Endless

Income

50 Secrets to a
Happier, Richer Life

Ted Bauman
Endless
Income
Endless
Income
50 Secrets to a
Happier, Richer Life

Ted Bauman
 Banyan Hill Publishing
P.O. Box 8378
Delray Beach, FL 33482
Tel.: 866-584-4096
Email: http://banyanhill.com/contact-us
Web: http://banyanhill.com

ISBN: 978-0-692-16879-0

Copyright (c) 2018 Sovereign Offshore Services LLC. All international and
domestic rights reserved. No part of this publication may be reproduced or trans-
mitted in any form or by any means, electronic or mechanical, including photo-
copying and recording or by any information storage or retrieval system without
the written permission of the publisher, Banyan Hill Publishing. Protected by
U.S. copyright laws, 17 U.S.C. 101 et seq., 18 U.S.C. 2319; Violations punishable
by up to five year’s imprisonment and/or $250,000 in fines.
Notice: this publication is designed to provide accurate and authoritative
information in regard to the subject matter covered. It is sold and distributed
with the understanding that the authors, publisher and seller are not engaged
in rendering legal, accounting or other professional advice or services. If legal
or other expert assistance is required, the services of a competent professional
adviser should be sought.
The information and recommendations contained in this brochure have been
compiled from sources considered reliable. Employees, officers and directors
of Banyan Hill do not receive fees or commissions for any recommendations of
services or products in this publication. Investment and other recommendations
carry inherent risks. As no investment recommendation can be guaranteed,
Banyan Hill takes no responsibility for any loss or inconvenience if one chooses
to accept them.
Banyan Hill advocates full compliance with applicable tax and financial report-
ing laws. U.S. law requires income taxes to be paid on all worldwide income
wherever a U.S. person (citizen or resident alien) may live or have a residence.
Each U.S. person who has a financial interest in, or signature authority over
bank, securities, or other financial accounts in a foreign country that exceeds
$10,000 in aggregate value, must report that fact on his or her federal income
tax return, IRS form 1040. An additional report must be filed by April 15th of
each year on an information return (FinCEN form 114) with the U.S. Treasury.
IRS form 8938 also may be due on April 15th annually, depending on the total
value of foreign assets. Willful noncompliance may result in criminal prosecu-
tion. You should consult a qualified attorney or accountant to ensure that you
know, understand and comply with these and any other reporting requirements.
 ACKNOWLEDGEMENTS

In quoting John Maxwell, “Teamwork makes the dream

work,” I would be remiss not to thank my Banyan Hill Publishing
colleagues, whom without their support and effort, I would not
have completed this book.
First and foremost, I’d like to thank Jocelynn Smith, Banyan
Hill’s senior managing editor, for her time and dedication to
organizing and editing this book. Also, for ensuring it delivered
the goals we set forth at the beginning of this project.
I’d also like to thank Jennifer Somerville, Tiffany D’Abate,
Hillary Weiss and Alexandra Dreibelbis for their meticulous
proofing and Mary Branch for her incredible design talents.
Last but not least, I thank the numerous industry gurus who
shared their insights, which helped with my research.
 AUTHOR BIO

Ted Bauman

T
ed Bauman joined Banyan Hill
Publishing in 2013. As an expat who
has traveled to over 60 countries and
lived in the Republic of South Africa for 25
years, Ted specializes in asset protection
and international migration. He is the edi-
tor of The Bauman Letter, Alpha Stock Alert,
and 10X Project. Born in Washington, D.C.
and raised on Maryland’s Eastern Shore,
Ted migrated to South Africa as a young man. He graduated
from the University of Cape Town with postgraduate degrees in
Economics and History.
During his 25-year career in South Africa, Ted served a
variety of executive roles in the South African non-profit sec-
tor, primarily as a fund manager for low cost housing projects.
During the 2000s, he worked as a consultant, researching and
writing extensively on financial, housing, and urban planning
issues for clients as diverse as the United Nations, the South
African government, and European grant-making agencies. He
also traveled extensively, largely in Africa, Asia, and Europe.
In 2008, Ted returned to the U.S., where he served as Director
of International Housing Programs for Habitat for Humanity
International, based in Atlanta, Georgia. During that time, he
extended his travels to Latin American and the Caribbean. He
continued to research and write on a variety of topics related
to international development. In 2013, Ted left Habitat to work
full-time as a researcher and writer. Ted has been published
in a variety of international journals, including the Journal of
Microfinance, Small Enterprise Development, and Environment
and Urbanization, as well as the South African press, including
the Cape Times, New Internationalist, Cape Argus, and Mail and
Guardian.
 TABLE OF CONTENTS

INTRODUCTION.........................................................1
INVESTMENT..............................................................3
Income Secret No. 1: Become a “Lazy Landlord” and
Collect Rent Without Buying or Managing a Single Piece
of Real Estate................................................................................4
Income Secret No. 2: The One Asset Class Paying Out a
Steady Income Stream..................................................................6
Income Secret No. 3: Triple Your Dividend Income With
a Few Nearly Forgotten “High-Class” Stocks...............................10
Income Secret No. 4: Get Paid $2,500 a Month From Your
County Treasury.........................................................................12
Income Secret No. 5: Supercharge Your Savings With
Accounts That Pay You 25 Times More Interest...........................14
Income Secret No. 6: Ramp up Your Retirement Fund With
This Surprisingly Simple Move...................................................16
Income Secret No. 7: Increase Your Brokerage Statement
$3,120 Each Year by Firing Your “Robo” Stock Adviser...............18
Income Secret No. 8: Become an Early Investor … With
as Little as $500 … With Peer-to-Peer Lending...........................20
Income Secret No. 9: Turn Your Hobby Into a Secret
Income Gold Mine......................................................................23
Income Secret No. 10: The Low-Cost Maneuver to Defeat
Disaster … Trust Me....................................................................32

TAXES.......................................................................47
Income Secret No. 11: Stop Giving Interest-Free Loans
to Uncle Sam..............................................................................48
Income Secret No. 12: Double Your Tax Break With a
Spousal IRA................................................................................49
 Income Secret No. 13: Pocket Extra Income Taking
Advantage of President Trump’s Favorite Tax Loophole (TAX)....50
Income Secret No. 14: Collect $770 With a Property Tax
“Circuit Breaker” Refund............................................................63
Income Secret No. 15: Let Your Pet Earn You Some Tax
Deductions..................................................................................65
Income Secret No. 16: Never Pay U.S. Taxes Again..................68

