Change earned, passive, and portfolio income to tax-free.
In this episode, I'm going to address the question "How to reduce the amount of tax
you pay?" And it's actually easier than you may think. But I'm going to enlighten you on
the 3 types of income we pay income tax on. And basically, you just shift a lot of your income
over to income that is not classified as those 3 types of taxable income. So,
get ready to gain insights into opportunities that maybe you didn't know existed before.
So, my name is Doug Andrew and I've been a financial strategist,
retirement planning specialist for more than 4 and a half decades. I've been very blessed in my
life to have authored 11 books thus far. In fact, I have a goal to release a new book every year to
the rest of my life. And we've been fortunate because many of them have not
only been bestsellers but New York Times and Wall Street Journal number one best-sellers.
They're stacked here behind me on the right. In my books, I often talk about the 3 types
of income that Americans pay income tax on. And this all started back in 1986.
This was the 1986 tax reform act passed by President Ronald Reagan in his second term. And
ever since 1986, there have only been three types of income Americans pay income tax on --earned,
passive, and portfolio income. So, let's go through and define what those three
are and how you can take your income and get it out from underneath that umbrella of taxable
income. Now, before I share those 3 types of income and how to transfer money over into income
that is not subject to tax under the internal revenue code. And this is not a loophole. If you
know somebody who is intrigued and wondering how to reduce the amount of tax they pay,
recommend this video. Subscribe and also search some of the other topics that are related to
this one. Now, earned income would be income that you earn from actually working --wages, salaries,
things like that. That's you going to work. Now, there's three sources of money. There's
mankind at work, money at work, and charity. So, most people, they're trying to save enough
money to have their money provide income which is great. So, when you put money to work, you often
receive that income or that increase with passive income or portfolio income. Passive income,
simply put would be like rental income or lease income, if you owned real estate or you leased
out machinery or equipment or boats or whatever. That's called passive income. Portfolio income
is where you earn interest, dividends, and this is where most people have their money in mutual
funds or bank accounts or credit unions or what have you. Most people's RAs and 401(k)s
are earning money as portfolio income and you defer paying tax until you retire until you have
to pay tax on that. So, those are the 3 types of income Americans have to report on the front of
their 1040 tax return. So, let me simplify this. If you have income that is not classified as one
of those 3 types of income, there is nowhere on a 1040 tax return to put it. It's tax-free.
It's not a secret. It's not a loophole, it's not one of those 3 types of income. You don't have to
pay tax on it. People say, "Well, what would that be?" Well, I'm going to share with you
what that would be. But let me tell you a story. I'm going to give you a dramatic story that is
actually told in my latest best-selling book The Laser Fund. And if you stay to the end,
I'm going to show you how you can claim a free copy of that book for you. It's 300 pages
containing 62 actual client stories like this one. This couple came to us. They lived in California
and they were being taxed to death. They were in the highest tax bracket. If you are not aware,
I mean, California will tax people up to 13.5% on top of the federal income tax. So, these people
were in a 39.6% federal income tax bracket. On top of that, another 13.5%. And so, they were
paying more than 50% of their income in taxes. They had done very well in their lifetime. And
they had 4 million dollars of tax-deferred money and IRAs and 401(k)s. And now, by taking it out,
they were going to have to start paying tax. When they learned about the Laser Fund, they wanted to
convert that 4 million of yet-to-be-taxed money and IRAs and 401(k)s over to tax-free income.
Well, they're going to have to subject that to tax. So, they performed a strategic rollout.
This was not a rollover. A rollover would be like taking money out of a 401(k) and rolling over to
an IRA and continuing to defer. And then people have to take out required minimum distributions
or they're going to be penalized 50% starting at age 72 if they don't take out the money the
government wants you to take out. Because the government wants their share, okay? So,
instead of doing that, in 5 years, we got that 4 million dollars out of their IRAs and
401(k) strategically. We took care of the tax. We actually resurrected some deductions that they had
been killing. And when we got all through because we were earning really good rates of return, even
after tax, after 5 years, they still had 4 million left after paying the tax on that. It's pretty
incredible. But this is what happened: We took them from the highest tax bracket over 50% to a 0%
tax bracket. Now, we can't do that for everybody. And I'm not necessarily recommending that you
do this. I would recommend that when you retire that 40 to 60 percent of your income is tax-free.
It's not deemed, earned, passive, or portfolio income. This couple went
"Why not 100%?" So, we did. Do you know that has doubled now in the last 7 years because they've
been averaging over 10% the last 7 years. They now have 8 million. 4 million grew to 8 million
tax-free. That 8 million... Now, if they keep earning 10%, that's 800 grand a year. They said,
"Doug, we don't need 800,000 a year. We could never spend that much a year in our life forever."
They only take out 300,000. In other words, they're earning 500,000 more
this year than what they need to live on. I mean how nice of a problem is that?
