Financial Freedom for the Small Business Owner

As Founder of Lifetime Paradigm, Inc., Randy Luebke’s job is to help his clients to and through their retirement by fixing broken retirement plans, putting them back on track and making up for both lost time and insufficient savings. His company is real estate integrated and provides self-directed retirement planning, asset protection, estate and tax planning for businesses, homeowners and real estate investors. Randy is licensed in several fields as a Registered Mortgage Advisor, Registered Financial Consultant, Life Insurance Agent, Real Estate Broker, Mortgage Broker, Stock Broker, and an Educator. After serving thousands of clients, he frequently finds out that most people struggle planning for their retirement because it is too complicated and sadly avoid dealing with it altogether or they seriously underestimate how much money they will need to fund their retirement for 20, 30 years or more. He is the author of “The Business Owner’s Guide to Financial Freedom.”

What you’ll learn in this episode:

*There are more than 300,000 licensed advisors in the U.S. The bulk of those work for a broker-dealer and become a registered representative of the broker dealer. Only 30,000 of these are fiduciary, which is 10 percent, and of that total, only 3,000 are independent fiduciary advisors.

*A broker dealer advisor uses “suitability” as their standard of advice. That means that if you have the financial wherewithal, you can buy a fund or property even if it’s not in your best interest upon your broker-dealer’s advice. You can’t sue him or her if it goes south.

*Broker dealers are not held to the standard of only giving advice that is in the client’s best interests. A fiduciary by law must do that. As an independent fiduciary advisor, Randy’s responsibility is to make sure that the advice and guidance he gives is in the client’s best interest. People should always seek an independent fiduciary advisor for their financial investment concerns.

*Randy got into the business 32 years ago as a mortgage broker and is a mortgage broker today. He believes that in most people’s portfolios, real estate is the biggest asset.

*An explanation of Randy and his co-author Mark Cohler’s four by four financial independence plan. The traditional advisor doesn’t have enough expertise in real estate to help guide their client to financial independence – which is the goal of the four by four plan. It’s about creating a plan that’s built on real estate in addition to stocks, bonds and mutual funds

*The four steps of the plan. First is financial independence, the income plan portion of it. The others are asset protection, real estate planning and tax planning. These elements work together like a Rubik’s Cube or chess players; when you change one it affects the other

*Most financial advisors focus on selling stocks, bonds, mutual funds and maybe life insurance or annuities, which don’t include these other important aspects and often ignore taxes

*There are four steps to implement the four by four plan. Step One is optimizing everything you have, getting their current assets financially organized and making sure everything they have is doing all it can for them

*Step 2: Eliminate all debt. There is good debt and bad debt. He helps clients get rid of personal loan and credit card debt. He creates a debt plan which focuses on getting those debts down to zero

*Good debt is debt that makes you money. That’s debt you might use to increase your inventory for your business or that you might use to acquire real estate

*Step 3: Making sure you have significant liquid cash reserves. We need those for the unexpected troubles in life, because we don’t want to be using credit cards to bail you out during emergencies. He calls it “dry powder to get you through the bad times.”

*Step 4: What everybody is doing today. We want people to save and invest for our long-term goals and plans. But to get to step four, and start working on those plans, you need to clean house with Steps 1-3 first.  

*The nuts and bolts of a real estate integrated and self-directed financial plan. A Wall Street advisor’s idea of self-directed is letting you pick and choose stocks, bonds and mutual funds from their lists. But the reality Randy talks about is more a more diverse retirement portfolio. With self-direction, you can invest in anything from bitcoins to apartments and real estate complexes and businesses. Paper investments are fine, but there are other choices

*20 years ago, Randy found it hard to find a “financial custodian” that would allow real estate investments, but now, in the wake of the Great Recession, it’s become more accepted and popular

*Taxes are going to be life’s single biggest expense. Because of the federal government’s massive debt, it’s more likely than not taxes will always be going up. One of his jobs is to help clients find legal ways to reduce their taxes and focus on that as a financial strategy

*Most W-2 employees are limited to tax deductions for their company’s 401K plan. Outside real estate investments provide tremendous tax benefits. He also explains how to start your own 401K when you own property and explains how you can put $50-60,000 away each year tax deferred

*The “Solo K” means having a 401K with a single contributor – you!

*The differences in numbers between the 401K and Roth IRA. Either way, having a rental property can increase your annual contributions to a retirement account

*A “Super K,” is an amalgamation of different plans. It includes defined contribution plans and defined benefit plans, which allows you to basically create a pot of gold that’s waiting at your retirement (around $3-4 million dollars). You can take the benefits of the defined contribution and combine with the benefits of the defined benefit plan. He has been able to take individuals stuck at $40-50,000 of pre-tax contributions and take them up to $3-400,000 per year

*For a Super K, an actuary will determine how much you can put into a plan; they will also file the tax returns and create the legal docs

*The beauty of working with Randy’s Lifetime Paradigm is, all you need is a simple solo K or 401K or an IRA. Whether you’re a small business owner or have hundreds of employees, he can help

*Randy’s philosophy is “Defer everything you can. Because you’re going to buy time with that deferred money to figure out how to get out of that deferred plan and not pay any taxes on it ever. If you don’t defer it, you’re going to pay taxes and never get it back.”

*1031 Exchanges – a strategy that allows an investor to defer paying capital gains taxes on an investment property when it is sold, as long as another like-kind property is purchased with the profit gained from the sale of the first property. Some time ago, the IRS covered car sales with this rule. You have six months from the sale of the first to closing on the second, and 45 days to identify the property you are going to be exchanging into.

*A deferred sales trust works like a 1031 exchange in that you can sell a highly appreciated asset and then push forward those taxes into the future. Unlike a 1031 exchange, there’s no restriction on the assets that you sell

*These unique tools in Randy’s arsenal are not normal everyday consumer products pushed by Wells Fargo and Merrill Lynch advisors

*A captive insurance company is one created and wholly owned by one or more non-insurance companies to insure the risks of its owner or owners. Captives are essentially a form of self-insurance whereby the insurer is owned wholly by the insured. Randy relates this concept to the reality of owning a business in detail

*Explaining “Pocket A” (operating business) and “Pocket B,” where B gets the deduction for paying the premiums. Pocket B gets the money but doesn’t have to pay income tax on it

*Most insurance companies invest in high quality bonds and real estate.

*How to put excess cash flow into one of these “captives” at your range

*For those new to real estate investors, Randy says, “On the deal you’re going to keep, focus on a good cash flow. Don’t buy properties with negative cash flow. And keep in mind that a lot of properties with good cash flow are not in the most desirable areas. And you’ve got to balance that cash flow with depreciation.”

*Randy’s advice on how you should be using your traditional IRA. Don’t pay attention to the ups and downs. Just hope that over the long term it’s there long enough to make money but it will be liquid which means you can use that money to partner with other people to get other deals

*Workshops that Randy and Mark will be doing in Chicago, Honolulu, Seattle, Philadelphia and in their home of Orange County CA

*Randy’s parting advice: “Fundamentally the goal is to accumulate enough assets to provide the income you need to live the life you want. Once you’ve done that, you have financial independence and work becomes the option. Ask yourself, How do I accumulate enough assets to provide the income I need to live the life I want?

*How to get a free financial independence tool kit

Resources:

www.lifetimeparadigm.com

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