How to Rescue Your IRA with a Guarantee or Two

How to Rescue Your IRA with a Guarantee or Two

Today I share with you the story of a client who recently contacted us was able to guarantee and double her children’s inheritance. Notice the keywords here: guarantee and double.

Between the checks from two pensions, Social Security, and IRAs, 69-year-young widow, JB, has enough income to continue living comfortably. However, after losing nearly 20 percent of her IRA’s value during the 2008 stock market meltdown, JB decided to set aside $300,000 for her two children. “After what happened with the stock market, I want to guarantee that my children receive at least this $300,000.”

JB’s long-time, big-company financial advisor proposed that she transfer $300,000 into a jumbo money market fund, which presently pays a yearly interest rate of 1.05 percent or $3,150. In all fairness, this proposal is an option that will meet JB’s goal. In fact, you’ve likely heard many “expert advisors” offering similar advice in the media. But the zillion-dollar question remains: Is this the best means of achieving JB’s goal? And just so we’re clear, the term jumbo means that the money market is really, R-E-A-L-L-Y huge and pays great interest.

Following a suggestion by one of her friends, JB consulted with me for a second opinion. JB didn’t tell me much, except that she has $300,000 she intends to leave for her children, and going forward she does “NOT want to lose even a dollar when the stock market crashes.”

I suggested we invest her $300,000 in an IRA contract with one of the A-rated carriers we recommend. This IRA comes with the guarantee that the $300,000 will never decrease due to market risk. In addition, she will earn a guaranteed minimum 3 percent annual interest. And if the S&P 500 Index, as defined by the contract, returns more than 3 percent in any given year, her IRA will be credited the growth up to a maximum of 6.5 percent.

So in plain language, the $300,000 is guaranteed to earn at least $9,000, and could earn up to $19,500 in interest per year, going forward. This is all covered in a written contract she receives from an A-rated company. This is not a joke; it’s a common-sense, proven, and practical approach to meeting JB’s goal.

Wait, That is Just One Part of My Proposal

For the second part, I proposed that JB purchase a permanent life insurance contract – one that will guarantee the death benefit for as long as she lives – with the guaranteed interest from the IRA. Based on my extremely conservative estimate, each year she’ll net about $6,300 (or $9,000, less 30% tax, because the $300,000 is qualified money).

We were able to get her approved with a standard rating by a top-rated carrier for a total death benefit of $230,000, for a premium of $4,923 per year. Remember, she’s 69 years young.

Under both her long-time advisor’s proposal and mine, this $300,000 will transfer after tax (based on her children’s tax brackets, which we estimate to be about 30 percent). They’ll therefore end up with a net of $210,000, after paying $90,000 in income-taxes.

Win-Win-Win

Where I turbocharged JB’s dollars was in informing her of another – in my opinion, even more powerful – guarantee that an extra $230,000 from the insurance contact will go to her children, A-B-S-O-L-U-T-E-L-Y income-tax free!

Recall that saying about the difference between night and day? Here’s a simple way to illustrate such an extreme. For the exact same $300,000 outlay, JB’s so-called advisors’ proposal will net her $210,000 ($105,000 per child) versus my plan, which will net $440,000 ($220,000 for each child) and still include all the guarantees she wanted.

I must point out that JB’s “worst-case scenario” net annual guaranteed minimum interest from my plan is $6,300, while the insurance premium is $4,923, leaving an extra $1,377 which I doubt anyone will complain about. Also notice that this interest could be as high as $19,500; however, for the sake of prudent planning, I based the plan around the lowest figure.

Of course this is a no-brainer, so JB was ecstatic and has since set her plan in motion. The most important question for you to ponder is whether you will heed your friend’s advice and seek a second opinion, especially when you’ve been with your big-company advisor for so long.

In conclusion, let me say that there is good, there is better, and then there is best. Which do you believe your hard-earned wealth deserves? Note, the above was the recommended plan for JB; yours will be tailored to your situation and will likely have a different net result.

Please contact us for your free consultation at (301) 949-4449 or http://www.laserfg.com/ to learn what kind of plan we can develop to meet YOUR needs and goals.

1 Step to Paying ZERO Income Tax

1 Step to Paying ZERO Income Tax

Last Thursday being April 15, one expected to hear a lot of “tax-talk,” but the gist of this year’s tax conversation was particularly interesting and striking to me in two ways.

First, there were a number of anti-tax protests. Second, the majority – and I mean the overwhelming majority of the protesters I saw on TV – appeared to be retired Americans. As I gathered from their placards and some brief comments/interviews, they are basically “sick of being taxed to death by Uncle Sam” and are therefore demanding everything from lower taxes to a complete elimination of taxes. Well, who wouldn't love that?

