A Case Study Part 1 — Video

What this episode covers

Here’s something in which many have expressed interest. A case study part 1.   Transcript:   Here’s a case study, and it’s about a young couple. They both work, maybe they have kids, maybe they don’t. Between the two of them they’re highly paid, but not super highly paid. Between them they make somewhere around $180,000. They own a small home, and they don’t have a lot of toys. They don’t live up to their eyeballs. They save a lot of money but they have fun, too. Here’s their goal. They’re 32 years old. They want to retire before they’re 65. When that happens is up to how things work out, and everybody’s crystal ball is as reliable as the other guy’s. If they can retire in 20 years, that’s great. If it takes 30 years or more, they understand. What they have now is $150,000 that they’ve saved up, and $100,000 is in a personal account, $50,000 is in a Roth IRA. Now, that Roth IRA can’t be rolled into anything. They were not happy to hear that. Just so you know, almost anything can be rolled into anything else, but a Roth IRA just stands alone. Here’s the thing, we’re going to take a lot of different plates that we’re going to have spinning at once. The first is going to be because they were young enough, in their early 30s, we’re going to get them hooked up with David Shafer in what’s known as an EIUL. We don’t need to go into that. I’ll give you the bottom line. It’s an acronym for Equity Index Universal Life. It’s an insurance policy designed to hold assets or create retirement income. For them, it’s going to be income. The income, by definition in its IRS definition, is tax free. It’s way down the road, at least 20 years. The second plate is going to be real estate investment. They’re going to buy a small Texas duplex. They’re going to pay $300,000 or less. It’s going to cash flow. They’re going to love it. It’s going to be managed, blah, blah, etc. The third thing they’re going to do is take that $50,000 in the Roth and buy a discounted note with that. That play is going to be, give or take, at least 17 years because 59 and a half is the earliest they can access that. What we have is EIUL, real estate investment, and notes personally versus notes in your qualified retirement plan which is IRAs and 401ks. The next step we’ll be talking about specifically how we’re going to interweave those investment strategies together to enhance one or more of them such that they’re either bigger at retirement when it comes to income, they’ve been turned into after-tax or tax-free income, or they’ve been turned into greater income at retirement. Here’s the first thing they do. They buy a piece of real estate. They have $100,000 saved up, I said. It’s going to cost them about $80,000; maybe $75,000, maybe $85,000, down payment, closing cost, and all of the different things that come in an escrow when you buy. They’re going to end up owning a property that the spreadsheet says is going to yield north or south of $5,000 a year. You know what Murphy says? Murphy says we’re just going to take the gross rent for the years scheduled and divide by two. Their cash flow’s going to be a little over $2,000 a year. I much prefer that. Let’s do the spreadsheets, but let’s just believe that Murphy exists, and he knows where we all live. Now, that left give or take $20,000 in their bank account. Now, they make about $180,000 a year. They told me when they did their budget that after taxes and after everything, their family is able to save, give or take, about $4,000 a month. What I’m going to have them do for the first six months is add give or take $25,000 to that $20,000 extra. Their cash reserves are now going to be labeled “untouchable” in bi...

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