Hello again. In this episode, we are going to address the question of "Why deferring
tax in RMDs will actually cost you more?" Yeah. This is my son Emran. And he's
been involved with me since you were very, very young.
He's a co-author with me on 2 of our best-selling books.
We're going to dispel some myths here that the best way to preserve assets is by
taking the minimum or the RMD --required minimum distribution out of an IRA or
401K. If you don't need the money starting at age 70 and a half. Also, that
it's the best way to pay less in tax, you're going to be shocked with what he
shares with you. And that it's the best income option? No, it isn't. So, put your
seat belt on. You're going to be blown away in some facts that most people don't
understand even CPAs and tax attorneys.
Like Doug mentioned, most people tend to put off pulling money out of their IRAs
and 401Ks and just take advantage of the required minimum distributions at age
70 and a half. Because they think it's the best way to preserve the asset it's
the best way to minimize their taxes and it's the best way to generate the
greatest amount of income. But as we're going to see here, that just isn't true. I'm
going to take a 62 year old male that I met with recently here. And take a look at
the situation he was in. Now, when I look at the numbers, I want
you to be able to interpolate the numbers. It doesn't matter whether this
is $3,000 in an IRA or 401K. $900,000
or 1.9 million dollars in an IRA or 401k. The principles are always going
to be the same. So, what we want to see here is the difference between what if
we do a proactive strategic rollout approach versus a just traditional let's
delay until I made 70 and a half and just plow required of minimum
distributions. So, in the situation, a 62- year-old male has 1.9 million
dollars sitting in his IRA/401K. And again, his normal goal was just to
wait until 70 and a half to ensure that the money grows and has enough money and
figures, you know, wants to pay the least amount of tax as possible. Well, what we
did in comparison to that is start our strategic rollout right away. Taking
advantage of the lower tax rates and the rumi hasn't as the existing tax rates. So,
we're going to look at that comparison. But first and foremost, let's just go ahead
and take a look at the actual RMD. So, when the actual RMD at age 70 and a half,
what you're going to see is that if he delays in ways that 1.9 million dollars
is going to grow to a total of $3,264,000.
Now, that's the gross number. If you remember in an IRA or 401K,
this is not a sole proprietorship. This is a partnership. So, some of that money
belongs to you and some of that belongs to Uncle Sam.
So, based upon just existing tax brackets, you know, about 2 million dollars of
the 3.2, 2.1 would belong to him. Another million, a million
one would belong to Uncle Sam, the IRS. And so, with that in mind there, he's got
a looming tax bill. Though he doesn't have to pay it until he pulls the money
out but that's still going to go to the IRS in one form of
the other. And if I try to string it out over my lifetime, we're going to see exactly
what ends up happening here. So, instead, what we're going to look at establishing is
pulling out $200,000 a year starting right now at age 62.
Don't wait. If I pull that $200,000 out then yes, I'm going to net. I'm meant to pay
taxes. So, I'll not about $160,000. They can go into
either a Roth conversion strategy or what I would prefer is straight into the
Laser Fund tax-free just like the Roth IRA. So, in doing so, the RMD comparison at
age 70 and a half... Again, if he's got 3.2 million dollars a gross sitting in there,
he's going to have to pull out total of $119,000 as his required minimum
distribution at age 70 and a half. He'll pay taxes on that and net 77,980. So,
a net income at age 70 and a half of 77,980 not
bad. But again, if I compare that to the strategic rollout where I pulled out the
$200,000 netted 160 and put that inside
the Laser Fund. What good does the Laser Fund do for me because it really focuses
on what it can generate for me in the time of life that I needed the most. And
you'll see the Laser Fund is going to calculate an income stream of about
$233,000 tax-free. So, with my RMD, I
brought out $119,000 paying taxes, netting 77,000 and
I get to go spend 77,000 or I have the alternative inside the
Laser Fund. I get to go spend $233,000. That's
about 3 times. That's a 200% increase in his net spendable retirement income.
And that's only at age 70 and a half. Fast forward 5 more years in here, if
we fast forward 5 more years, you're going to see, I've got 3.7 million dollars
sitting inside of the 401k still or the IRA. Now again, out of that, I stole all my
taxes and so I'm only having net about 2.4 million dollars. My RMD at age 75 is
$163,000 netting me net after-tax
$100,000 that I get to go spend. Inside of the Laser Fund, it
stays the same. I'm still pulling up the same $233,000.
So, still more than 100% more income than I'm
able to access or go spend inside of the Laser Fund approach.
Now overall, tax-wise, if you simply go the RMD route, what is my cumulative
taxes I've been paying us so far? So, I've only had to pay taxes for 5 years but
if you look at that cumulatively, I'll have paid $291,000 in taxes.
So, by age 75, I've already paid 300 grand. Versus in the strategic rollout,
I've got all my taxes basically over and done with. And we'll look at the overall
comparison on that as we finish it up here. Income-wise, the Laser Fund has
given me a total over those 5 years 1,4 million dollars tax-free
compared to the RMDs. If I just plot my arm D's every year,
I've netted $551,000. So, 551 compared to 1.4, we're doing pretty good
so far. But let's keep going. 875, let's go let's just go all the way to age 100.
