BawldGuy Audio Podcast

Why on earth is it ok to plan a retirement with income so low you’re gonna be in a significantly lower tax bracket compared to when you were still working?

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Why on earth is it ok to plan a retirement with income so low you’re gonna be in a significantly lower tax bracket compared to when you were still working?

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Cash flow is given far too much emphasis at the wrong time by far too many real estate investors. The ‘ball’ you wanna keep your eye on is maximum retirement income.

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Cash flow is given far too much emphasis at the wrong time by far too many real estate investors. The ‘ball’ you wanna keep your eye on is maximum retirement income.

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When investing for your retirement, having real synergy at work for retirement income is a real turbo charger.

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Transcript:   Today we’re going to talk about what really is the concept of synergy as it relates to real estate investing. First of all, let’s start out with I’m with you, synergy is a marketing term that has come to mean almost nothing, and have no value whatsoever. It’s the most over used and abused concept there is in marketing today. I’m with you on that. We’re on the same page. However, my test is pretty down and dirty. It must do 1 of 2 things if not both, or it’s not synergy. It either gets you to retirement more quickly, or it gets you to retirement with more retirement income. Hopefully it does both, but if one or those 2 rules aren’t met, you did not use synergy, you used a marketing term. Let’s use an example. All synergy is in my world is to be able to use more than 1 strategy at a time. Sometimes we use 3 or 4 at a time. Yeah, first of all, the buy and hold real estate investment strategy. Doesn’t mean you buy and hold forever. It means you’re not buying low to sell high immediately like a flipper might. The second strategy you might involve is a particular type of depreciation if you’re a high incomer, or $150,000 a year household income or more, or your might bring in cost segregation as a depreciation strategy. I’ll bring these together when I’m done. In order to make the long term investment and cost segregation strategies work even better, you might bring in discounted notes as a long term strategy. Even that as a standalone strategy will do 2 things, both short and long term. Short term it brings in cashflow now, and it will continue to. Long term you make profits because you’re buying these notes at a discount while at the same time you have more income per month coming in after tax then you would have had you not bought those notes, and this is income you don’t need to live on, so it’s like cashflow from real estate, you get to use the income from the notes like the real estate to advance your retirement plan. Let’s take the strategy of buy and hold, cost segregation, and discount note investment to see how that can enhance and maybe push your retirement date much earlier. You buy a couple of pieces of real estate, and let’s say those pieces of real estate costs you $80,000 for down and closing a piece. You paid maybe $300,000 give or take for them. What you do is your use cost segregation, because you guys make a couple hundred thousand a year, and that means the IRS does not allow you to take any left over depreciation from your properties after sheltering the properties cashflow against your ordinary income. You might have, in this scenario, a $5,000 a year annual cashflow per each of these 2 properties, and each of these 2 properties in cost segregation might have a $20,000 a year depreciation dollar figure. You would have $15,000 left over per property per year. $20,000 depreciation, minus $5,000 a year cashflow. That $15,000 per property, should be according to normal thinking, be able to be used against your ordinary income, but since the tax code says you make too much money, it must simply go onto the shelf and gather dust until you no longer own those properties. Let’s turn lemons into lemonade. You buy those properties knowing that you’re going to use cost segregation as a second strategy to your buy and hold approach. Each year both of those properties combine to generate a total of $30,000 of useless, unused depreciation. Well that goes on for say 5 years, and 5 years you’ve now stockpiled $150,000 of unused depreciation, and you say, “Why on earth would I do that on purpose?

When investing for your retirement, having real synergy at work for retirement income is a real turbo charger.