RETIREMENT............................................................83
Income Secret No. 17: Boost Your Social Security Benefit
by Retiring Earlier.......................................................................84
Income Secret No. 18: How to Collect an Extra $5,600
per Year in Social Security Benefits.............................................88
Income Secret No. 19: Boost Your Social Security Benefits
by $1,140 per Month … or More................................................90
Income Secret No. 20: Roth or Traditional IRA: Don’t
Let Taxes Eat Into Your Retirement.............................................93
Income Secret No. 21: Why the Self-Directed IRA is Your
Key to Long-Term Prosperity.......................................................96
Income Secret No. 22: Use Your “Secret IRA” to Save as
Much as $591,000....................................................................111
Income Secret No. 23: Get Paid $565 a Month, for LIFE,
Simply for “Insuring” Your Nest Egg.........................................125
Income Secret No. 24: 13 States That Won’t Loot Your
Retirement................................................................................138

TRAVEL...................................................................151
Income Secret No. 25: That’s the Spirit: Use This
“Gift-Giving” Key to a Bon Voyage............................................152
Income Secret No. 26: Save at Least 85% on Airfare With
This Quick, “Old-School” Travel Tip.........................................155
Income Secret No. 27: Stay 6 Nights in a South Pacific
Island Paradise for Less Than $900...........................................157
Income Secret No. 28: Vacation for Free — as an
International House Sitter........................................................160
 Income Secret No. 29: Get a 200% Retirement “Pay Raise”
for Taking a Trip.......................................................................163
Income Secret No. 30: Summer in a Dream Vacation Spot
for Free — and Earn Money Doing It........................................165

AROUND THE HOUSE............................................175

Income Secret No. 31: Save 85% on leading Brand-Name
Prescriptions.............................................................................176
Income Secret No. 32: Switch to a Cash-Back Rewards Gas
Credit Card...............................................................................182
Income Secret No. 33: Save 15% on Auto Insurance by
Taking This Course...................................................................184
Income Secret No. 34: Earn up to $10,000 Per Year Renting
Out Your Own Car....................................................................186
Income Secret No. 35: Review Your Auto Insurance Bill
to Save $531.............................................................................188
Income Secret No. 36: Chop Your Cable Cord ... and
Save Big....................................................................................190
Income Secret No. 37: Separate Your Landline Long-Distance
Phone Carrier...........................................................................206
Income Secret No. 38: Save up to $45 Per Month by
Replacing Furnace and Air Filters Regularly.............................208
Income Secret No. 39: Save Hundreds in Energy Costs Just
by Switching to the Right Light Bulb........................................210
Income Secret No. 40: Save up to $20 Per Month by
Tinting Your Home Windows....................................................212
Income Secret No. 41: Save up to 30% on Your Heating
and Cooling Bills With This 1 Simple Trick...............................214
Income Secret No. 42: Save Energy and Money by Setting
Your Ceiling Fans to a Low Speed.............................................216
Income Secret No. 43: Get Paid to Clear Out Your Clutter......218
Income Secret No. 44: Win up to $10,000 Playing Digital
Scratch-Off Lotteries Each Day … for Free...............................220
Income Secret No. 45: Get Automatic Refunds With
This Little-Known Email App....................................................222
PASSION TO PROFITS............................................225
Income Secret No. 46: Get Paid to Do Routine Activities........226
Income Secret No. 47: Earn Thousands Per Year Writing
About Your Favorite Hobby Online...........................................229
Income Secret No. 48: Turn a Lifetime of Knowledge
Into Cash..................................................................................232
Income Secret No. 49: Spending Time With Man’s Best
Friend Can Increase Your Income.............................................234
Income Secret No. 50: Earn $5 Every Time You Snap a
Photo With Your Mobile Phone.................................................235
 INTRODUCTION

W
hy do people think the way they do? Sometimes the
answer is obvious. People raised in strict cultural en-
vironments often end up with similar beliefs as their
parents. Those who experience profound personal dislocations
are usually permanently affected.
In my case, an unusual combination of factors made me
what I am. I was born into a conservative American family with
strong beliefs about personal liberty and the dangers of statism.
Then I ran off to Africa and experienced firsthand (a) the rev-
olutionary overthrow of an oppressive government and (b) the
rise and ultimate corruption of another.
During my years in South Africa, I developed the conviction
that true freedom isn’t something to be purchased. It does not
result from wealth. Nor should it depend on handouts from the
government.
Instead, freedom comes from a never-ending struggle by
individuals and groups to define and pursue their own interests
within broader society. Those interests consider the interests of
others. They are not exclusive or oppressive. Freedom means
coordinating with others for everyone’s best interest.
But freedom never comes from politicians — at least, not
from them alone. Voting will never secure freedom. Voting is im-
portant. So is speaking your mind to influence others. But free-
dom also requires a willingness to take direct personal action.
The strategies in this book are examples of that kind of per-
sonal action. In every case, I identify a solution to a problem,
or an opportunity. These strategies are legal. But they are often
buried deep in bureaucratic regulations or case law. Sometimes
they are even deliberately obscured by those who stand to bene-
fit financially or politically if you don’t know about them. Other
times people ignore them because they assume they are only for
the rich and powerful.

1
2 Endless Income

Creating an asset protection trust in the state of Nevada,

for example, is an inexpensive and powerful way to ensure that
your assets — no matter how large or small — are protected
from legal challenges. I don’t mean that you can get away with
crime; I mean that if you are sued, or faced with a difficult di-
vorce, or a business partnership goes sour, whatever you vest in
the trust is safe.
Similarly, the tax optimization strategies I discuss aren’t
illegal. Nor are they unethical. But they are often restricted to
wealthy clients of wealthy tax attorneys because those attorneys
like to pretend that they are difficult to implement. They aren’t,
and I show you how to do it.
Opportunities like self-directed individual retirement ar-
rangements (IRAs) are little-known because the retirement-sav-
ing industry vastly prefers it that way. They tell scary stories
about what can happen if you do something wrong with your
IRA, then take your money and invest it in weakly performing
stocks and charge you high fees. It’s true IRA mistakes can be
costly, but I tell you how to avoid them — without charging you
an arm and a leg.
These three examples have something in common: People
are often afraid to try them. They think they will get into trou-
ble, or that they are too expensive, or too complex and risky.
That illustrates another thing about freedom: It means over-
coming those fears. The best way to do that is to consult some-
one who truly cares about you and your prosperity. Someone
who does what he does not just for a job, but as a personal
mission.
I’m that someone. I know you will benefit from this book,
and from the strategies for freedom and prosperity contained in
it. And you should know that when you do, I will be very happy
indeed!
Kind regards,

Ted Bauman
Editor, The Bauman Letter
 INVESTMENT

T
he freewheeling ‘80s churned out a bevy of movies about
how a little guy with grit, intelligence, and a little cash
could make it rich investing on Wall Street. But there’s far
more to smart investing than just scooping up the hottest names
trading at the moment. In this section, you’ll learn about several
types of assets that pay out a steady stream of income, how to
get paid by your country treasury, and a critical way to slash
through fees that are eating away at your returns. Punch your
ticket now to beating Wall Street with its own tricks.

