Let’s talk about professional service, and who gets paid for what.
Let’s talk about professional service, and who gets paid for what.
Americans are, in ever increasing numbers, beginning to understand many of the expectations they’ve been led to believe about their employer retirement plan are nothin’ but 401k fantasies.
Transcript: Hi this is Jeff Brown the “BawldGuy”. Today we’re going to talk about your 401K at work, and what a fantasy it is. It’s not your retirement income. It’s designed to increase. You know whose it is. Look, here’s the evidence. There’s a corporation that’s called DALBAR. Every year, they do a 20-year review of the average yield gotten by tax payers with their employers 401K. You know what it was the last 20 years? Around 3.5% a year. Yeah, you’re going to brag about that, right? An EIUL, on the other hand, all that is is an insurance policy, it stands for equity index universal life. The income it produces in retirement is tax-free by definition. Your 401K income isn’t. An EIUL can be taken at any age. A 401K, you’ve got to wait until you’re 59-1/2. Now look, you can borrow from an EIUL. It has cash value after a certain number of years, like any policy. Borrow from it. Don’t borrow from it. When you borrow, pay it back, don’t pay it back. It’s up to you. Your 401K? You can only borrow 50% of the value, up to $50,000 no matter how much you have, and you’ve got to pay it back in five years with interest, or they’ll be knocking on your door. EIULs can be employed seamlessly and synergistically with your real estate investment plan when it comes to retirement income. You don’t have to do things the way everybody tells you to do. Take what you’re putting into your 401K. Redirect it to an EIUL. Tax-free always beats after-tax when you have to pay the tax yourself. Why don’t you reverse what the plan’s really about, and make the plan about your income, and make that income tax-free whenever it’s on your menu to do so. This is Jeff Brown, the BawldGuy. I’ll catch you next time.
Does tax free retirement income for life interest you? Take a look at the EIUL.
Transcript: Hi this is Jeff Brown the “BawldGuy” again. Today we’re going to talk about the synergy that you can use between real estate and creating tax-free income from what’s known as an EIUL. Now, we don’t need to get into the specifics about EIULs. Just understand they’re an investment-grade type of insurance policy, and the EIUL stands for Equity Indexed Universal Life. It was created a little over three decades ago by E.F. Hutton – ironically, not to create tax-free income, but to put assets in to get away from the tax man. It also creates this, and this is what a lot of people use it for. What happens is you can use your investments in real estate, together with what we talked about with cost segregation, and the synergy created by those two strategies. And if you remember from our last video, our investor ended up with a little over half a million dollars in tax-free cash. Now, they probably own many more properties. We’re just using a segment of their real estate portfolio to get this done. So they take this half a million or more – let’s just call it half a million, because it’s an easy number. Usually what you do, because I know how you are, you take $100,000 out and get that RV or that bass killer you wanted. Then you take $400,000, and you get what I call a one-pay EIUL, but really, because of one of the rules the IRS has, you have to make five payments over four years and a day. What that gives you, over the next twenty years – thirty if you can do it – is an income that will probably be somewhere in the vicinity of $5,500 to $9,000 a month for life, tax-free. And you did this with your real estate. You paid no taxes on the real estate, because you used that synergy. The money you can just forget about; there’s no monthly premiums. It’s just done, and it was all without paying any taxes whatsoever. And it’s just another bucket that is tax-free income at retirement. It’s there for life. If you want to borrow from it at some time, it’s not like your 401, it’s your money – take it. It’s not even a taxable event. When you pass away, you’re worried about your heirs – unlike your 401, it’s not even considered; by definition of the Internal Revenue Code, it’s not part of your estate; there’s no taxes on it. Now, here’s the bottom line. What you’ve done is you’ve taken two completely unrelated investment strategies and combined them to create $50 to maybe $120,000 a year in tax-free income for life, beginning at your retirement. If you can beat that, give me a buzz – I’ll sign up. Hey, thanks for listening, thanks for watching. This is Jeff Brown, the BawldGuy. I’ll see you next time.
Ever wanted to see a case study of real people, in real time? Here’s a case study summary.