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Transcript:   Today we’re going to talk about what really is the concept of synergy as it relates to real estate investing. First of all, let’s start out with I’m with you, synergy is a marketing term that has come to mean almost nothing, and have no value whatsoever. It’s the most over used and abused concept there is in marketing today. I’m with you on that. We’re on the same page. However, my test is pretty down and dirty. It must do 1 of 2 things if not both, or it’s not synergy. It either gets you to retirement more quickly, or it gets you to retirement with more retirement income. Hopefully it does both, but if one or those 2 rules aren’t met, you did not use synergy, you used a marketing term. Let’s use an example. All synergy is in my world is to be able to use more than 1 strategy at a time. Sometimes we use 3 or 4 at a time. Yeah, first of all, the buy and hold real estate investment strategy. Doesn’t mean you buy and hold forever. It means you’re not buying low to sell high immediately like a flipper might. The second strategy you might involve is a particular type of depreciation if you’re a high incomer, or $150,000 a year household income or more, or your might bring in cost segregation as a depreciation strategy. I’ll bring these together when I’m done. In order to make the long term investment and cost segregation strategies work even better, you might bring in discounted notes as a long term strategy. Even that as a standalone strategy will do 2 things, both short and long term. Short term it brings in cashflow now, and it will continue to. Long term you make profits because you’re buying these notes at a discount while at the same time you have more income per month coming in after tax then you would have had you not bought those notes, and this is income you don’t need to live on, so it’s like cashflow from real estate, you get to use the income from the notes like the real estate to advance your retirement plan. Let’s take the strategy of buy and hold, cost segregation, and discount note investment to see how that can enhance and maybe push your retirement date much earlier. You buy a couple of pieces of real estate, and let’s say those pieces of real estate costs you $80,000 for down and closing a piece. You paid maybe $300,000 give or take for them. What you do is your use cost segregation, because you guys make a couple hundred thousand a year, and that means the IRS does not allow you to take any left over depreciation from your properties after sheltering the properties cashflow against your ordinary income. You might have, in this scenario, a $5,000 a year annual cashflow per each of these 2 properties, and each of these 2 properties in cost segregation might have a $20,000 a year depreciation dollar figure. You would have $15,000 left over per property per year. $20,000 depreciation, minus $5,000 a year cashflow. That $15,000 per property, should be according to normal thinking, be able to be used against your ordinary income, but since the tax code says you make too much money, it must simply go onto the shelf and gather dust until you no longer own those properties. Let’s turn lemons into lemonade. You buy those properties knowing that you’re going to use cost segregation as a second strategy to your buy and hold approach. Each year both of those properties combine to generate a total of $30,000 of useless, unused depreciation. Well that goes on for say 5 years, and 5 years you’ve now stockpiled $150,000 of unused depreciation, and you say, “Why on earth would I do that on purpose?

What investors really enjoy is a real world case study. Here’s one using a couple for whom I just generated a Purposeful Plan.

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Transcript:   Let’s do a case study today and talk about people that actually exist, what they’re going to do and what is probably going to be the outcome for them, and how long of a period of time. We have Millie and Jim. Between them, they make about a hundred thousand dollar a year or maybe a little bit more. They have about twenty thousand dollars in the bank, and they have the ability to make payments of about a thousand dollar a month, depending on what they’re doing. That would be the max. The first thing I told them was that based on their ages, they’re thirty and they’re thirty-one years old, that David Shafer said that for five hundred dollars a month, they will get at age sixty and sixty-one a tax-free income of about a hundred to a hundred and ten thousand dollars a year until they’re ninety. Again, that’s tax-free. Now, they live in California, and to get a hundred thousand dollars a year after tax in California, and remember they’re going to be retired when they do this, so they won’t have deductions for kids. The IRS hasn’t given us deductions for grandkids yet so that’s off the table. They will have paid off their house. At least most people try to, right? They really don’t have any tax shelter or whatsoever. At least we have to look at it the way it is now and project that to be the case thirty years from now, which means that if they wanted to get that hundred thousand plus after tax, they would have to make somewhere between a hundred and thirty-five and a hundred and fifty-five thousand gross. Well, this will get them a hundred to a hundred and ten thousand dollars tax-free for the first thirty years of retirement. That won’t include any note investments they might make. It doesn’t include anything they’ve done in their IRA or 401(k), or maybe they have a small business later in life and they have a solo 401(k). We’ll talk about that at another time. The bottom line is what this will do is it will give them a base retirement income over and above anything else of around eighty five hundred to nine thousand dollars a month, all of which, again, by Internal Revenue Code definition, is tax-free. Now, what they can do over time is that they’re going to be like everybody else. They’re going to start a family. They’ve already got a house. They’ve only had it for less than three years. They’re making those payments. They can grow a family in there before they decide to move on. What they’re going to do is they’re going to save their money. Now, let’s fast-forward ten years. They’ve got two or three kids. They’re feeling a little cramped. They’re in a three-bedroom but it’s a small three-bedroom. They’ve got two baths but again it’s small, and they want to move to a little bit more square footage. Now, Jim’s making a lot more money than he was. Molly quit her job and she’s using her degree in childcare that she got in college to open up a home-based business of taking care of kids. Now, between them, remember, they’re forty and forty-one now, they’re doing around a hundred and thirty to a hundred and fifty thousand dollars a year. He’s been saving, saving, saving. They established, both of them, Roth IRAs back when they first me when they were thirty and thirty-one. They don’t have an employer-based 401(k) between them. They got rid of that. Do you know how I know they got rid of it? Because that’s the way Jim financed the down payment for their house a decade earlier. All right. For ten years,

What investors really enjoy is a real world case study. Here’s one using a couple for whom I just generated a Purposeful Plan.

