- What is the second leading danger
that causes retirees to outlive their money?
This is the second of three reasons
or dangers why most retirees outlive their money.
Get ready.
This is going to surprise you,
especially how big of an impact this will be right now.
(upbeat music)
So I'm Doug Andrew.
I've been a financial strategist
and retirement planning specialist now
for nearly five decades.
I started in 1974
and I've been helping people prepare
for a comfortable retirement,
and unfortunately, a lot of Americans I feel
are duped into putting money
into traditional IRAs and 401(k)s with pre-tax dollars
being told that they'll likely be in a lower tax bracket
when they retire and just put your money
in the market.
The market will always bounce back.
Well, by the time they hit retirement,
they have some rude awakenings.
I talked in the first of this three-part episode,
this is part two,
about the negative impact of taxes.
Most people are shocked
about how much they're gonna pay in tax.
They thought they were gonna be in a lower tax bracket.
This is part two and it's the second leading danger
that causes most retirees to outlive their money,
which is sometimes referred to as a hidden tax.
So danger number two: inflation.
Inflation affects everyone
and in my opinion will double the cost of living
in less than five years.
I'm going to prove this to you.
A lot of people don't understand the negative impact
of inflation, especially right now.
And it happens because of the irresponsible spending
and the printing of money,
which the government has been printing money,
from what I understand,
five times what it was previously.
And so you can't just print money.
Show me any country in the history of planet Earth
that solved their government spending by printing more money
where that turned out good.
And we're now worse than it's ever, ever been.
Okay, so let's talk about inflation
because this is gonna cause a lot of people
to outlive their money maybe in 5 or 10 years
after retiring or they're gonna have to go back to work.
So inflation, we didn't really have a lot
of people paying attention to this
until after COVID-19 sort of hit hard for the first year.
And in the spring of 2021,
I remember CNBC, and Barron's, and Fox Business,
and Bloomberg, and Forbes, and New York Times,
and MarketWatch, they all were like (Dough gasping),
inflation for the first time in years
has exceeded 3%,
and it was 4.2%.
And I just laughed
because I know that it's smoke and mirrors.
The real rate of inflation was about triple that.
And yet this is what they report inflation was.
It's called the consumer price index, the CPI, okay?
Now, I began in 1974.
Shortly after that, Jimmy Carter got in,
and Jimmy Carter is responsible
where we had double-digit inflation.
I remember when inflation went to 10%.
My clients were able to earn 15.5% tax free
when inflation was 10
because of what I'm gonna show you here.
You have to link your returns you're earning
to the things that inflate.
A lot of financial advisors don't know how to do that.
So when I saw this, I just sort of laughed.
Why? Well, here's why.
A lot of Americans don't realize
that back in the 1980s,
the federal government said,
"We can't afford to pay Social Security recipients
the actual increase in inflation, the cost of living.
We can't afford to give them 10, 12, 15% raises.
We need to limit this."
So they wanna change the definition
or how they calculate it.
If you've noticed, that's what government does.
They change definitions to meet their standard
and this is why recently
as of the recording of this episode,
all they did was basically change this big spending package
and called it the Inflation Reduction Act.
And everybody goes, "Oh, okay, we're for that."
And of course, many Congress people voted for that
because they'd changed the name.
And most savvy people go,
"This is not going to reduce inflation."
Well, folks, back in the 1980s,
all the way from 1981 to 2021,
this is a 40-year period, after they changed,
the government basically changed comparing
the same basket of goods
to the identical basket of goods,
the cost, the price one year later, apples to apples,
they changed it from apples to oranges so to speak.
So basically, they can compare the price
of an eight-once filet mignon steak last year
to eight ounces of hamburger this year if they want.
And so this red line shows
what the government said the inflation rate was
under the CPI based upon how they chose to report it.
The blue line shows what the real cost
of living increase was and it was about triple.
So when they said inflation was 4, I went 12.
Later on, they thumped themselves on the chest
and said, "We're gonna give Social Security recipients
a 5.8% increase."
