Use the ultimate rich man's Roth. In this episode, we are going to address the
question "What is the best way to have the greatest flexibility with my
retirement savings?" And so, we're going to do a little deep dive into what many savvy
CPAs and tax attorneys call the rich man's Roth. But you don't have to be rich
to have one so. I'm Doug Andrew. And I've been a financial strategist for more
than 45 years. And I helped many, many thousands of clients optimize their
financial assets, minimize unnecessary taxes and prepare for retirement to not
outlive their money empower their true wealth and just enjoy life and not have
to worry about money. I love taking them through a meaningful
transformation. But one of the little Beatitudes that I've used for years is
"Blessed are the flexible, for they shall not be bent out of shape." And so, in any
financial plan, I would always build in tremendous flexibility. Because frankly, a
lot of Americans, a lot of people in the world when they start saving for a
long-term goal like retirement do not have flexibility. Because life is full of
surprises and curveballs and all of a sudden this happens. And all of a sudden
you have a surprise child on the way or or this or that happens. Or the economy,
or you lose your job, or the corona virus comes out and and people all of a sudden
lose all the ground they gain the last 2 or 3 years when the market takes
a nosedive of 30 or 40 percent. This is going to keep happening. And so, you want to
have flexibility in any financial plan so you don't have that opposite, that
that rigid system where your money is trapped and "I can't get it because if I
do there's gonna be a 10% penalty if I touch it before age 59 and
a half. But Doug, I... and I'm really hurting. I
need to dip into that IRA or 401K. Or golly! The value is only this. I want to
wait till it gets back up to this value." I want to in this episode explain to you
what I think is one of the greatest flexible places to have your serious
cash so that no matter what curveball life throws at you, you can bounce back,
you can have resilience, you don't lose. You have all kinds of flexibility. And it
is what many savvy CPAs and tax attorneys when I teach them in advance
continuing education. They go, "Whoa! That is like the rich man's Roth." And I go, "Well,
that's nice. But you don't have to be rich to own one. But the rich can't own a
Roth." So, stay with me here. I'm going to show you the difference between a Roth and
what we call the rich man's Roth or what I call the Laser Fund.
91% of Americans unfortunately, I think are duped into putting their long-term retirement
savings into traditional IRAs and 401Ks. Why are they duped? Because they're told,
"Oh, put pre-tax money into an IRA or 401K." You'll have more money in there. It will
grow to a bigger sum because so many people don't realize you don't choose
investments based upon which ones grow to the most. Because if you do a
traditional IRA or 401K, they say, "Well look, it grows to the most." No, you should
choose your investments based upon which ones will generate the most net
spendable income to you at the time in life when you're going to need the money
the most. You have to subtract the taxes you're going to pay on the back end. What
inflation is going to do and so forth. So, traditional IRAs and 401Ks are pretty
pathetic. That's why occasionally, you'll see
articles like Time Magazine in 2008 after so many people lost 40% for the
second time in that decade. They had a cover page article why it's time to
retire the 401K and do something better instead. They called a 401K even an IRA
a financial flop. Rotten repository for our retirement reserves. They were
talking about it because of the market volatility and how people lost their
future. Well, I wrote an article years before that titled "Why Congress's Penalty
an IRA and 401k Snake Oil?" See, it's the best savings bond the government ever
came up with for themselves because they're telling you you're going to be in a
lower bracket. And most people are not in lower brackets when they retire. That has
not been the case for over 25 years. The government has a permanent tax lien on
that. So, they're using you as their partner so at the end of the day, they
get 25, 35, 40 percent of whatever is in that IRA or 401K whether you leave it
there, wait till you're 70 and a half, or now 72 and you have to start taking out
the money. It's taxable. And so many people get caught in that snare and
they're told to take RMDs, required minimum distributions, which is the worst
advice I've ever heard. And I have other episodes that explain why. But see
traditional IRAs and 401Ks have failed most Americans. That's why a few years ago
The Wall Street Journal in January had an article that said that the original
champions of the 401k lament the day they ever came up with that idea. Because
again, people had it in the the market. The biggest reason to me is people
aren't in lower tax brackets. And yeah, they should be protected from market
volatility. And so, I like to use the Laser Fund, it's what I call it. LASER is
an acronym that stands for Liquid Asset Safely Earning Returns. But this is what
the CPAs and tax attorneys call the rich man's Roth. Now, a Roth is a step in the
right direction. it was passed in 1997. And Senator Harry Roth and realized that
the government was hard up for money. They didn't do it for you and me
particularly. It may not be a bad strategy for some people to convert to a
Roth. They did it because they needed tax revenue. And if people converted to a
Roth, it would trigger taxes. Well, let's take after-tax money and have it be
tax-free thereafter so that when you retire its tax-free. So, Roth's have 2
advantages. You take after it's money. You fund it with after-tax
money because you believe in the future taxes will be higher, which most people
believe. So, this is a better strategy. If if taxes go up in the future, I can prove
a Roth will probably provide about 33% more in net spendable income than the
same amount of money in a traditional IRA or 401K. But I don't own an IRA or
401K. Never have, never will. But I don't own a Roth. Never have, never will.