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Transcript:   Let’s do a case study today and talk about people that actually exist, what they’re going to do and what is probably going to be the outcome for them, and how long of a period of time. We have Millie and Jim. Between them, they make about a hundred thousand dollar a year or maybe a little bit more. They have about twenty thousand dollars in the bank, and they have the ability to make payments of about a thousand dollar a month, depending on what they’re doing. That would be the max. The first thing I told them was that based on their ages, they’re thirty and they’re thirty-one years old, that David Shafer said that for five hundred dollars a month, they will get at age sixty and sixty-one a tax-free income of about a hundred to a hundred and ten thousand dollars a year until they’re ninety. Again, that’s tax-free. Now, they live in California, and to get a hundred thousand dollars a year after tax in California, and remember they’re going to be retired when they do this, so they won’t have deductions for kids. The IRS hasn’t given us deductions for grandkids yet so that’s off the table. They will have paid off their house. At least most people try to, right? They really don’t have any tax shelter or whatsoever. At least we have to look at it the way it is now and project that to be the case thirty years from now, which means that if they wanted to get that hundred thousand plus after tax, they would have to make somewhere between a hundred and thirty-five and a hundred and fifty-five thousand gross. Well, this will get them a hundred to a hundred and ten thousand dollars tax-free for the first thirty years of retirement. That won’t include any note investments they might make. It doesn’t include anything they’ve done in their IRA or 401(k), or maybe they have a small business later in life and they have a solo 401(k). We’ll talk about that at another time. The bottom line is what this will do is it will give them a base retirement income over and above anything else of around eighty five hundred to nine thousand dollars a month, all of which, again, by Internal Revenue Code definition, is tax-free. Now, what they can do over time is that they’re going to be like everybody else. They’re going to start a family. They’ve already got a house. They’ve only had it for less than three years. They’re making those payments. They can grow a family in there before they decide to move on. What they’re going to do is they’re going to save their money. Now, let’s fast-forward ten years. They’ve got two or three kids. They’re feeling a little cramped. They’re in a three-bedroom but it’s a small three-bedroom. They’ve got two baths but again it’s small, and they want to move to a little bit more square footage. Now, Jim’s making a lot more money than he was. Molly quit her job and she’s using her degree in childcare that she got in college to open up a home-based business of taking care of kids. Now, between them, remember, they’re forty and forty-one now, they’re doing around a hundred and thirty to a hundred and fifty thousand dollars a year. He’s been saving, saving, saving. They established, both of them, Roth IRAs back when they first me when they were thirty and thirty-one. They don’t have an employer-based 401(k) between them. They got rid of that. Do you know how I know they got rid of it? Because that’s the way Jim financed the down payment for their house a decade earlier. All right. For ten years,

Between their less than inspiring 401k performance, and not knowing all of what’s on their ‘options’ menu, most folks are hungry to more clearly understand various investment vehicles.