Transcript: Hi this is Jeff Brown the “BawldGuy”. What we’re going to talk about today is an actual case study. This case study is less than a year old and is ongoing. Let’s lay down what we started with and I’ll take you through the numbers. This is a couple in their late 30‘s, their household income is in excess of $150,000, it probably should hit $200,000 pretty soon. They both work, there are no children, and they’re both professionals. Now here’s their numbers: they own a fourplex that they bought to fix up. They moved into it so now they’ve got two animals in one. What I mean by that is they’re living in 25 percent of it so that’s a different section in the internal revenue code. That is residence, primary residence, the other three quarters of it is purely held for investment. Now here’s the deal… their fix-up was successful, they’ve got a ton of equity and they’ve got to know what to do. Oh, but wait; did I tell you about the cash they had to start with? They were able to invest $300,000 out of the more than $300,000 they had. That was able to buy them four properties in another state. They live in southern California and their properties averaged about $250,000 to $260,000, they all cash flow and it took about $295,000 to do. They then asked, “Okay, you’ve mentioned this before, Jeff. Does it make sense, really, to do a tax deferred exchange on our fourplex? We’re actually tired of living there.” “Yes, finish the fix-up, do the final touch up” which they did. It’s a case study on what to do right, because they did it right. Now, bottom line is they sold it in about six hours. They made a ton of money. I put it in an accommodator, which is where you put money from the sale of a property you’re going to use to tax defer, we’ll talk about that in another video, but the bottom line is they’re acquiring, with that equity tax deferred, another half a dozen properties very similar to the first four they bought with the cash they had. Now, that means they’re going to close with ten properties, but they’re not forty yet, they want to retire at or before fifty, that gives me about eleven or twelve years, ten years easy… they think they can do it in eight, I tell them ten, we’ll let the cards fall as they will. Now what’s going to happen is I’m going to use the synergy of cost segregation against two of their properties. Those properties are going to be paid off as fast as we can. We’re going to be like obsessed banshees. They’re going to add money like crazy. If they save and save and save they’ll be able to do this. I’ve done the calculations (my handy dandy 12C) and the bottom line is in less than sixty months, five years, they will have paid off two of these properties, which if they don’t appreciate at all, will yield them after cost of sales far in excess of $525,000 – that will all be tax free. They will then be given $100,000 because we know how it works with you guys; you want that bass killer, you want that new dually truck with the fifth wheel, whatever it is, here’s a $100,000 tax free… you’re buying lunch next time we meet. They’re going to take $400,000 and they’re going to put it with my buddy David Shafer, the EIUL expert. If you’ll remember that’s an investment grade insurance product that ends up giving you in retirement, tax free income for life. Bottom line is here’s what David said: In addition to the one they’re buying on a monthly premium basis that will come due and payable when they’re sixty-two, this one will be a one pay – actually five quick payments, but it’s going to be $400,000 in addition to what they’re doing monthly. Bottom line, what’s going to happen is, when they’re sixty-two they will have $163,000, this is not my number, the number came from the EIUL expert who did the numbers very conservatively with the real numbers of my clients, $163,000 from their sixty-second birthday until they die, tax free. Now what do they do if they retire at fifty? They’ve got twelve years to go. Well, they’ll have eight of those duplexes they bought remaining. They’ll be tax free and they’ll be generating, assuming no increase in value, no increase in net operating income during that decade and they will be generating a little over $12,000 a month, about 35, maybe 40 percent of that will be tax sheltered for another seventeen years. Now that means they’ll have to muddle along with five figures a month, most of it or a large minority of it tax sheltered until they hit sixty-two. Then they’ll have the $12,000 in change, plus $13,000 in change for the rest of their lives. This will not count what they’re doing in a third basket, which will be buying discounted notes, which we’ll talk about at another time. But the bottom line is they started with the fourplex they bought as a fixer. They saved a bunch of money that they had and they bought duplexes with that and in ten short years they created $12,000 plus in income and by adding their household income, because they could afford it, they’re frugal, they’re now going to retire from sixty-two forward with roughly $25,000 a month, the vast majority of which is either tax free by definition or tax sheltered. Works for me, does that work for you? This is Jeff Brown, the BawldGuy. Thanks for tuning in. We’ll catch you next time.
I live in the White Mountains of New Hampshire. We live for ski season here. This week the ski season ended almost a month earlier than it usually does because of unseasonably warm weather over the last couple weeks. This is on top of the season starting a couple of weeks late. People are pretty bummed here for that reason. But the reality was, other than the shortness of the season, it was good. We got in a lot of skiing this year. My son made major strides in his ability. My wife and I skied many, many days. It’s just that our expectations were not met so it seems bad because last season was a very long season. The big picture is that some seasons are like this, short and sweet. Some are even worse. We are basing our expectations on last season, which was above average in length.
Same about expectations on investing for retirement. Continue reading