Because Roth's have just 2 advantages. It accumulates your money tax-free,
that's a good advantage. And you can take it out tax-free. The laser fund has been
structured under the Internal Revenue Code for over a century to do that. You
can accumulate your money tax-free. You can access it tax-free. It's a maximum-
funded, tax-advantaged insurance contract. And if it's structured correctly, you can
earn like I have 8 to 10 percent average. I mean, some years I've earned
25% up to 55% one year. But on the average, I earn between 7 to
10 percent. Some years, I only earn zero or one. In other words, I don't earn anything but
I don't lose. Because when the market goes down, I don't lose. And that's called
indexing. But going back to the advantages of a Laser Fund, here are 4
additional advantages that create the flexibility that allows me to deal with
life no matter what happens that Roth's do not offer. So, a Laser Fund, you don't
have to be rich to own one. I mean you could set one up for 500 bucks
a month. But see the rich can't own a Roth, they make too much money. So, here's
the 4 additional advantages that the Laser Fund has and why it's called the
Rich Man's Roth. If I have a banner year and I want to sock away
$300,000, I can set up a laser fund to accommodate that. You cannot put
in that much money into a Roth unless it's a rollover one time or something.
But let's say 4 days after I put in 300,000 I need
250,000 back for some emergency or opportunity. I can do that
with an electronic funds transfer phone call. There's no IRS penalty. You can't do
that with a Roth. If you put it in you have to leave it there for
five years or till you're 59 ½. You can't put in that much money. Also, if
I can put in 300,000 and I don't. I only put in let's say 10, 20, 50
thousand and I do that for 2 or 3 years. And all of a sudden, I have a huge
windfall of a million bucks. I can make up for all the money I could have put
into my Laser Fund that I didn't. I can put it in one fell swoop. You can't do
that with a Roth. If you don't put in or what you are allowed to in the second
third, fourth year, then you can't retroactively go back and make up
for it. No. It's all a silo every year. So, a Laser Fund has that flexibility where
I can put in nothing, I can put in a little amount, I can put in a whole bunch.
I can take it out. I can access the money. The big advantage is if I need money, I
can access it for any reason. It doesn't have to be for some hardship or whatever.
The fifth biggest advantage is with the Laser Fund, I can use indexing so that
when the market goes up, I make money. When the market goes down, I do not lose.
I may not make money but that way I'm able to make money tax-free. When the
market goes down, I don't lose. And the final is that whenever I pass away, none
of us are getting out of here alive. I mean out of this life. When we ultimately
pass away, if you have a Laser Fund, it blossoms in value instantly and
transfers tax-free to your heirs, your kids, grandkids, a church, a charity, the
Boy Scouts the Red Cross whoever you want to leave it to. It blossoms. What do
I mean by that? If I died right now, I'm 67. If I had a million in this Laser Fund
account, let's say. If I died, that million would blossom right now to about 2 and
a half million and transfer tax-free to my wife or to my kids or to my church.
Whoever I leave it to. There's not a Roth around that will do that. People say, "Well
how much does that cost?" That's not the question. How much did it make you? I've
been earning an average of 11% for the last 25 years netting
10, 1%. You know I would have to be earning 15%? In any other investment to
net 10? But see, I only have to earn 11 to net 10. That's one percentage point. That
would be going out the window and unnecessary income tax if I had a
traditional IRA or 401K. And so, that's what pays for it to blossom in value
because it transfers into a tax-free insurance proceed under Section 101 A.
It's the only vehicle in the Internal Revenue Code that allows you to
accumulate your money tax-free, access it tax-free .aAd when you die it blossoms
and transfers tax-free. And there's not all these restrictions, it's the most
flexible vehicle. So, why would I ever own a traditional IRA or 401K or a Roth when
I can have the 2 benefits of a Roth and 4 additional benefits with tons of
flexibility. Click on this episode. Watch it and in there you'll learn how you can
go to laserfund.com. Laserfund.com. That's the title of my book. I'll pay for
the book. I'll send it out to you. You pay $5.95 shipping and handling and you can
learn how you can have what people call the rich man's Roth. And you don't
necessarily have to be rich to own one. But someday you will be rich because you
do own one.