Although I cannot say for sure that this approach will fail to achieve its intended result, it is fair to say that it is probably naive to believe or expect the U.S. government to significantly reduce our tax burden anytime soon. Fact is, any expert in this field of tax/budget deficits will tell you that, given our present fiscal condition as a nation, taxes are headed up, not down.

What if I told you I have the ONLY perfectly legal way to end these retirees' income tax problems? No kidding!

The simple, sensible, and legal way to fix the issue is to eliminate all income that is considered “taxable” by the IRS. I did not say have no income. I said, make sure your income is NONTAXABLE. I have met retirees bringing in about $40,000 per year who complain about taxes – and rightly so. But I also know retirees (clients of ours) who draw significantly higher incomes per year, completely income-tax free! The amazing thing is that they both live in the same zip code. Interesting, isn’t it?

The IRS puts out a document called Publication 525: Taxable and Nontaxable Income. Why do you think it is so-named? The only logical and factual answer is because there is such thing as “income that is not taxable.” In other words, if your income comes from those sources, your income tax rate is legally zero. Voila – problem solved!

It is very sad but true that millions of Americans waste years of hard work following so-called financial and tax gurus who, in my opinion, are completely out of touch with reality and frankly don’t know what the heck they are doing. What is most troubling is that in real life, the overwhelming majority of retirees earn significantly less than they did during their working years, yet they pay much more in income-taxes. And the situation worsens with each passing year. If I had my way, I would tell those retirees to protest their so-called advisors for failing to help them turn their income sources into what the IRS deems “NONTAXABLE.”

Isn't it ironic that the very same tax code that some absolutely hate provides completely income-tax free options? And the last time I checked – just three minutes ago – we still have freedom of choice regarding where we invest our retirement assets, which ultimately determines whether we get taxed or not.

Please pay close attention and follow savvy retirement planning professionals like the guys and gals at Laser Financial Group because it absolutely pays huge dividends.

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Please contact Laser Financial Group today for your complimentary consultation to begin the process of making your income "nontaxable." 301-949-4449 or laserfg.com.

The One Quality Your Financial Professional MUST Possess

The One Quality Your Financial Professional MUST Possess

When selecting a financial professional to help you plan for your retirement future, you should view it as a lifelong relationship. People generally do – and should – consider various attributes when deciding the financial professional they will hire. After working in the finance industry for some years, I want to make you aware of the one MUST-HAVE quality you should seek in whomever you decide to hire as your financial counselor. Of course, I recognize that this is America, so you are free to make your decision based on whichever criteria are important to you.

Before we get to this MUST-HAVE quality, you first want to make sure you hire a person, not a firm. You may like a firm’s name, logo, advertisements, or feel confident in them because a trusted friend or family member has recommended them to you because he or she had an awesome experience. There is nothing wrong with that. Laser Financial Group cherishes referrals, too, and thanks all who have referred clients to us and those who will do so in the future. BUT, you are a completely different person, so you must make sure that YOU feel comfortable and like the firm as much as the person who referred you. More likely than not, what they were looking for is quite different from your needs and desires.

Just the other day, I ran into a man at the barber shop who highly recommended a particular professional (non-financial) office to me. The reason? He thinks the female receptionist is “hot.” While this may be an extreme instance, after interviewing people over the course of several years about their choice of financial professionals, you'd be amazed at some of their reasons for choosing them. I occasionally have to struggle to keep my composure listening to some of their peculiar logic.

As I alluded to earlier on, there are several factors to consider in hiring a financial advisor, but the NUMBER ONE thing the person you hire must posses at all costs is incredible ability to provide CLARITY. By that, I mean that when they speak, you are always able to follow and understand exactly what they mean. You understand where they are coming from and, in most cases, can figure out where they are headed. This is HUGELY important, folks.

On an almost daily basis, I talk to people who pursued strategies that literally amounted to setting a time bomb on themselves; yet all they can tell me by way of explanation is, “My advisor said it was a good idea,” or “My advisor told me that was what I needed.” These are adults who have invested in financial products/strategies that have been earmarked for their retirement futures, but they do not know exactly why the product/strategy is good for them!

If everything is not crystal clear to you, don’t hire that person, period! If you cannot understand every step along the way, you run the risk of letting your advisor talk you into what they think you need. I view this as dictatorship, which in my opinion is an extremely dangerous cancer that will surely ruin your financial future. Now let me make myself clear here: I am not suggesting that you must understand every technical intricacy of the specific products, because that’s not your area of expertise. But you MUST understand, in a general sense, why the heck you are making particular choices, especially as they relate to your future retirement.