3
4 Endless Income

INCOME SECRET NO. 1:

Become a “Lazy Landlord” and Collect Rent Without
Buying or Managing a Single Piece of Real Estate

Wouldn’t it be nice to invest in real estate and derive a steady

income without having to lift a finger and actually manage the
property?
Well, you can — and you don’t need to put up millions of
dollars of your own money to do it. The trick is to use crowd-
funding sites to invest in real estate investment trusts (REITs)
and, in the process, generate a substantial amount of income.
A REIT is a company that owns, and often operates, in-
come-producing real estate. There are many types of commer-
cial real estate owned by REITs including office and apartment
buildings, hotels, hospitals, shopping centers, warehouses —
even timberlands. Other REITs are focused on financing real
estate.
When REITs were first created by an act of Congress in
1960, they were intended to provide a real estate investment
structure similar to that of mutual funds. Today, REITs are pub-
licly traded on the major exchanges, either public but non-listed
or private. As such, there are two main types of REITs — equity
REITs (which invest and own properties) and mortgage REITs
(which invest in property mortgages).
Savvy investors consider REITS strong income vehicles be-
cause they generally must pay out an amount that is equal to
at least 90% of their taxable income in the form of dividends to
their shareholders.
However, if you were to invest in a stock market REIT, your
annualized yield would average just 2% to 3%. Whereas, if you
use crowdfunding sites such as FundRise.com or RealtyMogul.
com to invest in REITs and real estate directly, your annualized
yield could be as high as 11%.
There are other advantages to real estate crowdfunding.
For one thing, they provide you with the ability to individually
 Investment 5

select the properties you wish to invest in. That way, you can be
more selective on a project-by-project basis and build yourself
a custom portfolio that is to your specific investment objectives.
In addition, real estate crowdfunding affords you the oppor-
tunity to invest in certain real estate markets that were previ-
ously off limits, such as commercial real estate.
Plus, crowdfunding doesn’t require a large minimum invest-
ment. You can own a stake in a major real estate project without
having to invest a large amount of money. Being able to invest
small amounts of money in real estate deals, you can diversify
your ownership in multiple properties. That allows you to build
a more diversified portfolio with minimized risk exposure. For
example, instead of investing $250,000 in one property, you can
invest $50,000 in five different projects.
Another important consideration: Investments in real estate
crowdfunding campaigns are not publicly traded. Therefore,
they are not subject to mark-to-market valuations from minute
to minute. This means the value of your real estate crowdfunded
investments doesn’t fluctuate. Unlike the stock price of a REIT,
which can be influenced by external factors and move up and
down significantly throughout each trading day, crowdfunded
REIT investments provide a safe haven from market volatility.
To further explore this opportunity to become a “lazy
landlord” while boosting your income, here are five of the top
crowdfunding sites worth looking into:
• Fundrise
(https://investorjunkie.com/44325/fundrise-review)
• LendingHome
(https://investorjunkie.com/48088/lendinghome-review)
• Patch of Land
(https://investorjunkie.com/47907/patch-land-review)
• Realty Mogul
(https://investorjunkie.com/45797/realthy-mogul-review)
• RealtyShares
(https://investorjunkie.com/44852/realtyshares-review)
6 Endless Income

INCOME SECRET NO. 2:

The One Asset Class Paying Out
a Steady Income Stream

Retirement is supposed to be a time of leisure and relax-

ation. It’s supposed to be a worry-free time where you travel,
learn new things, enjoy hobbies and spend time with loved ones.
But thanks to years of ultra-low interest rates, retirement
has become a frantic search for income to make all those dreams
a reality.
Over the past three decades, the investment environment
has changed — and not for the better — when it comes to those
on a fixed income.
Interest rates have fallen sharply due to economic weakness
and turmoil. The Federal Reserve has kept rates at bargain-base-
ment levels year after year in an attempt to keep the market
alive, while leaving those dependent on income out in the cold.
You may have forgotten exactly how far we’ve fallen.
In September 1981, the 10-year government bond yielded
an average 15.32%.
By September 1990, the yield was down to 8.89%.
In September 2000, it was at 5.80%.
And today … the 10-year bond yields a mere 2.98%. That’s
after the Federal Reserve has gone through several rounds of
rate hikes!
If you had invested $100,000 at a yield of 15.32%, you
would have earned $15,320 in a year. That was more than the
median annual salary of $11,669 in 1981 and would have made
for a nice retirement.
Today, $100,000 invested at a yield of 2.98% gets only
$2,840 per year. That is a frightening prospect for retirement
income.
 Investment 7

However, you can still find much higher yields — yields that
are closer to what we saw in 2000, 1990 … and even 1981.
These assets are master limited partnerships (MLPs), and
they are different from the stocks that you’ve likely already trad-
ed in your brokerage accounts and 401(k)s.
In fact, there are 568 agencies slated to pay $34.6 billion
over the next year to any American taxpayer with a claim on
the cash.
MLPs are safe, and they are outperforming the market.
MLPs are based on the belief that if the United States of
America is to remain a free nation, it needs to be self-sufficient.
However, most Americans have no idea we send over $535
billion every year to foreign countries for natural resources such
as oil, metals and agriculture.
And the worst part of this policy is that most of the foreign
countries receiving our billions of dollars are not only hostile to
the United States, but they actively support terrorist enemies
with our own cash.
But it doesn’t have to be this way.
According to a prominent geological survey, there is $128
trillion worth of physical assets within the borders of the United
States. These are massive resources — from oil and natural gas
to core metals (think steel and aluminum) … to precious metals
like gold and silver.
That’s enough money to pay off our $21 trillion national
debt six times over. Or fund Social Security for the next 150
years.
Every president from Nixon to Trump has been striving to
make the U.S. truly self-sufficient. Which means our country has
been fighting this battle for independence for over 40 years …
yet we’ve continued to send $535 billion every year to foreign
countries.
That’s why this opportunity is so critical. And after four de-
cades of struggling, we may have finally found the solution…
8 Endless Income

It’s known as Statute 26.

