Why You Should Never Use a Roth IRA Again (6 Reasons Why)

What are the advantages of an IUL Laser Fund, my favorite financial vehicle for long-term goals such as retirement, versus a Roth IRA or 401k? This question has been asked thousands of times in this episode. I'm going to explain why a property-structured max-funded IUL Laser Fund has 6 major advantages, whereas a Roth IRA or 401k only has 2 of those 6. There's too many strings attached. In other words, why would I mess around with all the rules and restrictions with a Roth when I can have the 2 benefits of a Roth and 4 additional benefits that Roths will never have? So, get ready. You're going to gain insights into why an IUL Laser Fund is far superior than a Roth IRA or 401k. So, I'm Doug Andrew. I've been a financial strategist and retirement planning specialist now for 5 decades helping thousands of Americans prepare for a comfortable retirement. If you watch very many of my educational episodes or read any of my 12 books, you'll know that my favorite vehicle without question is a property-structured max-funded indexed universal line. If it's structured correctly and funded properly, it knocks the socks off of traditional IRAs or 401ks or even Roths. It's deemed a Laser Fund which means liquid assets safely earning returns. Spills the acronym LASER. So, let's go through and talk about some of the advantages of an IUL Laser Fund over a Roth IRA or 401k and why without question it is by far the best instrument in my opinion. In order to do that, let's cover 4 different resources that many retirees will draw from during their golden years. Not everybody draws from all 4. Maybe 1, 2, 3, or maybe all 4 of these. But we have these 4 income potential resources. Investment income is probably the most common IRAs and 401ks, money you have in investments. Some people own real estate and they have rental income from those properties. Some people like guaranteed income such as social security or maybe a pension if you're a school teacher. But this is the most underutilized but my favorite tax-free income and I put it in green. So, let's go a little bit deeper in each of these 4. The purple bucket is usually money and yet-to-be-taxed IRAs or 401ks invested where? In the market. Wall Street was not designed to create predictable income at retirement. What you do at retirement for your planning is something totally different than maybe what you did for your retirement, okay? Because Wall Street was not designed to create predictable income. You don't want to have to time when you take income out based upon is the market up or down. And so, it's not a good place to create predictable cash flow at retirement. Now, I would recommend that no more than 30% of your money at retirement come from that purple bucket. This necessitates getting money out of that purple bucket sooner than later. Hopefully, before you actually retire. And so, this requires what I call a strategic rollout, not a rollover, okay? Now, a rollover is like going from the frying pan under the fire. This is where people who have money in IRAs often are told to continue to defer and roll over to a IRA or 401k out of a 401k into an IRA if your 401k does not allow you to leave it there. And many Americans, I think, are duped into rolling over from 401ks to IRAs at retirement. And then postponing, deferring, procrastinating, paying tax until maybe age 70 or 73. And then starting to take what? RMDs, required minimum distributions which I think is the worst advice for most Americans. That's not saving you tax. It's very myopic. Short-sighted, it's only saving you tax in a given year. If you look at the big picture and you calculate the amount of tax you'll pay by deferring and growing it and then taking RMDs starting at 72, 73 out to your life expectancy and your spouse's life expectancy. And then if you leave behind money to your children, they have to pay tax within 10 years. People are usually flabbergasted with the amount of tax they will pay by stringing it out. It's actually increasing your tax. So, it would behoove you to get the taxes over and done with sooner than later and reposition it into something tax-free from now on. Especially in your current tax bracket which is likely the lowest bracket you will ever be in. That's when a strategic rollout comes into play. Now, before I go into where we're rolling it out to the green bucket which is tax-free which can reimburse you for the taxes you pay while you're doing that, let's cover the blue and the orange bucket briefly here. Some people own real estate and they think, oh, I'm going to get some rental income from my rental properties. That's maybe good. But I would recommend don't rely on any more than 30% of your income coming from those rental properties being full or rented. Because we have downturns in the real estate market and you can have vacancies. A lot of retirees are disappointed and this is why you should not rely on any more than about 30% of your retirement income coming from those rental properties having tenants paying you rent for those, okay? Over here on the guaranteed bucket, based upon your risk tolerance, you may want to have an assurance that you will not outlive money. A lot of times, people aren't really concerned about being rich. They just don't want to be poor. And so, they like a guaranteed income. Now, this bucket would be your social security. It could be a school teacher pension or a police officer or a firefighter. It could be an annuity that if you run out of money in that annuity, the annuity keeps paying out an income until you die. Those are ways to assure that. I would recommend between zero, maybe up to 80% of your income be guaranteed depending upon your risk tolerance. But the most underutilized and my favorite is the green bucket, totally tax-free. And it could include municipal bonds. They're not very popular anymore because they're low-yielding and frankly, a lot of municipalities are filing bankruptcy. You have Roths. I have episodes on this channel that explain that Roths only really have 2 benefits. Your money accumulates tax-free and you can access it tax-free. A property-structured max-funded tax advantage insurance contract, what I call a Laser Fund has had those 2 advantages that Roths have for over 100 years in the internal revenue code. Roths have only been around since 1997. But Laser Funds have 4 additional advantages that Roths will never have. So, I'll never own an IRA or 401K or a Roth. Why would I mess around with the restrictions? Roths only allow you to put in a certain dollar amount or certain percent of your income. If you put money in, you can't take it out without a 10% penalty within 5 years or until 59 and a half. You can't use indexing with a Roth to protect you when the market goes down. You can with an IUL Laser Fund. And the Roths don't blossom when you die. If I die, anything left behind in a Laser Fund increases in value and transfers tax-free. So, why would I mess around with a Roth? Because they don't have those additional advantages. Now, the green bucket is totally tax-free. I would recommend