WS1691 How The Ultra Rich Invest For Retirement | Stephanie Walter

On this episode of "The  Real Estate Syndication Show," host Whitney Sewell interviews Stephanie Walter, a wealth strategist and author, about the unique perspectives and approaches to money that the ultra-wealthy utilize. Stephanie discusses how the affluent put their assets to work strategically, mitigate risk, and utilize leverage to accelerate wealth growth, all while securing tax-free income in retirement. With her expertise and passion for teaching, Stephanie aims to unlearn conventional money thinking and unlock the secrets of wealthy investors for the not-so-ultra-wealthy. Tune in for insights and knowledge that can transform your financial outcomes.

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Transcript

WS1691 How The Ultra Rich Invest For Retirement | Stephanie Walter

Stephanie Walter Most people have never heard of this, even agents that are in the financial space. This has really been utilized by people that make 25 million or more for years. Our track record for the past 10 years is 9.53% returns on this product every

Whitney Sewell year. This is your daily real estate syndication show. I'm your host, 

Whitney Sewell: Today, our guest is Stephanie Walter. She's a wealth strategist, author, CEO of ERBU wealth. With her expertise and passion for teaching, Stephanie helps professional individuals unlearn conventional money thinking and unlock the secrets of wealthy investors. Her journey includes a recent retirement and sale of her insurance agency, allowing her to focus on educating others about the unique perspectives of the wealthy. She's discovered that the affluent approach money differently, actively putting their assets to work strategically, mitigating risk and utilizing leverage to accelerate wealth growth and securing tax-free income and retirement. So she's going to bring a few of those strategies to the show today that she's learned that, Hey, the ultra wealthy do these things, have been doing these things. And now some of that is available, you know, to the not so ultra wealthy, I guess you could say, but that, that, well that you would never know about, right? Unless somebody likes her, or, you know, is telling you right, or bringing it out that, Hey, this is what the wealthy do. And there's no reason, you know, you're not doing it as well. So she's on a mission to expose people to this, just right. The alternate ways of investing and offering insights that can transform your financial outcomes. She's going to mention a few stats as well that are pretty eye opening. And so enjoy the show. We are all thinking about the future, right? And hopefully you're, you are thinking about many years from now, not just six months from now, and what your finances look like. I mean, that word tax always comes up in our conversations at times that are probably not often enough as far as planning and being really good at planning. But our guest today has some strategies that I think all of us need to be aware of. And she's written a book recently that's going to help us to better understand those things. And welcome back to the show, Stephanie.

Stephanie Walter Thank you so much for having me.

Whitney Sewell Stephanie give you update the listeners a little bit about who you are, your background, your wealth strategist, author, or, you know, numerous things that you've done that's helped you to get to where you're at now to help us, you know, and others with building wealth and doing it well and tactfully, but tell them a little more about your background.

Stephanie Walter Yeah. Well, I started, well, I was an insurance agent, for about 16 years. And, in about 2016, I started doing real estate syndications and I was sort of the partner in the group that raised the money. So I dealt with a lot of wealthy investors and got to know them pretty well. We have about 300 million of assets under management, and I'm now sort of transitioning into this, I guess, second phase of my career where I've written a book to kind of make people aware of what the wealthy are doing with their money, because it's very different than what we're doing with our money. Yeah. So I wrote this book and now I'm just trying to get out and talk to people about some strategies that they might not be aware of.

Whitney Sewell Yeah. Well, let's dive into a few of those strategies, right? I'm sure there's many myths that come along with, you know, wealth building as well. Why don't you, why don't we talk about some of the myths and we'll dive into some of the specific strategies as well.

Stephanie Walter Well, I think a really important myth that I address a lot is that you need to invest in high people. They say, Oh, well, the person got wealthy because they invested in very high risk investments and that's why they got all their money. But actually nothing could be further from the truth. And I'm sure you're aware of that too. Dealing with investors is the wealthy ones are very, very concerned with the risks and understanding everything that's involved with an investment. They do that with real estate. They do that with everything. They try to actually have an asymmetric return that is more realistic to what an investor wants. They want a very large return for a very small amount of their money that they put in. And that, that is a big part of it. I know part of my book, I go into just what losses, just plain old losses due to your portfolio. And maybe a lot of people don't really think about that, but that, that that is super impactful when you're, you know, let's say the stock market went down 25%. Well, they say, well, it'll, you know, I'll just need another, for the stock market to go up 25% this year. That's actually not true. They need a return of 50% just to get them back to normal. And that can take years and years and years.

