.
Keep deferring until age 72
and then you just take required minimum distributions,
thinking they're saving their client a tax.
Now that is very myopic in my opinion,
shortsighted, because you may be saving the client tax
in that given tax year
but I developed software years ago
that shows the fallacy behind that type of mentality
because you're not saving tax,
you're compounding the tax by procrastinating paying tax
in today's maybe lower brackets
and continuing to let the money keep growing tax deferred
because you're increasing the taxes you will pay
if you put it off.
If you procrastinate to age 72 and then take out RMDs
until your life expectancy and your spouse's life expectancy
and anything that then transfers down to your children
is going to have to be taxed fully within 10 years.
When I show people the actual amount
of taxes they will pay by doing that, they're shocked.
And so I show them the darkness of the night, so to speak,
if they follow that advice versus
what if you just sort of bite the bullet
and get the taxes over and done with in the next five years.
It may hurt in the short run
but it's going to save you money in the long run.
And when they see how much they will save in tax,
they're like blown away.
So this is a strategy that I call a strategic rollout.
Not a rollover.
A rollover is like going from
the frying pan into the fire so to speak.
It's taking money in 401ks and rolling it over to IRAs
and continuing to defer maybe to age 72
and then taking RMDs.
Again, that's the worst advice for most Americans.
So a strategic rollout means you're getting the money
out of your IRAs and 401ks usually strategically
in a five year time period, getting the taxes
over and done with sooner than later.
Rather than thinking future tax rates are gonna be lower.
Most people don't think they're gonna be lower
in the long run.
Why? Because of irresponsible government spending
and the printing of money.
But the second part of the strategy
is you take the net after tax money, the rollout money,
you don't have to live on it, you don't have to spend it.
You simply reposition that
into vehicles that will be tax free from now on.
Now my favorite vehicle that accumulates money tax free
and allows you to take out your interest
and your growth tax free
is a maximum funded index universal life insurance contract
that actually many, many thousands of clients
have been able to generate eight to 10% payouts tax free
without depleting their nest egg.
A million dollar nest egg can generate
eighty to a hundred thousand a year of tax free income
without depleting the million dollar nest egg.
And I call it a laser fund,
which is the title of my 11th book that I'm gonna gift you
at the end of this episode. So stay with me.
Laser is an acronym that stands for
liquid assets safely earning returns.
So what I'm talking about here is you want to get that money
out and the taxes over and done with sooner than later.
Now at the beginning of this episode, I said
if you don't use the room, you'll lose it forever.
So what am I talking about?
Even though I'm using the year 2023 tax brackets
whenever you're watching this episode,
it doesn't matter what year,
the concept has been the same for decades.
So this is a single individual filing a tax return
for the year 2023.
And what you'll notice here is that
between the 22% federal tax bracket and the 24% tax bracket
there is $50,650 of room there,
that if your income is over 44,000
but it's not up to 95,000 of taxable income
you may want to use that room
to pay tax at 22% because I can almost assure you
you will never be in a lower tax bracket.
Or what about if you make over 95,000
but just barely over 95,000.
So you're already in a 24% tax bracket
but you have up to to 182,000,
that's $86,725 of room
that you could get money out of an IRA or 401k
and you probably ought to wait until
after your age 59 and a half to to avoid a 10% penalty.
You're gonna lose money by leaving it there in the market.
Sometimes the market has dropped 30 or 40%
and I told people before the market crashed, you know what?
Get it out and pay a 10% penalty
'cause that's gonna be far less expensive
than losing 30 or 40%
by keeping your money in the IRAs or 401ks in the market.
And so that's what I mean.
If you don't use this room
in a given tax year, you will lose it forever.
So you may be sitting there going, well, we're married.
Well, you can look at married filing joint tax returns,
that's a lot of Americans.
Between $89,450 of taxable income clear up to 190,000.
There's $101,300 of room that you could take out money
out of an IRA or 401k up to that threshold and you'll pay
no more than you'll probably ever pay in tax, 22%.
And I can assure you when the Trump tax cuts of 2017
expire or sunset at the end of 2025,
the twenty-two is going to go up to twenty-five
and the twenty-four is gonna go up to twenty-eight.
What are you waiting for?
For taxes to go up?
Waiting for your account values to be higher?
You will pay more in tax, but between the 24%
and the 32% bracket, there's $173,000 of room.
