Jan '24 • Long term investing ideas
Infinitely tax delayed strategy.
Here's a strategy I have been drafting up for Investing Accelerator 4.0 (the 4th strategy in the program).
It's called - Infinitely Tax Delayed Strategy.
And it goes like this...
Let's say you have $1 million in index funds that make 10-15% per year (regular margin account).
This portfolio makes $100,000-$150,000 per year.
When you need money for retirement, what do you do?
Option 1: Exit all $1.15 million and then take out $150K? This means you would pay tax on all 150K of gains. Normal but not great
Option 2: Exit only 10% of the shares which the gain will be only a fraction (around $10K gets taxed). Withdraw around 110K which $10K is gain and $100K is principal.
This lowered your taxes by 90%. That's pretty good.
But what if we can do even better?
What if we can reduce our taxes to zero AND also make more gains?
Option 3: Instead of exiting your shares, you simply just withdraw money. Yes - just take money out.
With regular margin accounts, the broker is willing to lend you interest at 6% (example).
If you are investing in index funds that offer you 10-15%, you will make a net 4-9% after paying interest to your broker.
So withdraw $150K from your account, and your account will use $150K margin. You still have the same number of shares after you withdraw money.
The money you borrowed from your broker will continue to work for you year after year.
Since you didn't EXIT the shares, you never trigger taxes until the day you die.
By then, it will be 20-30 years later and your gain will be much more than if you exited and withdrew money using option 1 or 2.
The exact steps to execute this strategy will be laid out in Investing Accelerator in the future.
Cheers,
Eric
Eric Seto
Chartered Professional Accountant (CPA)
Chartered Investment Manager (CIM)
Founder of 5MinInvesting.com
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Infinitely tax delayed strategy.
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