It basically says that a company can operate tax-free if it
becomes a designated agency.
To meet the requirements, a company must:
• Generate 90% of its revenue from the production, pro-
cessing, storage and transportation of the $128 trillion of
natural resources in the U.S.
• And pay out lucrative freedom checks to all shareholders.
Obviously, operating anything tax-free is a huge incentive …
especially with a corporate tax rate of nearly 40%.
It’s no wonder companies jumped at the opportunity to
become one of these designated agencies. They would much
rather pay billions of dollars to their shareholders than pay even
more money to Uncle Sam.
Yet, of the 16,000 publicly traded companies that qualified,
only 568 have met the guidelines to become a designated agen-
cy.
Over the next year, these agencies are set to cut $34.6 bil-
lion in freedom checks. And all you have to do is buy shares,
or “units,” in one of these 568 designated companies and then
collect the payouts. You can get started with an investment of
$10 or less, since shares of these MLPs trade like every other
company on the stock market.
You can trade MLPs on major exchanges. You can purchase
them just as easily as shares of a company or an exchange-trad-
ed fund. That makes investing in an MLP very easy.
When it comes to an MLP, instead of shares of a company,
you are typically buying “units” of an MLP.
Instead of a being a shareholder, you’re a “unitholder” of an
MLP.
And where a company pays you a dividend, an MLP pays a
“distribution.” Just a small change in language, but the concept
is similar.
 Investment 9

The key difference comes in the treatment of their payouts

to investors.
As an MLP investor, you have to pay taxes on 10% to 20%
of the cash you collect. Taxes on the remaining 80% to 90% are
deferred until you sell your units.
With an MLP, every time you receive a check, a portion of
your initial investment is returned to you. As a result, the IRS
does not consider these MLP payments as “taxable income,” but
rather a “return of capital.” The IRS doesn’t tax most of your
quarterly income checks until you sell your units.
This sounds complicated, but it’s really not.
Ordinary dividends must be filed on Form 1099-DIV
(https://www.irs.gov/pub/irs-pdf/f1099div.pdf). Distributions
from an MLP must be filed on Form K-1 (https://www.irs.gov/
pub/irs-pdf/f1065sk1.pdf). This means that your taxes are go-
ing to require a little more time for preparation, but the upside
is that the payments you receive for investing in MLPs should
more than make up for the added tax headache.
How much more? Let’s take a look at what the market has to
offer right now and how we can beat it with not only great-yield-
ing MLPs, but also units that are set to rise in value over time.
Right now, the S&P 500 Index has a pathetic yield of just
1.93%. Utilities, which have long been seen as the go-to for
income, are paying out an average of 3.31%. Real estate invest-
ment trusts (REITs) aren’t doing much better with an average
yield of 3.85%.
And as I mentioned earlier, the U.S. 10-year note is yielding
only 2.98%.
So far, we’re still lagging behind even the average yield of
the 10-year bond in the early 2000s.
We can do better.
The average yield of 128 high-yield, tax-advantaged MLPs is
8.9%. That matches Treasury yields we haven’t seen since 1990!
Check into adding MLPs to your trading portfolio and start
earning a steady stream of income.
10 Endless Income

INCOME SECRET NO. 3:

Triple Your Dividend Income With a Few
Nearly Forgotten “High-Class” Stocks

So … how much is that “hot” new common stock paying you

in dividends on a quarterly basis? Two percent? One percent?
How about 0% — because it doesn’t even offer its share-
holders a dividend?
Maybe it’s time to start investing in preferred stock shares.
They offer dividends of 6% to 7% on average.
Not only that, but they’re safer than common shares of
stock, which is another reason they’re popular among retirees
who want to boost or stabilize their cash flow.
What’s the difference between a preferred stock and a com-
mon stock since both have the potential to appreciate in price?
A preferred stock is a class of ownership in a corporation
that has a higher claim on its assets and earnings than a com-
mon stock. Generally, preferred stocks have a dividend that must
be paid out before dividends to common stock shareholders.
They also yield more than common stocks and can be paid on a
monthly (or quarterly) basis. These dividends can be fixed or set
in terms of a benchmark interest rate.
The finer details of each preferred stock depend on the type
of share. For example, adjustable-rate shares specify certain
factors that influence their dividend yield, while participating
shares can pay additional dividends that are determined by the
company’s profits.
Preferred stocks are also classified as either perpetual or
callable. Perpetual shares have no stated maturity date, while
those with a call date may be redeemed by the authorizing com-
pany at a future date. Those are considered a risk and thereby
generally pay a slightly higher yield than perpetual shares.
In addition to the income they generate, “called” preferred
stocks provide the opportunity for capital appreciation. The risk,
 Investment 11

however, is that they will eventually be called, at which point

the investor will have to replace the yield and expected income
with another holding.
Since preferred stocks with a call date may be redeemed at
face value (usually $25), it can be advantageous to pay as close
to par value as possible (also generally $25).
Dividends from preferred stocks are usually labeled as either
cumulative or noncumulative. Cumulative dividends are those
that must be paid by the company (or at least accrued until the
company can pay), whereas noncumulative dividends can be
withheld from shareholders based on the company’s profitabil-
ity. That being the case, you may think it best to consider only
cumulative dividends. However, they aren’t as popular as non-
cumulative versions, so in order to truly diversify your portfolio,
you may want to incorporate both.
One caveat: Preferred yields can rise into double digits
or languish on the lower end of the scale. While that makes
preferred stocks with higher yields more desirable, they usually
come with far more risk in terms of the company’s credit rating,
corporate fundamentals, tax eligibility, industry market condi-
tions and bid-ask price.
Therefore, it would be wise to balance yields with these
factors when considering which preferred stocks to choose. For
example, a corporate credit rating dictates the rate at which
a company can borrow. So you may want to consider invest-
ment-grade companies that carry ratings of AAA, AA, A or BBB.
They may pay lower rates than those rated BB or lower, but
what you sacrifice in a lower yield, you’ll gain in added invest-
ment safety.
Two helpful sites to broaden your understanding of the ben-
efits of using preferred stocks to boost your retirement income
are QuantumOnline.com and PreferredStockChannel.com.
12 Endless Income

INCOME SECRET NO. 4:

Get Paid $2,500 a Month From
Your County Treasury

There’s tax-free income hiding in plain sight.