Between 190,000 of taxable income up to 364,000 of income,
you pay the same tax rate of 24%.
If you don't use that room, you will lose it forever.
And if you keep putting it off
and the Trump tax cuts expire at the end of 2025,
it's gonna go up four percentage points right off the bat.
And so you need to make the decision more logically
than emotionally.
Sometimes people, they go, oh, I don't wanna pay the tax.
And so they keep putting it off,
well, you're not saving any money.
So I once had clients that I had advised years ago
to withdraw an extra $60,000 out of their IRAs and 401ks
and get the taxes over and done with
even at a 3% higher tax rate.
And they went to their CPA and their accountant said,
"who is this crazy nut that wants to force you
to a higher tax bracket?"
And they said, well, it's Doug Andrew.
And he scared him so bad that they didn't do it.
Well, I told them to get 60,000 out because
even though they would pay 3% higher in tax on that 60,000,
which by the way that's only $1,800,
they're gonna be glad they did that
because tax rates were going to go up.
Second, I could see an impending recession or market dive.
And I said, you wanna get taxes over and done with
sooner than later, get your money out.
And they listened to their accountant because,
oh, they're gonna be in a higher tax bracket.
They thought that somehow the higher bracket went
retroactive back to dollar one.
No, when you pay 3% higher in tax, it's only on
the money over and above the last tax threshold.
They were still paying just,
let's say 22% on all the money up to that threshold.
They're only only gonna pay 3%
on the last 60,000, which was $1,800.
But they got spooked, they listened to their accountant
and the next year that $60,000 lost 24 grand.
They came in and said,
Doug, is there any way to retroactively go back
and withdraw that 60,000 and pay 1,800
'cause we just lost 24,000 by leaving it there
and now taxes are going up.
See, they made the decision more emotionally
than logically and they just
listened to their accountant who thought I was crazy
as a tax strategist for telling them
to get the money out in the taxes over and done with
sooner than later.
I think too many accountants are myopic,
they're shortsighted.
They don't look at the big picture.
As a tax strategist, I look at the big picture.
And so you may want to use the room
in a given tax threshold rather than lose it.
If you're married filing separate,
you have 50,000 of room between a 22 and 24.
You have 86,000 of room between a 24 and 32.
If you're a head of a household,
you have 35,000 of room between a 22 and a 24.
You have 86,000 of room between a 24 and a 32% bracket.
If your income is just barely over that threshold
you're never gonna pay any more
in tax up to the next threshold.
Don't kick yourself because you didn't get the money out.
So if you want to learn more about strategic rollout,
I want to gift you a copy
of my most recent bestselling book called "The Laser Fund"
because they're explained in here and there's even stories
on this side of the book that show five different examples
of clients who got money out and how grateful they were
that they got the money out of their IRAs of 401ks
at the lowest tax rates that they would probably ever be in
and they repositioned that money into something
that's gonna be tax free from now on.
We had a couple in California,
they had 6 million in their IRAs and 401ks.
But they did a strategic rollout over five years.
They bit the bullet and paid 2 million in tax.
They netted 4 million into their laser funds.
In the next seven and a half years,
that 4 million doubled to 8 million.
They now have 8 million generating 600 to 800,000 a year
of tax-free income.
They don't need that much.
We took 'em from the highest tax bracket
to a 0% tax bracket in five years by doing this.
They only need about 300,000 a year to live on.
And so they're actually seeing growth of 500,000
on that account value in their IUL policies
because they're only pulling out 300,000
even though they're earning about 800,000 per year.
Is that making sense?
So let me show you how you can claim your free copy
of this 300 page book.
Simply go to laser fund, L-A-S-E-R Fund.com
or click on the link below.
You contribute a nominal amount
towards the shipping and handling.
I'll cover the rest of that cost.
I'll pay for the book.
I'll fire out a hard copy to you via priority mail.
There's also options when you're in there
claiming your free copy.
If you want to listen and learn or watch and learn,
check out some of our free educational webinars.
You can even schedule an appointment to talk to
an IUL specialist with no cost or obligation
to see how these strategies may apply
in your particular set of circumstances.
But read, study, and flip the book over and read 62 stories
about how "The Laser Fund" can be the dream solution
for many of your financial goals.
But this is designed to help you understand
how to seize opportunities instead of kicking yourself
because you didn't pay attention
and use the room when you had it.
(uplifting piano outro music)