This couple makes $800,000 a year totally tax-free.
In this episode, I am going to address the question, "Where the wealthy put their money
to pay less taxes?"
I've been asked this question many, many times.
You're going to get some epiphanies a-ha's as you learn where the wealthy put their money
to avoid paying unnecessary tax.
So, my name is Doug Andrew.
I've helped thousand of people reposition their assets in order to increase their liquidity,
their safety and earn predictable rates of return.
And I of course preferred tax-free.
This is where my acronym LASER comes from.
The L stands for liquidity.
S is for safety.
The R is for Return, rate of return.
And I prefer tax-free rates of return.
And so, I recommend that money be put into vehicles that pass the laser test.
Liquid asset safely earning returns.
So, when people say, "Where do wealthy people put their money to pay less in taxes?"
Well, let me show you that many wealthy people pay way more than their fair share in taxes
because of what they earn and what they do.
And they voluntarily give back to society and so forth.
That's another topic for another video in our channel here.
But the question here is where do they put it to pay less in tax or avoid paying what
I call unnecessary tax.
Well, there are just a few vehicles where you can put money and they are tax-free.
I call it the tax-free bucket.
And you may think of municipal bonds.
When you buy bonds that are offered by municipalities, you're helping a city raise money to put in
a new recreation sender or a park or whatever.
And so, you buy their bonds.
Bonds pay usually lower interest.
But they're tax-free.
So, if you only earn 3 or 4 or 5 percent tax-free, it's as good as if you're having to earn 7
or 8 or 9 percent in a taxable investment.
A lot of people think municipalities have the ability to tax people so the money is
safe.
Well, some municipalities have had to file bankruptcy in the last decade or 2.
And so, I don't think they're really the greatest.
They're not as popular as they used to be.
But they're tax-free.
The other big one would be Roth's.
Roth's allow you to fund it with after tax dollars.
And it accumulates your money tax-free.
And then when you go to access the money, it's tax-free.
But see, wealthy people can't own Roth.
They make too much money.
And so, most of the time they're savvy CPA and tax attorney refers them to someone like
me to open up what is called he Rich Man's Roth.
Now, I always snicker it that term because you don't have to be rich to have a rich man's
Roth.
But the rich can't own a Roth.
So, that's why they call it the rich man's Roth.
It is what we call max-funded, tax-advantaged index universal life insurance policy structure
correctly and funded properly.
When you do it the proper way, you'll see why I have earned average returns an excessive
11%.
If I 11, I net 10% cash-on-cash after all cost and fees.
Most people go, "What?"
I've never seen and insurance policy do that.
Well, you've never seen one structured correctly then.
Have you ever seen an insurance policy that gets cheaper as you get older?
No.
Well, then you haven't seen one like this.
Because you're self-insuring.
You put in a half a million bucks and you're earning a net return of 10%.
Your half a million doubles to a million in 7.2 years.
In another 7.2 years, the half a million doubles to a million.
Then a million doubles to 2 million.
Well, you're self-insuring because the amount of life insurance required for it to qualify
to be tax-free at the very beginning may have only been 1.2 million.
Now you have 2 million dollars of cash in there.
So, now, there is no money at risk really to the insurance company.
The insurance company will give you a life insurance benefits about 5% greater.
So, in that case, if I have 2 million dollars of cash value in my index universal life,
the death benefit is only 2.1 million.
But 2 million of the 2.1 million is my own money.
They're only charging me for the remaining $100,000.
So, the cost of the insurance goes down and gets cheaper as I get older because the interest
on the 2 million dollars is way, way more than the cost of insurance on $100,000 even
though I'm older.
What does that mean?
Right now, if I earned 11% this year on my index universal life insurance, even though
I'm 30 years older, it would net me 10.9.
If I earn 11, I net 10.9.
The cost of the insurance is draining out 1 tenth of 1%.
It used to drain out 1%.
People say, "Huh?"
It's because the cost of insurance is so much lower and the interest I'm earning is so much
greater.
You would't believe how many life insurance agents don't understand what I just said.
So, when we talk about this, I'm going to use a story of a couple who came to us and
they were able to accumulate 8 million dollars by using this strategy.
So, this couple came to us and they had about 2.4 million dollars in yet-to-be taxed IRAs
and 401Ks.
And it was pretty pathetic because their advisors said, "We would recommend you only take about
4% a year for retirement income."
Now, that's pretty pathetic.
You don't accumulate 2.4 million dollar to have a 4% pay out.
That's 100 grand a year of income.
And it's taxable.
In their tax-bracket of 4%, (they lived in California) that means they pull ut 100,000
they're only netting 60,000 on a 2.4 million dollar nest egg.