that 40 to 60% of your income at retirement not even show up on the front page of your 1040 tax return. The IRS will know you're receiving it. They know everything, okay? But they'll know it's tax-free. It's been that way again for over a century in the Internal Revenue Code. So, it necessitates thinking about at retirement getting money out of the purple bucket and down into the green bucket. So, this is called a rollout, not a rollover. You're getting the money out of those IRAs or 401Ks, getting the taxes over and done with sooner than later. And then repositioning the after-tax money into something that's going to be tax-free from now on. And then ultimately, when you pass away, it usually reimburses you the taxes you incurred during the rollout. So, it's not a rollover, okay? A rollover is just continuing to procrastinate. Now, the first question I get asked, well then, what about a Roth? Why would I mess around with an insurance contract? Because there's some costs there of the cost of the insurance. Well, if you structure it correctly, the insurance is actually being paid for with a minuscule portion of money that would otherwise go out the window in unnecessary tax. But I've always been able to outperform a Roth using a property structured max-funded insurance contract. As I mentioned, Roths have only 2 of the 6 benefits that Laser Funds have, okay? So, IUL has the 2 that Roths have and 4 additional ones. Let's review. Your money accumulates tax-free in a Laser Fund. It does that in a Roth. You fund both with after-tax dollars. You can withdraw the money income tax-free out of an IUL Laser Fund. With a Roth, you can too. But you have to wait for 5 years or till you're 59 and a half. So, the 4 additional benefits of a Laser Fund over a Roth with each contribution or with your contributions, you can put in more money than you're allowed to with a Roth. Roths only allow you to put a certain dollar amount or a certain percent of your income in a given tax year, okay? If you make too much money, you can't even have a Roth. Did you know that? That's why savvy CPAs and tax attorneys refer to a Laser Fund as a rich person's Roth. I snicker because you don't have to be rich to have a Laser Fund. You can set one up for as little as $500 a month. But if you make too much money, you can't have a Roth. I have many savvy business owners that they have banner years in their business. And they want to sock away maybe $300,000 for their retirement. You can't do that with a Roth, okay? There's a certain dollar amount, a certain percent of your income. So, I like the Laser Fund because I can design it to accommodate maybe $300,000 a year or as little as $30,000 a year. I don't have to put in $300,000. If I put in $30,000, I can make up the other $270,000 anytime, anywhere down the road. You cannot do that with a Roth. If you don't use the amount of room in a given tax year, you lose it. If you don't use it, you lose it. Now, with a Roth, if I put in money, I'm not supposed to touch it for 5 years or till I'm age 59 ½ or else there's a 10% penalty. With a Laser Fund, I've had people put in $200,000, $500,000 and 60 days later need $120,000 back. They can take it back out again. There's no tax. There's no penalty. I like that flexibility. You don't have that flexibility with a Roth. The next big advantage is with a Laser Fund, you get to use indexing which if you watch the episodes on this channel allows you to participate when the market goes up, okay? And you can get some years 16%, 25%, even 61% accredited in interest or growth. But if the market crashes, you may not make anything but you don't lose. If you have your money in a Roth in the market, you can lose 20%, 30%, 40% like many people did in 2008. And March of 2020, COVID-19, about every 7 years, we'll have a downturn in the market. So, we get to use indexing with a Laser Fund that allows you to participate and benefit when the market goes up and not lose when the market goes down. The main other benefit with a Laser Fund is it blossoms. It increases in value and transfers tax-free. Now, Roths, if you die with a Roth, you leave it behind to your spouse and it's tax-free to them but it doesn't increase in value. A Laser Fund increases in value by as much as double. If I died, I'm 72 years old. And if I was in an accident tomorrow, every million I might have in my Laser Funds would probably blossom and transfer to about 2 million and transfer tax-free to my heirs if I die. People say, well, how much does that cost? Well, nothing's free but it doesn't cost me anything. It's being paid for with a minuscule portion of money that would otherwise go out the window in unnecessary tax. So, I'll take as much of that benefit as I can get if it's not costing me anything. It's being paid for with money that most Americans just shell out an unnecessary income tax. So, that's why I really prefer a property structure max funded index universal life. If it's structured correctly and funded properly, it's deemed a Laser Fund. I'll never mess around with an IRA or 401k or a Roth. There's just too many strings attached. So, hopefully, you're gaining insights and you're motivated to check out more. If you want to learn, watch other episodes on this channel. You can study and read one of my books. This is my most recent. It's flying off of our warehouse shelves. It's called The Laser Fund, How to Diversify and Create the Foundation for a Tax-Free Retirement and Instruments Far Better than Roths, okay? Now, this retails on Amazon for 20 bucks up to 60 bucks. If you buy it on Amazon, thank you. But I'll gift you a copy of this book free. It's 300 pages and it's actually 2 books in one. This side about 200 pages is 14 chapters with all the charts and graphs and explanations if you're a left-brain learner. If you're a right-brain learner and you learn more by stories and examples, you flip it over to this side and it contains about 62 actual client stories about 100 pages, okay? If you want to use both your right and left brain, you can read both books. Now, when you're in there claiming your free copy because as soon as you do that, I require a little bit of skin in the game. You contribute a nominal amount towards the shipping and handling. I'll cover the rest of that and I'll pay for the book. I'm going to fire out a hard copy to you via priority mail. But when you're claiming your copy, if you'd like to listen and learn or watch and learn, there's those formats available for your investment if you'd like. You can even register for a free educational webinar that we teach on a weekly basis. And you can even schedule an appointment to talk to an IUL professional or specialist that I have mentored and trained. No cost or obligation because if you want to see how a laser fund may work in your particular set of circumstances, I would strongly recommend it be structured correctly and funded properly so that it achieves what we illustrate in the book and what I talk about on this channel. And so, you can schedule a free consultation and analysis to have some illustrations created for you with your numbers.