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Transcript:   Today let’s talk about various investment vehicles. I want to talk about the difference between buying discounted notes or maybe an EIUL, Equity Index Universal Life. It’s an insurance policy that is geared towards income while you’re still alive in retirement instead of a death benefit once you’re gone. That’s the only difference. What’s the difference between betting on the stock market the next 30 years or betting on notes on an EIUL for the next 20, 30 years? It’s already been proven over the decades that if you get good advice, and of course, we see with 401Ks that apparently most Americans are not getting that good advice because they’re arriving at their 65th birthday with 100 thousand or less in their 401K, right? Of course, they all have matches so it’s even less impressive. If we’re told that you can make seven, eight percent over the really long haul, let’s call the long haul 15 to 30 years, in the stock market. Let’s assume that is the Lord’s truth for today’s discussion. What we both know is that when you buy a stock from a brokerage firm, they don’t give you any security for that stock. You’re just buying a slice of ownership of that company. When you buy a piece of real estate, that value can go down, but you’re always going to be able to rent that house out or those four units, whatever that is, for something. Where when things go really bad in the economy, it’s not just that dividends go down, generally speaking, they go down to the floor or disappear completely. Then you get to notes and you say, not only do I have security more than just buying real estate, I actually get a piece of free and clear real estate if I foreclose on a first position note. If I bought that note at the BawldGuy Note Fund, I not only don’t have to foreclose if I think it’s better not to, I can just invoke my warranty. Everybody, let’s stop right there. Let’s have a show of hands across America. When was the last time your stock broker offered you a warranty on your Apple stock? Yeah. I didn’t think so. Let’s get real about what’s going to happen and what’s not going to happen in the next 15 to 30 years with your investment dollar for retirement income. If you’re buying notes, you’re not only getting a security that’s tangible, a piece of freaking real estate that’s free and clear when you foreclose, but in my case, with my fund, you’re getting a warranty that’s going to keep you whole. If you put X amount into it and somehow it goes south on you- and they will occasionally, don’t let anybody tell you they won’t because they will. 38 years doing it myself, they go south at times. If a note in my fund goes bad and you’ve received 20,000 in payments and you put 60,000 in it, the fund’s going to make up that other 30. You put 60 in, you got 60 out. That’s the way it’s going to be. You don’t get that with the stock market. Let’s compare it to EIULs. You put a certain amount in just like you do in your 401K. You put a certain amount in every month, every quarter, every year, however it’s structured. It’s after tax money. You don’t get any tax break like you do on a 401K sponsored by your employer. Those are mostly not Roth, right? When you put this in, 250 a month, 500 a month, 1,000, 2,000, 3,000, whatever you can afford and you do it for 15 to 30 years, two things are going to happen.

Between their less than inspiring 401k performance, and not knowing all of what’s on their ‘options’ menu, most folks are hungry to more clearly understand various investment vehicles.

Download Audio

 

Transcript:   Today let’s talk about various investment vehicles. I want to talk about the difference between buying discounted notes or maybe an EIUL, Equity Index Universal Life. It’s an insurance policy that is geared towards income while you’re still alive in retirement instead of a death benefit once you’re gone. That’s the only difference. What’s the difference between betting on the stock market the next 30 years or betting on notes on an EIUL for the next 20, 30 years? It’s already been proven over the decades that if you get good advice, and of course, we see with 401Ks that apparently most Americans are not getting that good advice because they’re arriving at their 65th birthday with 100 thousand or less in their 401K, right? Of course, they all have matches so it’s even less impressive. If we’re told that you can make seven, eight percent over the really long haul, let’s call the long haul 15 to 30 years, in the stock market. Let’s assume that is the Lord’s truth for today’s discussion. What we both know is that when you buy a stock from a brokerage firm, they don’t give you any security for that stock. You’re just buying a slice of ownership of that company. When you buy a piece of real estate, that value can go down, but you’re always going to be able to rent that house out or those four units, whatever that is, for something. Where when things go really bad in the economy, it’s not just that dividends go down, generally speaking, they go down to the floor or disappear completely. Then you get to notes and you say, not only do I have security more than just buying real estate, I actually get a piece of free and clear real estate if I foreclose on a first position note. If I bought that note at the BawldGuy Note Fund, I not only don’t have to foreclose if I think it’s better not to, I can just invoke my warranty. Everybody, let’s stop right there. Let’s have a show of hands across America. When was the last time your stock broker offered you a warranty on your Apple stock? Yeah. I didn’t think so. Let’s get real about what’s going to happen and what’s not going to happen in the next 15 to 30 years with your investment dollar for retirement income. If you’re buying notes, you’re not only getting a security that’s tangible, a piece of freaking real estate that’s free and clear when you foreclose, but in my case, with my fund, you’re getting a warranty that’s going to keep you whole. If you put X amount into it and somehow it goes south on you- and they will occasionally, don’t let anybody tell you they won’t because they will. 38 years doing it myself, they go south at times. If a note in my fund goes bad and you’ve received 20,000 in payments and you put 60,000 in it, the fund’s going to make up that other 30. You put 60 in, you got 60 out. That’s the way it’s going to be. You don’t get that with the stock market. Let’s compare it to EIULs. You put a certain amount in just like you do in your 401K. You put a certain amount in every month, every quarter, every year, however it’s structured. It’s after tax money. You don’t get any tax break like you do on a 401K sponsored by your employer. Those are mostly not Roth, right? When you put this in, 250 a month, 500 a month, 1,000, 2,000, 3,000, whatever you can afford and you do it for 15 to 30 years, two things are going to happen.