How ridiculous sis that?
And so, in 5 years, we were able to roll out, not roll over.
We got the 2.4 million out the taxes over and done with on those IRAs and 401Ks.
We earn them predictable rates of return averaging more than 10% during that 5 year period.
At the end of 5 years, even after tax, in a 40% tax-bracket.
Because I'm a tax-strategist.
We actually resurrected some deductions on their real estate, their rental properties
and so forth that they have been killing by paying them off.
That's a whole another strategy here.
But here's what happened: At the end of 5 years, we had 2 million dollars transferred
into a portfolio of indexed universal life insurance policies.
And so, we had 2 million bucks in there, tax-free.
Now, at that point, they could've taken out 200,000 dollars a year of tax-free income.
How much better is 200,000 than 60(thousand)?
Oh, a lot better.
More than triple.
They said, "Oh, we don't need the money."
If they had left it in the IRAs, they would have had to have taken out money with RMD's
--required minimum distributions.
But they said, "You know, let's just leave it there."
So, they left it there at 10%.
The 2 million doubled to 4 million in 7 years.
Another 7 year, it doubled to 8 million.
Now, they're ready to take out income.
They're in their 70's.
And they go, "Doug, how much can we pull out?"
I go, "Well, you got 8 million in there.
8 million at 10% can generate 800,000 a year of tax-free income without depleting your
nest egg if you live to be 120."
They go, "We don't need 800,000.
We only need about 300,000 and we'll e living high on the hog."
Now, how envious would that be?
So, they've been pulling out 300,000.
They're making 800,000.
So, they're making a half a million more than they're needing.
My heavens, it's growing.
That is growing from 8 million to 8.5 million, 9 million, 9.5, 10 million.
And it's still providing $300,000 a year tax-free income far better than 60,000 their IRAs and
401Ks were going to give them after tax.
Are you getting it?
And so, this couple has 8 million bucks where they could pull out 800,000.
They don't need it.
You don't have to take it.
If that was an IRAs or 401Ks, you would be required to take out more than that.
They don't have to.
So, they're taking out tax-free income.
It will last as long as they do.
But when they finally pass away, that 8 million will actually blossom in value to more like
10, 11 or 12 million and transfer totally income tax-free to their spouse, to their
kids, to their charities.
There's not an IRA or 401K or a Roth around that will do that.
So, you ask the question "Where do wealthy people put their money to pay less in tax?"
This couple went from the highest tax-bracket in 5 years to a zero-percent tax bracket.
I can't do that for everybody.
Sometimes I transfer about 60% of people's income off of their tax return by using this
strategy.
And they still have to pay tax.
But it's way less than they we're going to pay.
I recommend that at least 60% of your retirement income be totally tax-free.
Not even show up in your tax return.
This is one couple you can read about in my book.
They have been in a zero percent tax-bracket since the 5th year when we started this plan,
the strategic roll-out.
So, that's where wealthy, savvy, smart people put their money.
They're helping out this great country far more because they don't need the money but
they're using that for all kinds of benefits.
They're not a drain on society.
They're putting their money out in charitable causes that are better manage than maybe giving
it to the government and having them spend it as they see fit.
And so, we've helped many, many people redirect otherwise payable taxes to causes they support.
So, what's the takeaway?
Sometimes people ask, "Well, what if they had continued to postpone taking money out
of those IRAs and 401Ks and just taken RMDs?"
Well, at best, we calculated that maybe that would've generated enough to give them 4 million
dollars.
Not 8 million.
But 4 million if the market was incredible.
But 4 million dollars at a 4% payout which is the financials services industry's standard,
you take 4% of 4 million, that's 160,000.
Hello?
What would you rather have?
160,000 and have to pay tax on a 160(thousand) to only net 100 or 120 (Thousand).
Or have 800,000 tax-free?
This is where wealthy people put their money.
If you want to learn how to do this, you don't have to have a ton of money to do it.
You can do one of these laser funds for a thousand bucks a month.
If you're young, $500 a month.
To learn, I want to gift you a copy of my most recent best selling book.
This is my 11th book.
It retails for $20.
I want you to claim a free copy of the laser fund.
300 pages of charts, graphs and explanations and 62 actual client stories like the one
I just told you.
This actually is free when you go to this website and claim your copy.
LASER, L-A-S-E-R, ."com".
You pay $5.95 shipping and handling.
And I'll pay for the book.
There's options in there to get the audio and additional video instructions.
But the beginning point is to learn by reading.
Internalize these examples and figure out how this can benefit you so you can become
wealthy and not pay as much as in tax by redirecting it to other causes that you support.