April 1, 2010

Announcing my Imminent Retirement on April 1st 2010

I'm happy to declare that I've conceived a plan to meet my goal of being financially Free By 50!

I will be able to retire early far ahead of schedule by using the advice of various financial experts that I've found on the internet, seen on financial educational programs on late night television and from emails from some very helpful individuals.  The system is not just one strategy but a combination of several passive income sources.   I used a number of wealth building strategies to accomplish the goal and I'll discuss them each in turn below.

First of all I got a $52,000 refund on back taxes for the past several years.  Apparently I had over paid both state and federal taxes by a significant amounts for a 3 year period and I didn't even realize it.  This is one of the reasons why it makes sense to use a CPA.   I wouldn't have caught such an error on my own.   The 52 grand a windfall and the strategy part is to minimize taxes by hiring a good CPA.   They told me about various things I had been failing to deduct such as food and clothing as well as the business uses of our home, car and annual vacations.   My CPA even told me how federal income tax isn't actually applicable to individuals, but I don't want to run the risk of an IRS audit so I'm filing returns and paying what may I owe, just to be safe.  But now I finally understand how so few people actually pay any taxes.

Second I was able to cash out equity from our rentals.   I took all of our rental properties and then wrapped them in a trust that is owned by an LLC in the state of Nevada.   Having the LLC in Nevada is a key since their laws are more "business friendly" (if you know what I mean).  We then took out a loan against the trust.  This allowed me to pull $250,000 in cash out of the properties.   We then loaned ourselves that money at 16% interest and use that interest as a tax deduction.  The trust then pays that interest back to us in a salary my wife will draw as the manager of the trust.  We also raised all the rents on our tenants by 20% since the economy is recovering. We also minimized our legal liabilities from the rentals since neither the trust nor the LLC are legally in our names so this saves us on not having to pay for the extra liability insurance that we've had up until now.  We figure this system should increase our monthly income by approximately $3,600 or $43,200 annually.  

Third, I bought a whole life universal variable fixed term life insurance policy using that $250,000 cash from the trust.  The life insurance policy cash value is guaranteed to make a 18% annual return on our investment.  The nice man from the insurance company showed me some graphs from the early 1980's about how this works so I know its guaranteed.  I can access that cash value tax free via 0% loans out of the policy.   That gives us another $45,000 income.   Plus if we want we can also put the rest of our income into the insurance as well and then pull that out via 0% loans.   We'll deduct the insurance since its a business expense to our LLC in Nevada.  Since insurance policies are tax advantaged his will make all our income tax free.

Fourth, we put all of our spending on our credit card and then make 1.5% return on it via rebates.   Since we've got over $88,000 in income this will give us an extra $1,300 a year.   That increases our income to over $89,300 annually when you count the credit card rebates.

Fifth, big news : I've sold this blog to a consortium of Nigerian businessmen.   They plan to use this space to advertise free credit reports, PC virus protection software aids and work at home job opportunities.   The blog has been fun but now that I'm retiring I don't need to keep writing it full time.   The Nigerian's have promised to pay me 38% of their profits from the blog moving forward.   They say that should guarantee me an income of over $10,000 a year.   The checks should start coming as soon as the money I wired to them to cover the transfer fees clears their bank.  I sent it a couple weeks ago and I'm just waiting to hear from them again.  That income is also tax free since they agreed to classify it as a gift Don't worry, faithful readers, I'll be back with occasional guest posts about my usual topics of historical trends of interest rates or frugal tips on energy savings.

Sixth, we signed up for a plan so that we can pay off our home mortgage in just 3 years instead of the remaining 10 years of the original loan term.  The plan involves paying 52 equal weekly payments (plus 1 payment every 4 years during leap year)  instead of the normal 12 monthly payments.   By making extra smaller payments more frequently, we save via compound interest.  We also take out a loan for 150% value of the home and then put that money into an variable deferred annuity.   This helps hedge against devaluation of the dollar because the loan will now be tied to collateral of gold bullion bricks that we'll bury in our crawl space.   Its all pretty complex system but I only had to pay a $3,500 consulting service fee for the program's personal consultation and analysis and the special software used to setup the off shore accounts in Antigua.

Altogether we're expecting an annual retirement income of well over $99,000 a year and almost all of it is tax free.  Its been a fun ride and I can say that I'm equally excited and nervous about embarking on my new life as a retired person.   Where else but America (or possibly Canada) can you achieve such a real life 'rags to riches' story?

p.s. its obviously no coincidence that I achieved this goal on April 1st of this year.

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