64,000 is four times a 16,000-dollar a year 401(k) payout. In this episode,
I'm going to address a retirement plan that produces up to four times the income than a
401(k). Get ready because this could be significant for your retirement.
So, my name's Doug Andrew and I've helped many, many thousands of people optimize their financial
assets, minimize unnecessary taxes, and empower their wealth so that they don't outlive their
money. And I've discovered that a lot of people especially in America will outlive their money
because they follow the herd they put money in traditional IRAs and 401(k)s in the market
and then they lose a lot of their purchasing power or their income and outlive their money
because of taxes, inflation, and market volatility. Now, when we talk about a traditional
IRAs and 401(k)s. So, I'm going to share a story with you now about a gentleman who was
actually a widower. He had just lost his wife when he was age 70 and a half. Now,
I don't know if you realize that when you have money in a tax-deferred IRA or 401(k),
you don't actually have to start accessing money starting at age 59 and a half. You can
without a 10% penalty. If you don't need the money, you're often told, "Oh, keep deferring"
thinking that you're going to save tax. He had $600,000 accumulated in his IRAs and 401(k)s
but he didn't need the money because he had rental properties. And that was providing rental income
but you can put it off until you age 70 and a half when this happens to him. Now, it's age 72.
At that age, you must start accessing money out of your IRAs in 401(k)s based upon the government's
life expectancy formula. Now, let's just keep it simple. Let's say at age 70 and a half,
your life expectancy is 20 years. That means you have to pull out one twentieth of your retirement
nest egg which would be 50 grand. If you don't, there's a 50% penalty. 25,000-dollar penalty
on top of the tax. The government will take 80% or 90% of what you should have pulled out. So,
a lot of people will take RMDs, required minimum distributions which is the worst advice I've
ever heard. Here's why. When he came to me, his $600,000 in the year 2,000 he watched that 600,000
because it was in the market dwindled down in value to about 360,000 twice in that decade. 2001
to 2003. And it took 4 years to come back up to 600,000. In 2008, it went down to 360,000 again.
It took another 4 years until 2012 to come back to break even at 600,000. This is why we call it
the lost decade or actually the last 12 years. So, he had had it but his advisor said, "Oh,
hang in there. See, the market always comes back." Well, he had basically not earned anything in 12
years. He had the same 600,000, he had in the year 2000 and it was 2012. Pretty pathetic, right? What
did his advisor tell him to do? Well, because the market's unpredictable, the industry standard is
4%. Take out 4%. It's called the 4% rule. Search this channel and you'll learn about what that is.
4% is what they want you to take out so you will not outlive your money because most Americans
with money in the market in retirement are only averaging about 3.5%. What's 4% on 600,000? 24,000
a year. That's pretty pathetic. He pulls out 24,000, he has to pay tax because he owns all
this real estate, he's in a 33% combined federal and state income tax bracket. That's a third.
What's a third of 24,000? 8,000. So, he pulls out 24,000 a year, pays tax of 8,000 and has a net of
16,000 to buy gas and groceries and prescriptions golf green fees. That's pretty pathetic,
okay? He's only really netting about 2.8% on his money. He came and visited us and we said,
"Get it out of there. Do a strategic rollout." I'm going to tell you what we did for him to 4
times his income on the same $600,000. Listen. So, we performed what I call a strategic rollout.
This is not a rollover. A rollover is like going from the frying pan into the fire so to speak.
That's where people take money in 401(k)s and roll it over to IRAs and continue to delay,
delay, postpone, procrastinate pain tax until their age 70 and a half or age 72.
And then they're duped into taking RMDs. Worst advice I've ever heard.
In fact, people will say, "Well, how come they tell you to do that on CNBC?" Who's funding CNBC?
Government revenuers. Why would they ever want to kill a partnership where the government continues
to get a third of everything you will ever earn for as long as you keep it there? Through your
lifetime, your spouse's lifetime and transfer down to your kids. That's called a stretch IRA. No, no,
no, no. I said, "Get it out. Get the taxes over and done with in today's lower tax rates." You
will not be sorry you did this. "Oh, I don't want to pay the tax." No, you will be glad you did.
Here's what we then did strategically. We pulled out 150,000 a year out of the 600,000.
While we were doing that, we managed it so he was earning actually 7.9%. So, the 600,000,
while we were getting the money out was earning an extra 150,000. So, we ended up getting 750,000
out because he kept earning interest, right? So, 150,000 a year. Worst case scenario,
every year we pull out 150 000 in a 33% bracket he's got to pay 50 grand in tax.
He's going to have to pay it sooner or later. If he did pay tax, 150,000 comes out 50,000 goes
to tax. He has a net of a hundred thousand to reposition. Remember, he didn't need the
money. Where did he put it? He put that 100,000 a year into my favorite vehicle that's tax-free.
It's called the Laser Fund. So, we do that for 5 years. 100,000 net for 5 years,
he's got 500 grand in his Laser Fund is totally tax-free. Now, the Laser Fund has been earning 8%
and even a little north of 10%. So, 500,000 at 8% is 40 grand a year tax-free. Is that better
than 16,000 after tax on as IRAs? Yeah. He's actually been earning more like 10.07. 10%
on 500,000 is 50,000 tax-free. But wait a minute, at the beginning of this episode, I said 4 times.
