Strategically convert to tax-free income prior to retiring. In this episode, I'm going to address
the question "How can I avoid paying tax on retirement income?" You know a lot of people
would like to learn this. They sometimes put their head in the sand and they think they just have
to pay tax on those IRAs and 401(k)s the rest of their life and then they're told to string it out
that they're saving tax by taking out the required minimum distribution and so forth.
Get ready, I'm going to show you how to get the taxes over and done with. I'm going to share 3
stories in this episode they're going to blow you away. But I want you to be empowered at the
end of this so that you can go, "I can do that. I want to see how I can save unnecessary tax."
So, my name is Doug Andrew and I have been a retirement planning specialist for more than 4
and a half decades. I'm sort of a financial strategist, a tax minimization specialist.
And so, I've helped thousands of people avoid paying unnecessary tax on their tax-deferred
IRAs and 401(k)s. They sort of painted themselves into this tax corner. And so, I've had to cure
that tax dis-ease. See, when you're not at ease physically, we call that disease.
Well, a lot of people are not at ease when they retire. So, they have a financial dis-ease. And
I like to cure that I wish I could have prevented the dis-ease. But let me cure it for you if you're
sitting here going, "Oh, my heavens". Because I'm always shocked at how many people say, "Wait,
a minute. I have to pay tax on these IRAs or 401(k)s now when I take the money out?" I'm going,
"Yeah. Where have you been?" They just sort of followed the herd because the company
offered a 401(k) and everybody does it so they did it and they didn't realize they were going to have
to pay tax on the back end. They were told "Oh, you'll be in a lower bracket. Just don't worry
about it until you get there." No. So, a lot of times, they have this rude awakening that they may
outlive their money because of the negative impact of paying tax on the back end. If they have a
million-dollar nest egg and if they need $100,000 a year of income, they better be earning 10% rates
of return. But that's not going to cut it. 10% on a million is a 100 grand. You pull out $100,000
out of an IRA or 401(k) and you have to pay tax. You only netting 66,000 in a 33 tax bracket. And
you go, "I can't make it." So, you go back and you withdraw the other 33, 34 thousand dollars
and wait a minute. You got to pay tax on that one. So, you pay tax of 11,000 on that when you only
have 22,000. You go, "I'm still short." So, you go back and forth back and forth and people go,
"Come on. I'm getting tired of going and grabbing money out of my IRA 401(k) account
because I have to keep paying tax. And so, just tell me how much I need to withdraw in the first
place so I don't have to go back and forth back and forth taking out money. In a 33% bracket,
you have to pull out 50% more money. Did you hear that? See, I have to pull out 150,000. Pay tax of
a third, 50 to net 100. If you do that, even if your account is earning 10%, your million-dollar
nest egg will be gone, dry done in 11 years. With my favorite vehicle (which I call the Laser Fund)
is tax-free. I do earn 10%. In fact, I've averaged 10.07% for 25 years. If I pull out 100,000 it's
tax-free. I get to net 100,000, I get to spend 100,000. I don't pull out a hundred and only net
66 or 67 because this tax-free. So, if I pull out 100 grand, I still have my million. In 11 years
when most Americans are out of money, I still have my million. If my wife and I one of us makes it to
age 90, we had at least another 20 years more than what somebody with an IRA or 401(k) would have had
of 100 grand a year of income. That's 2 million. Plus we still have our million.
That's a 3 million-dollar better retirement nest egg than the same amount of money in a
tax-deferred IRA and 401(k). Am I arousing some curiosity here? Listen. If this is beginning to
resonate a little bit with you, subscribe and share this video with somebody that is also
trapped in an IRA and 401(k) and these insights. And you can search throughout my youtube channel
because I have a lot of related videos to this very topic. But let me share with you 3 quick
stories that will illustrate my point. So, are you ready? Story number 1. This is Jerry and Kris.
They came in they were both school teachers and they had about a quarter of a million dollars and
yet to be taxed 403(B)s 401(k)s a tax-sheltered annuities. And their tax advisors said, "Oh,
if you don't need the money..." See they were 59 and a half. They don't have to pay a 10%
penalty if they dip into it. And their advisor says, "Oh, if you don't need the money,
continue to defer it until you're 70 and a half." Now, they let you go to late 72. And then you have
to start taking out the money or the government will penalize you 50% if you don't take it out.
They want their tax revenue. They've been waiting for that. So, this was the advice most accountants
only look at a given tax year. And so, I showed them the darkness of the night if they did that.
Now, assuming a 7.2% rate of return which is sort of what they've been averaging.