Whitney Sewell Yeah. Wow. That's probably not good news. Yeah. For most. But yeah, you know, often we do believe it has to be something high risk to get the high return. And I think the people who are, they become wealthy, right? It's because they have taken the time to analyze those risks and the returns and, you know, in their specific portfolio, maybe, is there another myth? Maybe we could discuss it before we dive into a strategy.

Stephanie Walter Knowing, I guess, what, what losses do to your portfolio and actually not only that, but probably a little bit more. I dive pretty in depth about the 401k and just being aware of what fees do to your, your returns as well, because I think I, it's in my book, but I believe it's the 80 to 90% of people who don't even know they're being charged fees on their 401ks. And I go through like three people step by step. And the fees are 1% for one person, 2% for the other person, 3% for the final person, and just show what that looks like over time. And it is hugely crazy, of what those compounding fees do to the returns and what they're thinking they'll be getting out of their 401k. So I just try to make people aware of what those fees are. And if they want to stay in the 401k, what they can do to, you know, get into low, low risk without fees being assessed to them. Yeah.

Whitney Sewell Very low fees anyways. Yeah. It's interesting that that higher percentage wouldn't even know that they're being charged a fee. And then you don't really think about how that affects your long-term, right? So, all right, let's get into some strategies. I know, you know, the tax treatment diversification, that's one maybe, but, is that a strategy that we should dive into right now? Or what would be the, the maybe top strategy that we, you would want to highlight?

Stephanie Walter Well, I think it's really important. And again, we both have seen this with real estate is that real estate is more a tax advantage product. So people really get some great tax advantages from working with real estate. But then there's, there is the 401k, which by and large, everyone, most everyone does, and that's tax to permit, you know, and what I'm bringing to light is that it's really important to have your money in a few different buckets, maybe a little bit in the tax advantage, which is real estate, tax deferment, which is your 401k, but tax free bucket is usually something that is not utilized at all. Because really people think the only way that they can take advantage of that is through a Roth IRA or 401k, which they have to, you know, usually it excludes people that make higher incomes, like a hundred thousand or more. But what I found is that there are some strategies that the wealthy use to kind of get around that and be able to have a lot of tax free income when they retire.

Whitney Sewell Maybe give us an example, or let's think through that a little bit.

Stephanie Walter The product that I'm talking about is actually, it's a premium finance life insurance. Now everybody freaks out when they hear the word life insurance. But actually, this is a very, very, most people have never heard of this, even agents that are in the financial space. This has really been utilized by people that make 25 million or more for years. And it functions very much like a real estate product in that you go in and the bank will pay, you know, probably a 80, 75 to 80% of the premium on this policy. And then you leverage into this large investment with only 20 to 25% of a down payment. And then this policy grows the way that it grows is that it is linked to the stock market and that it only takes the ups, but it will, it doesn't take, if there's a loss, like last year, if it's a 25% loss, they get a zero. You just supply zero. And I could go into more detail about how the insurance company is able to do that. But basically think of it as a way, say you leverage into a million dollar real estate product. You put $200,000 down. Now say that real estate goes up 8% in the year. You don't make 8% on your 200,000. You make 8% on the million dollars, which is exactly how this product works, except it is not real estate. So you don't have to worry about any kind of losses that would be associated or risks associated with the real estate, if that makes sense.

Whitney Sewell Yeah. And how would somebody learn about something like that or even start, you know, using a platform like that?

Stephanie Walter Unfortunately, there isn't a lot of information about this product because it has been reserved for the extremely wealthy. You can contact me, you know, or you can, you know, look around on the internet. There's not, like I said, a great deal of information. It's called premium financed insurance. And they have opened this product up in the last few years to accredited investors. So if you can prove that, you know, you have a net worth of a million dollars, this is definitely a cool strategy to look into.