You're a Centurion, you live to age 100. What did we do did we pay more or less
in taxes than the RMD versus the strategic rollout? Well, as we take the
snapshot here, the balance inside of the IRA under RMDs would be approximately
2.3 million dollars netting 1.2 after tax. Compare that inside the laser fund,
I've got 2.6 million dollars of cash sitting there available for me at age
100. So, 2.6 million dollars net tax-free compared to 1.2
million dollars net after-tax. Doing better so far. Good, better, best. We're
going to keep on going. So, at the income side of things, you're going to see that I'm
still pulling out $233,000 even at age 100. So, by age 100, I've
pulled out 6.7 million dollars out of my laser fund. So, out of
my laser fund tax-free, I've been able to go and joy over those 30 years in my
retirement 6.7 million dollars tax-free versus the alternative
is just taking out my RMDs. And if I just simply access my RMDs,
I went and spent 4.4 million dollars. So, that is a... That isn't going to be a massive
difference of overall income. Taxes. Let's look at the overall taxes. Over my RMDs,
between age 70 and by age 100, I'll have paid 3.4 million dollars
in taxes. Almost 3 and a half million dollars in taxes. And I'm still not done
because I still have over a million dollars
owing in the balance when I died that my kids are going to have to keep on paying. So,
I'll pay well over for 4 and a half million dollars in taxes if I
just simply take the RMD route versus the Laser Fund? What did I pay to
transition all the way over between age 62 and age 75, I transitioned
all of my money over and pay taxes of $570,000.
What would you rather pay a tax bill of? 3.5 million dollars
on your hard earned cash or would you rather only pay $570,000
in taxes. Comparing this overall, the whole summary of it is again,
the Laser Fund has a balance of 2.6 million compared to the IRA has a net
balance of 1.2. The Laser Fund generated 7.2 million dollars of tax-free income
versus the RMDs were only 4.8 million dollars.
The laser fund total then was 9.8 million dollars of resources
versus the IRA had total resources of 6 million dollars. Folks, that's a
3.7 million dollar better result. By doing RMDs, it is costing you an
opportunity and in pure money 3.7 million dollars. This is not
just small change here. This is significant. This totally transforms your
retirement to where you can reclaim those golden years. And again, it doesn't
matter whether it's 1.9 million dollars because if it's even
$700,000, the results are still the same.
$700,000, the ratio is still by age 100, I'll have a million dollars
sitting inside of my Laser Fund compared to only $468,000
inside of an RM D strategy.
I'll have enjoyed almost 3 million dollars. 2.99 million
dollars tax-free of income coming from a laser fund versus my RMDs,
would have given me 1..7 million dollars. So, over a million
dollars more of income with only 700,000-dollar IRA. So that's a
total of 4 million dollars of total resources on that 700,000-
dollar IRA over my retirement years compared to only 2.2 million
dollars in resources if I simply follow an RMD strategy.
Making it a 1.8 million dollar better choice.
Choose the easy route. Don't keep on delaying because if you keep on delaying,
the IRS is going to take it from you, And you can reclaim an extra 1.8 million
dollars for your future. What would you do with an extra 1.8 million dollars? I'm
sure you could travel a lot more, you can see those grandchildren a lot more.
There's a lot more you could do. And if you don't need the money, fantastic! Leave
it behind to... Again, bless your loved ones inside of your own Laser Bank inside of
your own Legacy Bank. So, what can this do for you? Well hopefully, it can help you
reclaim to be able to take that future back. Take care of those loved ones.
Whether it's their spouse, your children, your grandchildren. Think of all of the
wonderful things that you can help bless them with. Whether it's a college
education, whether it's generating those moments that matter. You can generate an
extra 1.8 million dollars of moments that matter by giving them those
experiences that they're going to need to continue to succeed and follow in your
own footsteps. So, take the future. Reclaim it for
yourself. -So, did that blow you away? This is a strategy we refer to as strategic
rollouts. But people are shocked when they see the amount of tax that they're
going to pay if they string it out thinking they're saving money by taking required
minimum distributions. Hopefully, you got some epiphanies with that. If this
resonated with you because of Emerin's presentation and you want to learn more,
take a deeper dive, I would love for you to get a copy of our most recent
best-selling book. We co-author this with my other son, Aaron. The Laser Fund. And
you can click down here and get a free copy sent to you for a nominal shipping
and handling fee. But in this book, it's actually 2 books in one. This is about
200 pages, 14 chapters. All kinds of charts and graphs. And there's a chapter
devoted specifically to these strategic rollouts. If you like the stories instead
of just the graphs, you flip the book over and you read this. This has 12
chapters with a 62 actual client stories. And there's
a chapter dedicated with actual stories of how we have saved people
250 thousand, 500 thousand, a million two for to physicians I'm
thinking about. So, click down here and get your free copy and we'll see you on
the inside of that education.