It was actually over 15%.
And then in 2022,
they said, "Oh inflation's 9%."
Well, it's more like 27%
and most Americans do do the math.
I mean, they go to the gas pump and go,
"This is up double, even more."
They look at the price of used cars.
They look at the groceries and eggs and meat,
and they look at homes,
and they go, "This is 20, 30% more.
Not 9% more."
Yeah, people who understand economics get it.
They don't just believe what somebody tells them.
So this is from 2005 until 2021.
You see the big difference
between what they report inflation
and what the actual inflation rate is.
So it's smoke and mirrors.
This is why for years I've had an acronym, TIME.
I love protecting people like you
from the negative impact of taxes, inflation,
market volatility, economic uncertainty.
And I do that by maintaining LASER focus with their money.
LASER is also an acronym.
It stands for liquid assets safely earning returns.
In fast, it's the title of our most recent bestselling book
we just printed the eighth edition,
and we're sending out thousands of these.
I don't want you to miss out
so stay with me to the end
and I'm gonna show you how you can claim your free copy
of this book.
Now, folks, let me just teach you something about inflation.
We're gonna use simple rule of 72 math.
What's rule of 72?
Most people think well, okay,
if you take the interest rate you're earning on money,
it will tell you how fast your money will double.
Now, I'm gonna use 7.2%
because my favorite vehicle, the LASER fund
in the worst decade since the Great Depression,
2000 and 2010,
people earned 7.23%.
A million doubled to two million in a LASER fund tax free
whereas most people in America,
their million was still only worth 630,000
at the end of 2010.
Now, at 7.2%, it means
that your money's gonna double every 10 years.
7.2 into 72.
If you started out with 125,000 one lump sum,
it would double to 250 in 10 years,
500 by the 20th year, and a million.
So let's say you did this.
I've had many clients who have done this
and they have a million dollar nest egg.
So this is what more retirees think.
They have a million dollar nest egg earning 7.2%.
So you theoretically ought to be able
to pull out 72,000 without depleting principal, right?
You pull out 72 and you owe 24,000 in tax
in a 33% combined federal-state income tax bracket.
You pay 24,000 or 1/3 in tax,
you only have 48,000 a year,
which is 4,000 a month to buy gas, groceries,
prescriptions, golf green fees.
And you go urg,
well, if I really tighten my belt,
maybe I can get by on 4,000 a month.
Well, let's use the rule of 72 to calculate inflation.
It's real easy.
Let's say inflation averages 5%.
5 into 72 is 14.4.
The cost of living will double in less than 15 years.
So if you could get by on 4,000 a month
when you first retired, in less than 15 years,
that 4,000 would only buy what 2,000 buys today.
That's called purchasing power.
Or you will need to have 8,000 a month
in order to buy the same gallon of gas
and loaves of bread that 4,000 a month buys today.
That would require you pull out twice as much money
and your million dollar nest egg
will be gone in less than 11 years.
Okay?
Now, that's just inflation, let alone taxes.
Now, folks, if you live 30 years,
which some retirees between the husband and wife,
one of you might make it to age 95
if you retired at age 65
or age 90 if you retired at age 60.
That means you're gonna need 16,000 a month
to buy the same gallons of gas
and loaves of bread that 4,000 a month buys today.
That's at 5% inflation.
What have I been talking about?
At 7.2% inflation, it doubles every 10 years.
At 10% inflation, it doubles every 7.2 years.
At 12%, every 6 years.
Inflation has been over 15,
at 15% divided into 72.
The cost of living will double in 4.8 years.
Yeah.
You're gonna need twice as much money
in less than five years from now
and it's not gonna get any better.
They can't correct that just like that.
And so you're gonna need twice as much money,
which means you're gonna have to pull out double
in order to net the same amount
because of inflation
that the government has been spending money printing it
and that's what causes inflation.
And that's why so many politicians
don't even understand economics.
So folks, instead of deferring
in IRAs or 401(k)s,
and deferring the tax,
what I've been talking about,
that's just increased taxes.