Whitney Sewell What's the risk for that?

Stephanie Walter The risks are if say the market doesn't go up. Like if we had like 10 years of zero percent returns, which has never happened, you know, that could be something. Also, interest rates do affect this product. It's just like a loan, like anything else for real estate. So we try to get them in the best loan possible, lock them in for a few years. But this is a different product in the sense that we're always looking at it on an annual basis to be sure that, yes, they are in the right loan, the lowest loan they can get. And let's see what the market does this year. Our track record for the past 10 years is nine point five, three percent returns on this product every year. But the key is, when you leverage the money in, you leverage about a million dollars in from the bank. It grows like gangbusters. And then the person is able to get the loan out or the they're able to get money out when they retire tax free, which is very significant because the money grows tax free while in the product. And then it's distributed tax free.

Whitney Sewell All right. I wanted you to be able to hit the tax treatment diversification as well. And what is that and why should we care?

Stephanie Walter I usually say we have like three buckets of money. We've got money that's just maybe sitting in your savings and growing that, you know, a small rate. But then you're taxed every year on that. So that's taxable money. The second one is tax deferred money. That's your 401k. That's what the majority of people have. And then the tax free bucket is money that comes to you tax free in retirement.

Whitney Sewell OK. And I don't know any other thoughts around strategies that we should be investigating or even learning from you that maybe we hadn't thought of. I mean, somebody obviously somebody having a salary of 25 million or more. They are in a different category than most. Right. And there's different things that they need, but, you know, that we wouldn't be exposed to. What would be something else?

Stephanie Walter I think it's again, it's sort of a mindset shift is that people that have money are aware that like when they retire, if they get to the point of wanting to retire, they think about how much money they need or how much cash flow they need coming in for them. And that can actually take many forms, as I thought that most people that invested in real estate, that was all they did. But you see these strategies in which they leverage money. And like I said, with this life, the premium finance life insurance product. But they also take advantage of annuities. Annuities are something only an insurance company can sell. But basically they give off guaranteed lifetime income. And so people are more thinking about not necessarily, you know, they have their assets, you know, that are out there, but they try to look at what they need to do to make those assets produce income. And I think that's a huge thing that most people don't think of. They think I'm going to save and save and save in my 401K or whatever method. And I'll have this big pile of money, maybe a million dollars when I'm ready to retire. But most people, most wealth strategists or even financial planners don't really talk about what happens after that. And I was just in my book, I think I referenced this. That Morningstar is a consulting firm, and they did a survey of how much money you should expect to get out of your 401K. If you have a million dollars in it, you'd be pretty surprised at the answer. I think most baby boomers think it's eight percent. Actually, that number is two point eight percent. So if you have a million dollars, you can expect to take twenty eight thousand dollars out of that and possibly hopefully not run out of money. So that's why it's important to look at these different income producing strategies.

Whitney Sewell I think anyway. Yeah, yeah. Two point eight is very different from eight. Wow. And just being I mean, how can they find some, I guess, realistic numbers like that? I mean, obviously talking to somebody like yourself. But man, I guess as hard news as that is better earlier than later. Right.

Stephanie Walter It is. And I think actually the industry is coming around a little bit because we've got a few things going on. We've got longevity, in which people are living longer than they ever have lived before. Social security, we're not really sure of the stability of that. And then another thing that people don't think about is if they keep their money in the market, solely in the market, and then they have a significant loss right before they retire or they have a loss several years in, that can affect how much money they can realistically take out. So, yeah, I would say you could go on the Internet. There's so many resources. I apologize. I was reading something and I don't remember the source of it. But it was like a Morgan Stanley or something like that, where they are saying they think people should shoot for taking two percent out. And so, yeah, there's so many resources on the Internet. Good and bad information. But it's important. I think people think they're going to retire, but they don't give a lot of thought to it, like a lot of things in our lives. And then they realize that they haven't planned for it. And that that's kind of the kiss of death. If you don't plan based on taxes and just plan based on your income that you want to have in retirement, those are really important things to do.