Nearly every town across America offers it.
Multimillionaires collect it whenever they can. But most
working-class families still haven’t taken advantage of it.
In case you haven’t guessed, I’m talking about municipal
bonds. The interest you receive from them is exempt from fed-
eral tax.
But that’s not all. If you live in the state in which they’re
issued, they’re also exempt from state and local tax.
Plus, the tax exemption prevents the income you earn from
boosting you up into a higher tax bracket … which is one of the
reasons millionaires absolutely love their munis.
Yet most middle-class investors overlook municipal bonds
and, in doing so, are missing out on a great opportunity to gen-
erate additional income.
For example: $500,000 in savings placed into a tax-free mu-
nicipal bond that yields 6% would generate $30,000 per year …
which amounts to $2,500 per month in interest income.
Not bad, eh? And having the benefit of being exempt from
state income tax in addition to being exempt from paying fed-
eral taxes increases the taxable-equivalent yield. That’s why the
higher a state’s income tax, the more likely state residents will
buy their state’s bonds, while states without an income tax are
forced to offer higher yields to attract both in-state and out-of-
state buyers.
Those states that have no income tax include: Alaska, Florida,
Nevada, South Dakota, Texas, Washington and Wyoming. As
such, they offer slightly higher yields to offset the fact that their
bonds offer no local tax benefit to their own citizens.
 Investment 13

Elsewhere, the rules vary. For example, New York State’s

municipal bonds are exempt from city and state income taxes.
So, interest from municipal bonds issued in New York may be
triple tax-exempt from city, state and federal income taxes.
Meanwhile, Utah doesn’t tax its own bonds … but it also
doesn’t tax bonds issued in states that don’t tax Utah bonds. To
put it another way, if a particular state doesn’t collect taxes on
Utah’s bonds, Utah doesn’t collect interest on that state’s bonds.
So, Utah residents are free to buy bonds from states with no
income taxes such as Texas, Florida or Washington and avoid
paying Utah state income taxes on the interest.
Among the states that tax in-state bonds are Oklahoma,
Utah, Iowa, Wisconsin and Illinois.
For most other states, only interest from bonds issued within
the state is exempt from that state’s income taxes. So, if you
invest in bonds from other states, it’s likely that you’ll have to
pay tax on the interest from those bonds.
And what about residents of Washington, D.C.? The district
doesn’t tax in-state or out-of-state municipal bonds, so they can
buy bonds from anywhere and not pay state or district income
taxes on the interest.
Regardless of whether or not your state taxes the interest
on municipal bonds, most of your tax savings are going to come
from not having to pay federal income taxes. So, when it comes
to dealing with state taxation, the best strategy is to diversify
your municipal bond portfolio across multiple states.
14 Endless Income

INCOME SECRET NO. 5:

Supercharge Your Savings With Accounts
That Pay You 25 Times More Interest

As we all know, standard savings accounts have been of-

fering paltry interest rates for some time now. And by paltry, I
mean next to nothing. In fact, the current national average is a
measly 0.08%.
But that doesn’t mean you can’t generate extra income from
savings accounts or that you should scratch them off your list of
investment options. It just means you need to find the right kind
of savings account available at some of the most reputable and
recognized banks in the nation.
Here’s why: High yield online savings accounts from banks
such as Barclays, CIT, Goldman Sachs, Synchrony and many
more offer up to 2% APY versus the national average of 0.08%
for standard savings accounts.
Do the math: 2% divided by 0.08% equals 25. So that’s as
much as 25 times more in interest you could be accumulating
with an online savings account.
Plus, besides offering much higher interest rates than the
average savings account, the best of these online banks offers
other perks, such as a no minimum balance, ATM access and/
or free checking.
Here is just a small sampling of some of the highest-yielding
online savings accounts (Note: rates can fluctuate, so check the
individual bank websites for the latest APYs):
• Synchrony Bank — This one offers 1.85% APY with no
minimum balance, no monthly fee and it’ll even throw
in an ATM card. While most internet-only banks require
electronic funds transfer that can take a few days, having
ATM access means quicker access to your money.
• Marcus By Goldman Sachs USA — Along with a 1.80%
APY, this account requires no minimum balance, and there
are no transaction fees. You can deposit funds by check or
 Investment 15

by electronic or wire transfer, and access funds via elec-

tronic or wire transfer.
• American Express National Bank — With a personal sav-
ings account, you can earn a variable 1.75% APY with no
minimum balance and without any fees. Plus, the FDIC
insures your deposits up to $250,000.
• Barclays Bank — With more than 300 years of history,
Barclays is as dependable a bank as they come. It offers a
1.85% APY for its online saving account with no minimum
balance or monthly fees.
• Ally Bank — Not only does Ally offer a 1.80% APY with no
minimum balance required, but you can get a free check-
ing account with no minimum balance that provides easy
access to your funds.
• CIT Bank — It’ll cost you $100 to open this online sav-
ings account, but it comes with a 1.55% APY and interest
compounds daily. In addition, there are no monthly main-
tenance fees.
• Popular Direct — You’ll need a minimum of $5,000 to open
this account and you’ll have to maintain a $500 balance to
avoid a $4 monthly service fee, but that’s because it pays
a whopping (by today’s standards) 2.00% APY that, over
time, could generate the most interest income of compara-
ble online savings accounts.
Just about anyone can open an online savings account and
rake in hundreds, if not thousands of more dollars each year in
interest compared to your average neighborhood savings bank.
Which, frankly, is why I’m amazed that more retirees aren’t tak-
ing advantage them.
And with the Federal Reserve on course to continue raising
interest rates in the months ahead, the rates these online banks
offer could get sweeter.
To keep abreast of the best offers (which are subject to
change on a monthly basis), type “Best Online Savings Accounts”
in your search engine.
16 Endless Income

INCOME SECRET NO. 6:

Ramp up Your Retirement Fund With
This Surprisingly Simple Move

Many of us dream of retiring early — say, at 50 years old

instead of 65. But all too often, it’s just that — a wishful fanta-
sy — because we simply don’t have the savings or retirement
income needed to sustain us for the next 20, 30 or 40 years.
Nevertheless, when William was just 38, and his wife Nancy
was just 33, they did just that: They retired.
No, they weren’t high-powered CEOs raking in seven-figure
salaries. And they didn’t win the lottery. They were your ordi-
nary middle-class couple living in Seattle, Washington.
And yet, thanks in large part to a surprisingly simple move,
William and Nancy turned a modest nest egg into a $1 million
fortune … and are on track to make $3 million in investments
over the next 30 years while millions of other Americans are still
struggling just to get by.
What’s their “secret”?
Three words: low-cost income funds. They saved as much as
they could and focused on investing in low-cost income funds
rather than ordinary mutual funds. Today, 100% of their savings
are in these funds because of what William read from billionaire
investor Warren Buffett and Jack Bogle, founder of the Vanguard
Group, on low-fee and diversification benefits.
In fact, William and Nancy invested the bulk of Nancy’s mon-
ey in one simple exchange-traded fund (ETF) — the Vanguard
S&P 500 Index Fund. And in 2015, she made $172,500 in in-
terest and dividend income. Basically, investing in no-cost or
low-cost ETFs allows you to slash your fees from an average
4.25% to 0.25%, which makes a huge difference in your total
return on investment when you factor in reinvested dividends.
An exchange-traded fund is a marketable security that
tracks an index, a commodity, bonds or a basket of assets. Unlike
mutual funds, an ETF trades like a common stock on a stock
 Investment 17

exchange and experiences price changes throughout the day as

it’s bought and sold.
The Vanguard S&P 500 Index tracks the S&P 500 and is a
low-cost fund started by Jack Bogle in the 1970s. As you can
see in the chart below, the Vanguard S&P 500 Index Fund has
returned over 200% over the last eight years.

Vanguard 500 Index Investor

Total Return Price % Change
225%

200%

175%

150%

125%

100%

75%

25%

0%
2011 2012 2013 2014 2015 2016 2017 2018
SOURCE: Bloomberg

With returns like that, combined with low maintenance fees,

it’s easy to see how William and Nancy were able to amass their
fortune and watch it grow, enabling them to retire at an age
when others are just starting to take retirement saving seriously.
Warren Buffett is such a true believer in the power of invest-
ing in low-cost ETFs like the Vanguard S&P 500 Index Fund that
his estate plan specifies that if his wife outlives him, 90% of her
inheritance should be put into the same ETF.
It’s amazing to think that earning an extra $172,500 per
year while you just sit back and watch your investment income
soar could be so effortless. Yet you too can ramp up your retire-
ment fund with this unusual “hands-off” approach to automatic
income and possibly retire happily ever after much sooner than
you originally planned.
18 Endless Income

INCOME SECRET NO. 7:

Increase Your Brokerage Statement $3,120
Each Year by Firing Your “Robo” Stock Adviser

Welcome to the “robo” age — complete with robocars, rob-

ocalls, robochefs, roboworkers and … yes, robo stock advisers.
What, you may ask, is a robo stock adviser? It’s an auto-
mated electronic system that provides financial advice or in-
vestment management online with little human intervention.
A robo-adviser provides digital financial advice that is based on
algorithms executed with software that automatically allocates,
manages and optimizes your assets.
These automated advisers have soared in popularity in recent
years mostly because they make investing easier. In fact, there
are well over 100 robo-advisery services that have the capability
to allocate your assets in many different investment products
such as stocks, bonds, commodities, futures and real estate. The
funds are often directed toward exchange-traded fund (ETF)
portfolios, and you can choose between offerings with active
management styles or passive asset allocation techniques.
Of course, as we all know, there’s no such thing as a free
lunch … or a free robo-adviser. While they do offer competitive-
ly low fees compared to human, professionally managed invest-
ment assistance, robo-advisers like Asset Builder, Betterment,
Wealthfront and others can charge up to 0.50% in their fees
alone.
That may seem fairly reasonable, but you could save as
much as $3,120 per year simply by ditching your robo-adviser
and instead putting your money into low-fee stock and bond
index funds — much like robo-advisers often do anyway.
Here’s an example furnished by self-made millionaire and
wealth management adviser Chris Reining…
Let’s say you sign up with a robo-advisery service, deposit
$3,000 in the account and set up an additional $300 investment
 Investment 19

every month. Assuming you earn an annual return of 10%, your

investment would be worth $70,893.
However … don’t forget there’s a fee to have the service
invest your money in an index fund. Let’s say it’s only 0.25%.
You need to subtract that fee from the return to calculate what
you’re actually making. So now it’s 9.75%. At that rate of return,
your investments are worth $69,825 — so, you’ve already lost
about $1,000 in fees. But it doesn’t stop there.
Keep in mind that the robo-advisery service isn’t paying the
index funds fees for you. So, you have to pay those as well to
the average tune of 0.16%. That boosts the total fees to 0.41%
and lowers your return to 9.59%. Now your investment is worth
$69,150.
No big deal? Then, consider this:
Let’s say your goal is to save $1 million in order to generate
$40,000 in passive income every year. You realize that to reach
that goal you would have to invest a lot more money. So you
start out investing the same $3,000; only now you’re investing
an additional $3,000 every month.
Following that strategy, you’re going to end up with $1.2
million within 15 years. But how much will you pay your robo-
adviser in total fees on that $1.2 million? The answer is $3,720
per year.
Now, had you invested your $1.2 million directly with the
stock index fund with a fee of 0.04% and a bond index fund
with a fee of 0.05%, the index fund would only be skimming off
about $600 per year, putting the extra $3,120 in your pocket.
If you’re living on $40,000 a year, can you really afford to
pay an additional $3,120 (7.8% of your passive income) in fees?
It simply comes down to this: While robo-advisers charge
lower fees than most financial advisers, they charge higher fees
than if you simply invest in an index fund yourself. And over
time, those fees can make a huge difference in your nest egg.
20 Endless Income

INCOME SECRET NO. 8:

Become an Early Investor … With as Little
as $500 … With Peer-to-Peer Lending

Maybe you’ve always wanted to invest in a startup compa-

ny or a venture capital opportunity, but that brass ring always
seemed to be just out of reach because you simply didn’t have
enough funds to take the plunge … or the amount needed was
too much to finance on a credit card … or the amount was too
low for banks and angel investors to get the return they wanted.
But now anyone can become an early investor … with as
little as $500 … and collect a steady stream of income every
month.
The key is peer-to-peer (P2P) lending. It’s a method of debt
financing that enables you to borrow (or lend) money without
using an official financial institution as an intermediary.
In other words, it removes the middleman. It’s a form of
crowdfunding that involves borrowing money from your peers,
including other businesspeople and investors who are interested
in relatively small financing amounts.
Peer-to-peer lending offers several benefits:
• No collateral is required.
• Lower interest rates are available, depending on your
credit score, loan amount and loan term.
• You can repay the loan early without prepayment penal-
ties.
• Faster approval.
• No paperwork besides a few online forms and a digital
signature.
Also, you can continue using your P2P lending connection
to tap additional funds once you borrow and repay the initial
loan.
 Investment 21