Okay, I'll deliver on that. I mean would double be enough? Triple But we quadrupled his cash flow.
Here's how. So, before I share how, we were able to get 750,000 out of his IRAs and 401(k)s with no
tax consequence. If this is intriguing you, I would encourage you click like. Share with
somebody who really ought to learn this and feel free to make a comment. Subscribe, click the bell
so that you can be notified every time I post an in-depth answer to a financial question which I do
almost on a daily basis. Now, what we did for this gentleman is every year that we took out
$150,000 out of his IRAs and 401(k)s, it showed up on the front of his 1040 tax return, right?
You have to report it. Now, instead of having to pay tax on that 150,000,
we actually resurrected new deductions, tax deductions that he had sort of been killing
for the last several years. He owned a lot of real estate properties, rental
duplexes, and fourplexes. He thought the best thing to do was to take all the rental income
and hurry and pay them off. I said, "Well, let me teach you how money really works."
He had tons of equity in these properties. He refinanced them. In the internal revenue code,
he can deduct the interest on the mortgage. He goes, "Well, why would I mortgage these rental
properties?" I said, "Well, you're only achieving a portion of what you could do."
The third marvel of wealth accumulation is safe positive leverage. He goes, "Well,
I understand leverage." I say, "Yeah. But see, you want leverage with liquidity. You have no
liquidity." If something happens and they all became vacant and you can't even make a
mortgage payment, all the equity is trapped in the property. You can't get it out. It's the hardest
to get when you need it the most, okay? So, we refinance his properties and put the equity out
of those rental properties over into my favorite vehicle the Laser Fund because that's very liquid.
Now, the laser fund has been earning for him 9 and 10 percent. Let's just say 9% tax-free.
The mortgages on the rental properties were at 4.5%. Four and a half percent, tax deductible in
a 33% bracket is only a net of three. So, every million that he borrowed on rental properties,
he pays 45,000 a year in mortgage interest but that's deductible on his schedule E or his LLCs
however he owns those properties. So, he's really only selling out 30,000 for every million. 30,000,
he's making 90,000 more on the equity he pulled out. How much more is 90,000 than 30,000? 300%
more. Would you hire an employee for 30,000 that made you an extra 90,000?
Would you hire employees for that? Would you even buy a widget machine that made you 3
times what it costs? See, that's a 300 return on employment cost or equipment cost. So,
he was making so much money. He goes, "My heavens, Doug. What am I going to do with all this money?"
What was the byproduct of resurrecting deductions that he had been killing by paying it off?
He was able to offset the 150,000 as it showed up on the front of his 1040 tax return with new
interest deductions. So, he could pull out 150, he offset that with new deductions and he was able to
use the entire 150,000 because he did not have to pay tax on his 401(k) withdrawals. In 5 years, we
didn't end up with 500,000 after tax in his laser Fund. We ended up with the full 750,000. 750,000,
he's been earning let's say an average of 8.5%. That's $64,000 a year. How much more is 64,000
than the sixteen thousand he was getting out of his IRAs and 401(k)s? 4 times. You can do this.
Let me show you what you need to do next. So, just like this gentleman, when he got his a-ha's,
his epiphanies and we were able to increase his retirement income on the same asset by 4 times.
By doing what? A strategic rollout. It's simply a 3-part strategy. We got the money out of his IRAs
or 401(k)s in 5 years. Got the taxes over and done with in today's lower brackets. Even if we
had paid the full tax, he would have had $500,000 in what I call my favorite vehicle the laser fund
generating between 40 and 50 thousand a year of tax-free income instead of the 16,000. But I help
people optimize assets. I couldn't rest. I go, "You know what? If I were in your shoes, I would
resurrect some of the tax deductions you've been killing and we'll get the money out of your IRAs
or 401(k)s with no tax." Which we did. So now, he has 750,000. Not 500,000 that generates 4 times
what he was netting on the same amount of money in his IRAs and 401(k)s. If you would like to study
this example and several more, I have a chapter dedicated to that topic on this side of the book.
What? There's 2 books in 1. See, this side talks about the Laser Fund, how to accumulate access
and transfer your money totally tax-free for these types of strategies. For retirement and so forth,
tax reduction. If you learn more from the stories like the one I just told you,
then I would recommend you flip it over and read this book. This one has 62 stories just
like the one I told you that will empower you to understand this better. How to harness the
3 marvels of wealth accumulation --compound interest, tax-free accumulation, and safe
positive leverage. The ability to own and control assets with very little or none of your money tied
up at risk in that asset. But remember, leverage without liquidity is stupidity. You'll learn why.
Go to laserfund.com. LASERfund.com. Contribute a nominal amount towards the shipping and handling.
I'll cover the rest of that and I'll pay for the book and send out a copy of this to you.
There's options there to listen and learn watch and learn. But I'm passionate about providing you
with insights into opportunities that maybe you never knew existed before. So, enjoy.