That's the first danger.
But even if you accumulate your money
and it's tax free,
if you don't have a strategy
where you link your returns
to the things that inflate,
you may outlive your money.
That's why I've often talked about four phases
of retirement planning:
the contribution phase that overlaps the accumulation
with growth, hopefully on your money
and then when you go to the distribute the money,
and then when you die, anything that's transferred.
Most people are crawling around this race track.
We call it the million dollar dash
and they contribute after-tax money
into banks and credit unions, and mutual funds.
They pay tax every year on the interest and dividends
that's tax discerned.
They pay taxes on any gains
and it's taxed when you die.
It's the worst way to save,
and the most common way people save.
If you put after-tax money into a tax-deferred annuity,
let's say, you pay after-tax contributions
and then when you start taking out income,
it's taxed LIFO, last in, first out.
The last money earning the interest
is the first money coming out.
You only have one green circle.
And so rather than do that,
I would recommend that you understand
that a dollar doubling to two, four, eight,
16, 32, 64, 128, it will grow to a million dollars
if it doubles 20 times if it's tax free.
But if you had that dollar doubling to $2
and you pay tax in a 25% bracket,
you only have a buck 75.
That doubles to 3.50, you only have 3.06.
You only have 72,000 instead of a million.
In a 33% bracket, which most people are in,
you only have $27,000 instead of a million.
This is why most people will outlive their money.
But if you thump yourself on the chest
and say, oh, I have my money
in a tax-deferred IRA or 401(k),
well, what's happening here is you're saying well,
I have instead of no green circles or one green circle,
I have two green circles,
I get to contribute pre-tax dollars.
I get a tax break on the contribution
and the accumulation.
But then you agree to pay tax.
Okay?
And again, if you watched my first episode
in this three-part series,
you're not gonna be in a lower tax bracket when you retire
if you save very much.
So what my suggestion is is you contribute after-tax dollars
into a vehicle that allows you
to accumulate your money tax free.
And then you can access money tax free,
and when you die, it blossoms and transfers tax free.
You may think I'm talking about a Roth.
No, I've never owned a Roth and I never will.
An MFTA 101(a) alternative,
that's a section of the Internal Revenue Code
that has been around for over a century
that allows me and can allow you
to accumulate your money totally tax free.
You can access it tax free,
and when you die, it blossoms.
If I died tomorrow,
every million I might have here
would blossom to about two and a half million
and transfer to my wife.
There's not a Roth around that'll do that.
And I don't have to pay for that.
It's paid for with otherwise payable tax
most people pay down here.
So folks, in my various books and strategies,
I show people how you can actually
resurrect deductions indirectly.
And you can end up with four green circles.
That's not what this episode is about.
You can watch other ones
where we've actually helped people do this.
The point is this, I want to help you
have at least three or four green circles.
So the second of the three biggest dangers is inflation.
And my suggestion is that you link your returns
to the things that inflate
'cause when we experience inflation,
I don't like inflation anymore than you
but it doesn't hurt me.
I sort of come along for the ride.
Back in 1980 when inflation was 10,
my clients were earning 15, 15.5.
Last year as of the recording of this episode,
inflation was well over 15.
Many of our clients locked in gains last year
of 25%, 61% and even 158%.
You can see and learn how
in our updated version of this book
that I'm gonna gift you.
Here's how you claim your free copy of this.
You simply go to lasterfund.com, laserfund.com.
Click on the link below.
And you contribute a nominal amount
towards the shipping and handling.
I'll cover the rest of that
and I'll pay for the book.
And I'll fire out a hard copy to you.
There's options there if you would like
to also listen and learn or watch and learn.
Check out some of the educational webinars we teach
that are free.
And you can even schedule an appointment
to talk to an IUL specialist
to see how a LASER fund could be designed
in your particular set of circumstances.
But this is really about you
and your brighter future.
You'll see how the LASER fund eliminates
the three biggest dangers
that cause most retirees to outlive your money,
and you will be immune, you'll eliminate those dangers.
(upbeat music)