And so, here they have 800,000, they only need 300(thousand) of it. So, the other 500,000 keeps
compounding and growing tax-free. We took their income off of their tax return. Let me simplify
this. This isn't this couple's only income. They have social security and so forth. But
if you have income that is not deemed earned, it wasn't earned income, passive or portfolio income.
There's nowhere to put it on a tax return. Do you know I actually have clients who have incomes
of $50,000 a year, $100,000 a year, $200,000 a year. They don't even have to file
a tax return. Because if you have no taxable income there's no need to file a tax return.
The IRS knows they're receiving the money. The IRS knows everything. But they know it's not
taxable. It's not even worth auditing because for over 107 years, the money in a laser fund,
a maximum-funded, tax-advantaged index universal life insurance contract has been tax-free,
no question. They don't even audit them. We took this couple from the highest tax bracket to a zero
tax bracket the rest of their life. Can this work for you? I don't know. But let me share
with you what you need to do to analyze this and then I want to empower you with education.
I want to gift you a free copy of my most recent best-selling book so you can learn how this may
apply in your set of circumstances. So, how do you reduce the amount of taxes you pay?
Well, I have this software that I developed years ago, I think it's the only software on
the planet that shows people the darkness of the night, how much tax you'll pay if you string out
your retirement income by deferring, deferring and taking out only the minimum thinking you're saving
tax. When you add it all up --the tax you pay every year through your lifetime, your spouse's
lifetime, your kid's lifetime, when you leave it behind to your children. Because that's what most
people tell you to do. "Oh, if you don't need the money, stretch it out. Take the required minimum.
Leave it behind to your kids." Do you know if you leave behind an IRA or 401(k) to your kids, they
have to pay tax on it now within 10 years? They can't use it for their retirement unless they're
retiring right after you. And so, the government wants their share. I show them that they would pay
a quarter of a million, a half million, a million of unnecessary tax by stringing it out. They were
flabbergasted and say, "That's all I have in there right now". Well, yeah, because you're
going to keep doing this. Uncle Sam is going to be your partner forever. People say, "Well,
why do they tell you on CNBC to take required minimum distributions and stretch it out?" And
I go, "Who's funding CNBC?" Government revenuers. Why would they ever tell you to kill a partnership
where the government gets a piece of everything you will ever, ever make if they can keep that
partnership alive through your lifetime, your spouse's lifetime, and your kid's lifetime? Why
would they destroy that partnership? See, in this strategy, you get the taxes over and done with.
And then you convert to tax-free. I have dozens of stories of people, school teachers,
real estate gurus, doctors who we have saved them a quarter of a million, three-quarters
of a million, 1.2 million of unnecessary tax where we take people from maybe the highest tax
bracket to a zero percent tax bracket by doing a strategic conversion, a roll-out. You got to get
the taxes over and done with sooner than later. But then take the after-tax monies and put them
into something that's going to be tax-free from now on. What is that? My favorite instrument
is what I refer to as the Laser Fund. LASER is an acronym that stands for liquid assets
safely earning returns. Technically, it's a max-funded, tax-advantaged insurance contract
where you're taking the least amount of insurance the IRS will let you get away with and putting in
the most money that the IRS allows under three tax citations. And this thing turns
into a tax-free cash cow. I have earned returns between 7 to 10 percent tax-free for the last
40 years. The laser fund, every million can generate 60, 70, 80, 100 thousand a year of
tax-free income into perpetuity which is double or triple what most IRAs and 401(k)s can generate
if your money is in the market. So, let me show you how you can learn more about this
laser fund and see how it may apply in your particular set of circumstances. The laser fund
has actually been grandfathered in the internal revenue code for over a century. If you go, "Well,
how come I've never heard about it?" Well, it's interesting how many people do not know what they
don't know because you can't be aware of something you're not aware of. So, this is what motivated
me to write so many books. And my most recent book is called The Laser Fund: How To Diversify
And Create The Foundation For a Tax-Free Retirement. This will tell stories because this
side is about 200 pages, 14 chapters with all kinds of charts and graphs. If you learn more
by stories, you flip it over. And this side is 12 chapters with 62 actual client stories. So, it's
a right-brain, left-brain approach. The Laser Fund can be yours. It retails for 20 bucks. This isn't
about selling you a book, okay? I want to gift you this book. I'm into empowering people like you.
And so, if you go to laserfund.com, LASERfund.com and you contribute a nominal amount towards the
shipping and handling, I'll cover the rest of that cost. And I will gift you this book for free.
To claim your free copy, go there now. Subscribe to this channel. Watch this next video and begin
to learn how the laser fund can be used not only for a tax-free retirement but a tax-free emergency
fund, college education fund, working capital for your business, real estate management. You have no
idea. This is like a financial swiss army knife. It has so many applications.
So, many ways that you can accumulate access and transfer your money totally tax-free.