That 250,000 in their uh 403(b)s and 401(k)s would have doubled to 500,000 and then taking out the
required minimum distribution. I showed the tax that he would pay through his life expectancy
and she would pay during hers. Because usually the man passes away first. So, we just made that
assumption. And then passing it down to their kids and they were flabbergasted. Guess how much they
would pay in tax by stringing it out? A minimum of a quarter of a million. They went, "That's as much
as we have in there." I said, "Yeah. See, you're just stringing it out and compounding the problem.
Delaying the inevitable." -"Well, what should we do?" I said, "Well, if I were you, I would
get it all out. Whether you need it or not and get the taxes over and done with." -"Well what do we
do with the after-tax money?" -"Oh, I was hoping you would ask that question." So, in a nutshell,
we took out 60,000 a year. We paid tax of $12,500. Over 5 years, we got all the money out. Now,
if you add that up, we actually got out 300,000 because the money was growing as we were pulling
it out. We got the taxes over and done with over 5 years, 60,000 instead of 250,000. They went,
"Whoa! But... Oh, we don't want to pay the tax." I'm going, "You're going to pay it sooner or
later." I felt like Sam I Am in Green Eggs and Ham. "You will like this you will see." -"Oh no,
no." But at the end of 5 years after saving them all that tax they said, "Oh, we like these green
eggs and ham Sam I Am." Yeah, I've heard it so many times. Well, in their case, we actually
resurrected some deductions they'd been killing on some rental properties. We were able to get the
money out with no tax consequence. At the end of 5 years, this couple had double the income coming
out of their Laser Fund because after we paid the tax, we put the money over into the Laser
Fund which is tax-free. And the Laser Fund was earning rates of return greater than their IRAs
and 401(k)s were and it's totally tax-free. They now have double, even triple the income out of the
laser fund and it's totally tax-free. It doesn't show up anywhere on their tax return. I mean,
they are so grateful. They've been able to take their grandkids on cruises and family vacations
with money that would otherwise have gone down the drain in unnecessary income tax. Story number 2,
bill. When he came to us his wife had just passed away, he had $600,000 in yet-to-be taxed IRAs
in 401(k)s and he was at the age where he had to start pulling out required minimum distributions.
We showed him what would happen if he took out the minimum and strung it out. He was flabbergasted.
He was going to pay more than 600,000 in tax by doing that. We got his out over a 5-year period,
we actually pulled out 150,000 a year. In 5 years, that's 750,000 because he was earning great rates
of return with us while we were doing it. At the end of 5 years because we offset the tax,
he now had 750,000 in his portfolio of laser funds. That has been earning between 8 to 10
percent. What's 8% on 750,000? 60 grand a year. What's 10%? 75,000 a year. Guess what he would
have been getting out of his IRAs and 401(k)s had he left the money there? 24,000 a year before tax,
16,000 net after tax. What would you rather have? 16,000 to buy gas and groceries or 60,000 tax-free
or even 75,000? This was unbelievable what we did for Bill. Last story. This is Bob and Karen.
And they had over 4 million saved in their IRAs at 401(k)s. Their advisor said, "You know what?
They're going to pay 2.6 million in tax by doing this but they can afford that." I go, "Well,
let's ask them if they want to pay that if they don't have to." They said, "Well, no. Is there
a better way?" And I go, "Yeah." Long story short, I couldn't save them 2.6 million of tax.
I could only save them 1.2 million. But what did they do with that? In their Laser Funds,
that 1.2 million is generating a 100,000 a year of tax-free cash flow for their grandkids'
college educations, family retreats with a purpose into perpetuity with a perpetual education fund
for generations. Versus the money going down the drain in unnecessary tax. We do this all the time.
So, if this is intriguing you, let me empower you with some learning. I want to gift you a copy of
my most recent bestselling book. In fact, behind here, I've written 11 books so far. And my 11th
book is called The Laser Fund. It's 300 pages. But it's actually two books in one. See this?
This book uh is uh 200 pages, 14 chapters, all the charts and graphs. That's for the left-brain
learner. If you're more of a right-brain learner by stories metaphors, you flip the book over and
read this one. This is 100 pages, 12 chapters with 62 actual stories like these that I've
told you. One of these stories, you will relate to based on your set of circumstances, I assure you.
But don't take my word for it. You don't have to pay $20 which this retails for.
I will gift it to you. If you go to laserfund.com or laserfund.com
and contribute a nominal fee towards the shipping and handling, I'll cover the rest of that cost
and I'll pay for the book and fire a copy out for you. There's opportunities there to learn
via webinars, video, audio. I'm passionate about empowering people like you to have a
brighter future and to avoid paying tax unnecessarily on your retirement income.