Whenever I review feedback/comments from our seminars, my own client meetings or those from the other financial professionals I oversee, I pay particular attention to what the audience/clients say about their level of understanding. I give higher marks for “I understand clearly” than “You are very smart.” The kinds of comments that make my month are: “You make it very simple to understand” and “I never really understood it this way before.”

My usual response? It does not have to be complex to be right, right?

Please call us today at 301-949-4449 or visit our website to schedule your complimentary consultation. We guarantee we'll make things easy for you to understand.

Exercising Your Freedom of Choice Around Retirement Income and Taxes

Exercising Your Freedom of Choice Around Retirement Income and Taxes

Did you know that the U.S. tax code gives you ABSOLUTE AND COMPLETE CHOICE AND CONTROL over how YOUR tax dollars are allocated? By that, I mean that Uncle Sam initially gives all of us the opportunity to decide how to allocate our payable income taxes. Then, once we are done exercising that choice, OR if we decide to waive that control, we must turn over those dollars to the Department of the Treasury, at which point we completely lose any say over how those funds are used.

Sadly and unfortunately, the majority of taxpayers fall into the latter category – relinquishing their choice and control – either due to ignorance and/or poor financial advice. This is one of the little understood concepts in the field of personal finance, but I am confident that you’ll grasp the concept after reading this post.

First, though, let me be crystal clear that I am in no way, shape, or form joining the – in my view – completely misinformed school of thought that perpetuates the idea that there is no federal law requiring Americans to pay income taxes. That is simply not true! Section 1 of Title 26 (otherwise known as the Internal Revenue Code or Tax Code) REQUIRES Americans to pay federal income taxes. If you are not convinced, ask Wesley Snipes.

Meet Peggy

Let me illustrate this exercising of choice and control with the story of Peggy, one of our clients. I have this fireball of a lady’s permission to give you a glimpse of what I believe is preventing millions from enjoying their retirements.

Peggy finally began to realize that after all these years, the advice she’d been following from her so-called financial advisor/CPA landed her exactly where she did not want to be – with an increased income tax liability that was worsening each year. At precisely the same time, she seemed to be losing control over when she could withdraw her own money.

Peggy had been led to believe that since her income would potentially be lower in retirement, her taxes would be lower, too. It took her, in her own words, “less than 10 minutes to find the cure to [her] tax woes.” After reading one of my books – 5 Mistakes Your Financial Advisor Is Making – Peggy realized that her income had certainly been reduced in retirement, but her taxes had remained about the same as the pre-retirement level. The reason? Under the direction of her genius financial advisor and CPA – did I say genius? – she had eliminated the options that reduced her taxable income.

Peggy had sold her house in order to move back to her hometown and buy a very nice condo to enjoy all her years of hard work. She’d had a $250,000 IRA that she intended to leave to her only child, but she suddenly noticed that in addition to her already huge yearly income tax bill, she would be forced to take the IRS-mandated RMD (required minimum distribution) that comes with turning age 70½.

Her Financial Advisor/CPA’s Solution?

Take the $400,000 from the sale of her home to pay cash for her new condo, take the RMD since she really had “no choice,” and reinvest the yearly after-tax funds in a different account.

My Solution for Peggy

Put only 20 percent ($80,000) down on her new condo and take a mortgage for $320,000, which we found at 6 percent interest ($1,600 per month, or $19,200 per year). Peggy would then withdraw $19,200 each year from her $250,000 IRA to make her mortgage payments.

Here is the choice part: Peggy has a $19,200 yearly income, but also a $19,200 yearly deductible mortgage interest payment on her Schedule A Form, meaning she’s got a zero taxable income. Yes! Just like that, she has exercised her choice and control by mortgaging her condo.

Remember the $320,000 she was going to use to buy the condo for cash? If she could gain a return of more than 4.2 percent per annum (which is the true cost of her 6 percent mortgage at her combined 30 percent federal and state marginal tax bracket), she would turn a profit.

Peggy would now place her investment in a non-qualified vehicle – one whose withdrawal schedule cannot be dictated by the IRS because it’s completely income-tax free. If that is yielding her just 6 percent interest, her account would accrue $573,071 in 10 years. If she then CHOSE to eliminate her mortgage and give those dollars to the treasury via another path, she’d have made an income-tax free gain of $253,071.

You Don’t Know What You Don’t Know

That old axiom is true: You just don’t know what you don’t know – and what you don’t know really matters. Peggy’s so-called advisors stuck her with no flexibility and a decision that could have continued to cost her thousands of dollars each year. Remember, you do have a choice, and sometimes it pays quite handsomely to think outside the box.

For your free consultation and advice about how to make the best choice for your financial situation, call Laser Financial Group today at 301-949-4449 or visit us on the Web.