You can obtain P2P through sites such as LendingClub.com

and Prosper.com.
Launched in 2006, Prosper was the first P2P lending compa-
ny, followed in 2007 by LendingClub, which became the world’s
largest P2P lending platform.
Today, these are the two preeminent choices for peer-to-peer
investors. Both offer good deals for early investors, but have
different conditions.
Here’s a comparison:

LendingClub Prosper
Promotions Get up to 100,000 United None
Miles when investing
Fees 1%/year 1%/year
Minimum Deposit $1,000 $25
Loan Term 3 or 5 years 3 or 5 years
Loan Amount $1k-$40k consumer, $2k-$35k
$5k-50k auto, $5k-$500k consumer
business
Accredited Investor No (unless in Kentucky) No
Note Types Unsecured Consumer Unsecured
Debt, Auto Refinancing Consumer
and Business Loans Debt
IRA Account Yes Yes
Source: Investorjunkie.com

The first thing you need to do before becoming a P2P in-

vestor is find out whether peer-to-peer lending is available in
your state. Although LendingClub and Prosper are regulated by
the Securities and Exchange Commission (SEC), they are still
subject to the laws of individual states regarding the solicitation
of investors.
Currently, LendingClub is available to new investors in all
U.S. states and the District of Columbia with the exception of
Alaska, New Mexico, North Carolina, Ohio and Pennsylvania.
22 Endless Income

However, the LendingClub trading platform FOLIOFN — where

investors trade in existing loans — is available to investors in
each of these states except Ohio.
Prosper is currently available for new investors in most
states, including D.C., with the exception of Alabama, Arizona,
Arkansas, Iowa, Kansas, Kentucky, Maryland, Massachusetts,
Nebraska, New Jersey, New Mexico, North Carolina, North
Dakota, Ohio, Oklahoma, Pennsylvania and Vermont. However,
it doesn’t allow any additional states on its trading platform.
In terms of interest charged to borrowers, LendingClub
offers an annual percentage rate, or APR, ranging from about
6% to 28% based on factors such as the borrower’s FICO score,
number of recent credit inquiries, length of credit history, to-
tal number of open credit accounts and revolving credit. Most
borrowers tend to pay a higher interest rate for higher loan
amounts and for 60-month loan terms versus 36 months.
Prosper offers slightly higher rates ranging from 6% to 34%,
but also allows borrowers with lower credit scores on their plat-
form. These rates change regularly, so be sure to check with
both sites.
For more information on P2P lending offered by these and
other companies, visit https://www.goodfinancialcents.com/
peer-to-peer-lending.
 Investment 23

INCOME SECRET NO. 9:

Turn Your Hobby Into a Secret
Income Gold Mine

Using the collectibles market to increase your fortune means

honing in on some of your hobbies or special interests and put-
ting your unique knowledge to work. If you love baseball, you’ll
have fun gathering old trading cards. If you’re a comic collector,
then I’ll bet the idea of hunting down a rare variant cover of
your favorite issue appeals to you. The same goes for coin col-
lectors, watch enthusiasts, art lovers, wine connoisseurs, fans of
rare manuscripts and so on. And no matter what, you have the
thrill of the hunt — all while using an investment strategy that’s
proven to be exceedingly profitable for those who know how to
search for the right collectibles.
Historical price charts for collectibles tend to show a very
similar pattern. Be it coins, comic books or rare wines, collect-
ibles have a history of outperforming traditional assets over
time. And they tend to do so with far less volatility or correla-
tion to traditional investment assets.
It’s only logical when you consider that collectibles tend to
be held in “strong hands,” meaning they’re largely owned by
aficionados who rarely part with their collections just because
of economic tribulations. That gives them stability and provides
a certain counterbalance to an investment portfolio.
Of course, that doesn’t mean collectibles won’t fall in value;
they can and do at times. But if you’re investing in the long haul
with the idea that you will sell a collection at auction one day
— to supplement retirement or maybe pay for a kid’s college
education — then the growing demand for certain areas of the
collectibles world means that key items will likely retain their
value or grow in value over time.
These assets are a “quiet wealth” for a reason: They can help
you keep some of your wealth out of the government’s hands.
Various organizations and Western governments around the
24 Endless Income

world these days are talking about a “wealth tax” — let’s call
it what it truly is: wealth confiscation — as the last, best way
to extinguish what is now an unmanageable debt load that our
elected leaders have accumulated for us. If we ever reach the
point where America imposes such a tax, the hit men in the
IRS aren’t likely to include hard-to-value, non-financial assets
in their calculations. Collectibles, then, would be a perfectly
legitimate and legal means of shielding your assets from a gov-
ernment that is increasingly desperate for money. It’s a store of
wealth that potentially has a government buffer built around it.
And collectibles — true collectibles that can’t be mass-pro-
duced — hold value over time because of the nostalgia factor.
Sometimes they even become a part of pop culture. Collectors
want to hold on to their conquests and are willing to pay big
money for them.
And that means huge profit potential.
For example, the Codex Leicester, a compilation of scien-
tific writings by Leonardo da Vinci, was purchased in 1980 for
$5,148,000, and it sold for about $30 million just 14 years later.
The profit-gain increased by 443.90%, or 31.7% per annum.
Another recent example is the Fender Stratocaster guitar.
One went on sale for a whopping quarter of a million dollars.
It originally listed for about $250, so that’s a 10,000% appreci-
ation.
Not bad!
Nice profits aren’t that rare, either. In fact, collectibles have
a habit of outperforming other, more common investing ave-
nues. In December 2014, CNBC reported that, overall, investing
in high-end collectibles has been more lucrative than investing
in stocks. Over the past 10 years, the Knight Frank Luxury Index
(which tracks collectibles from cars and art to stamps, wine,
coins and furniture) was up 182% while Dow Jones was only
up 62%.
This is one investment avenue that is too often overlooked
by investors and I want to give you some key tips to get started.
 Investment 25