Whitney Sewell Yeah, and it's going to be very different depending on how old you are. Right. And maybe what would be a suggestion for the 20 year old versus the 40 year old?

Stephanie Walter The 20 year old has so much time on their hands. So that is truly when I guess the average person that I do the premium financed insurance on is someone who's 50 years old. But I've done a few in the last few years that are for people in their 30s. And just even a few years of difference make such a huge, huge impact. But I mean, if you're 20 and you're just starting out, I mean, it's just important to, you know, have a plan in place

Whitney Sewell how much income you want and just start doing something with it. All right, Stephanie, moving to a few final questions. I just wondered your thoughts on, you know, what you predict, right? You know, the real estate market over the next six, 12, eight months. Yeah, or 18 months rather. And how that's affecting what you're doing, right? Where you're investing or whatnot. I feel like nobody has that crystal ball. However, what we believe affects what we do. Right. And so I just wondered how, you know, your expectations of the real estate markets affecting what you're doing.

Stephanie Walter I think there's going to be a lot of opportunity. You know, I know people are all talking about that. They foresee a crash and things like that. But personally, I've invested in a lot of multifamily, every multifamily project I've done. And I think it's just really important to be conscious of the market you're investing in. Really, I encourage a lot of people to do a Wikipedia search on the market that they're looking at. Is it growing? Is the population growing? What kind of economic support does this just want? You know, are there many things in this market that's growing the economy or whatnot? I am looking at getting out of, I think, three will be cycling out of three this year, and I'm planning myself to personally buy retail in some growing markets around where I live so that I can be a little what I've invested in in the past has been a few states away, so it's hard to, you know, be on top of everything. But I'm actually looking at retail in some real fast growing markets around where I live. So I'm not really holding off. I think, you know, depending on who you talk to, they say interest rates, they think may have leveled and other people think they're going to keep going up. But the great thing about that is, you know, even if you choose to buy, if you buy a good deal, you can, you know, change the financing. If the financing, if it makes sense with the current financing, I think that's what you need to make that move. If it's a good deal, go for it. What's the biggest challenge in your business right now? For me, talking to people about other alternative ways of getting their finances in order and kind of struggling with everybody thinks they need to do it one in one way, you know. And so I think that's always a challenge. For me, anyway. What about some habits that you are disciplined about that produce a hash return for you? I'm a very hardworking person. So I just believe that you have to have, you know, your goals in front of you broken down to a daily, weekly, monthly basis and you know what you're trying to achieve in that period of time. And everything comes down to numbers, you know, for me, no matter who I'm talking about or who I'm talking about. You got to talk to a certain number of people to, you know, make something happen for me. And how do you like to give back? I'd love to give back. I do a lot with the Rotary Club. And we do lots of different things around the community, you know, doing things for the seniors. I really love doing that. I do that out of my church as well as just visiting and supporting them in the best way that you can. That's sort of what's close to my heart. But I also, you know, volunteer in my son's school,

Whitney Sewell which is really fun. That's fun. Stephanie, grateful to have you back on the show and really just expose us to some some maybe some strategies, thoughts that we didn't know or had never wouldn't have known. Right. Unless somebody brings it up like yourself, especially when typically some of them are only available to the ultra wealthy. Right. Most of us have not heard those things or wouldn't know that they're available to us now. And so grateful for that. Tell the listeners how they can get in touch with you and learn more about you

Stephanie Walter in your book. Yeah, you guys can reach me on my website, which is www dot e r b e wealth dot com. And if right there, you can order the book. And I have it. It's free for people because I just want to expose as many people as I can to it so you can either download it or get a copy of it. And on that website, you can request a call with me. And there's a lot of great education, educational material on there as well. So that would be a great place to start.

Whitney Sewell Thank you for being with us again today. I hope that you have learned a lot from the show. Don't forget to like and subscribe. I hope you're telling your friends about the Real Estate Syndication Show and how they can also build wealth in real estate. You can also go to lifebridgecapital.com and start investing today.