8 Beginner Tips for Making

Money in Collectibles
Each collectible category demands a unique approach for
making the most of your investment. But no matter if you’re
investing in wine, coins or comics, there are commonalities to
keep in mind. Because the basic strategy is always the same: You
need to buy the right item at the right time, preserve it well and
sell it at the right moment to the right buyer.
It’s deceptively simple. See, although the strategy seems like
common sense, it takes an intimate knowledge of the market
to execute correctly. If you don’t have a healthy knowledge,
it becomes extremely difficult to successfully invest money in
collectibles.
Just consider the wide range of questions you have to an-
swer: How do you begin your search? What trends are peaking?
Which dealer is the perfect candidate to rate your item? What’s
the best way to keep your collectible in tip-top shape? What
auction house should you use — if you use any?
To get you started, I’ve put together a list of eight tips a
novice collector should keep in mind.
Let’s jump right in, and start with the most important piece
of advice…
1. Stay on top of the market you’re invested in. All col-
lectibles depend on three main factors: interest, scarcity and
condition. Those are the biggies that span every area of the
market, and each category demands that a collector be aware of
the area they’re invested in. So do your homework! That means
keeping up on the latest trends, from current interests to the
speculative market.
For example, many comic books shoot up in value once
they’ve made it to the big screen. So there’s an entire specula-
tive market built around any superhero movies slotted for an
upcoming release. I suggest joining a blog or online community
that will keep you updated on your area. For instance, in our
26 Endless Income

sports memorabilia report, we suggest joining Sports Collectors

Daily, a blog devoted to delivering sports collecting news sto-
ries. You can also set up Google alerts to let you know whenever
a key word/phrase is mentioned in a news story. Basically, make
sure that you have a way to hear about a new development as
soon as it occurs.
And for those of you who might like to step away from your
computer, it’s never a bad idea to familiarize yourself with a
local collectibles store. The owners are on the ground floor,
dealing with comics on a daily basis. It’s the ideal environment
for getting a better handle on which characters or issues are
rising in demand. The same goes for trading card stores, etc.
You should also visit a local auction if you get the chance. It
will give you a behind-the-scenes look at the auction process —
and that will help you out immeasurably once you decide to sell
your collectible. Plus, there are social network sites which not
only connect you with fellow collectors, but also can be a source
for finding items for sale.
That just covers interest — the first factor. As for scarcity, a
little research will get you a long way. After you narrow down
the items you’re interested in, you should dig around to find out
how many baseball cards come in a certain set, how many vari-
ant covers of a particular comic book issue were released, how
many coins are in circulation, and so on. Basically, learn every-
thing you can about the history and current status of your item.
It’ll give an idea of why people would want a certain collectible
… and then you must ask yourself if this reason will always
exist. That knowledge is a major factor when considering a buy.
Of course, there are also plenty of dealers and experts out
there who are intimately acquainted with this knowledge, but
it’s never a bad idea to do your own research. As for finding your
ideal dealer, I’ll get to that in a moment. For now, just keep in
mind that you will want to consult an expert, either when you’re
looking for an item or when you’ve already scored one and need
to know the value.
 Investment 27

Finally, you have to consider the condition. One tear,

smudge or crease can mean thousands of dollars gone. On the
other hand, a rare misprint could mean thousands more. So
again, research is your friend! By learning everything you can
about a collectible, you’ll be able to get an idea of the value of
various conditions.
For example, by looking up PSA Sports’ trading card price
guides, you can find the value PSA Sports assigns to a mint
card, as opposed to a poor card. It’s not much different to when
researching the value of a car. Better condition vehicles can be
worth more than poorly maintained vehicles. There are also
price guides for just about any collectible you can imagine:
comic books, coins, guitars, wines, movie posters, etc.
Ultimately, just remember this: Don’t invest in collectibles
when you aren’t familiar with the market. If you’re not interest-
ed enough in the hobby to spend some time each week — or at
the very least each month — to keep up with the fluctuations in
the market, you probably shouldn’t invest in that hobby. It’s no
different than investing in stocks: In order to make the best of a
trade, you have to keep up with the company.
2. Don’t let emotions get in the way. Since this is an in-
vesting practice tied to hobbies and special areas of interest,
emotions have a habit of getting in the way. For example, if your
dad took you to every Mets game growing up, you’ll probably
have great memories of going to the ball park. Like getting a hot
dog, while watching a player such as, say, future Hall of Fame
pitcher Nolan Ryan walk across the field. Then you might be
willing to spend an exorbitant amount just to own his glove —
and end up paying much more than the value.
So you should always ask yourself this: What is the value of
my collectible and will it appreciate?
The bottom line is that by admiring a collectible too much,
you risk losing money. And if your goal is to make money, then
too much admiration will get in the way of good decisions. If
you really are investing, not collecting, don’t let your emotions
get in the way of your business sense.
28 Endless Income

While I recommend loving the item you get, you should also
be logical. Refer to your research and/or a professional, and
always remember that an item is an investment. Buy when it’s
cheap and sell when it’s expensive. That’s the long and short of
it.
3. Find the best dealer. There are plenty of disreputable
dealers out there, and fraud has been a problem in more than
one area of the collectibles market. Know who you’re buying
from. Don’t buy from eBay or an unknown auction house when
you’re first getting started. In fact, buy directly from the best
dealer if possible — one you know you can trust. That means
researching your candidate thoroughly.
Just a decade and a half to two decades ago, forged signa-
tures and sales of fraudulent memorabilia of famous athletes
were a rampant issue. In 2000, the FBI’s Operation Bullpen re-
vealed that $500 million to $900 million of autographed sports
memorabilia were attributed to forgeries. In 2016, a man was
charged in connection to a $2.5 million wire fraud scheme that
involved an alleged five-year scheme of selling counterfeit and
fraudulent sports memorabilia. This is why it is important to do
your research and confirm authenticity.
So, many athletes now enter contract agreements with mem-
orabilia retailers, where they promise to autograph items that
will be sold only through that company. By doing your research,
you can easily tell if a dealer has the right to sell a signed piece.
Of course, that’s only for certain pieces of sports memorabil-
ia. If you’re in the market for another collectible area, though,
doing your due diligence and researching the dealer will place
you with a reputable company more often than not.
In the end, the old saying rings true here: If you come across
a deal that seems too good to be true, it probably is.
4. Have your most valuable items professionally graded.
As much research as you accomplish, you still want to have the
experts take a look at your item. Professional grading means
having an independent company assess the authenticity and
condition of your item.
 Investment 29

Grading can only increase the value, so the cost is normally

worth it — specifically for any item with a value of $500 or
more. For items of lesser value, the cost can become a significant
part of an item’s value, so it should be considered on a case-by-
case basis.
And if you choose to do so, you can always discard the pro-
fessional grading. It’s not written in stone.
A professional service will also often seal it so that the
condition can’t be altered. For example, the Certified Guaranty
Company (CGC) provides encapsulation storage that gives the
optimum long-term protection for a comic book copy.
So this is something I stress: Professional grading is only
helpful with your most valuable items.
5. Keep your collectible secure. As I mentioned, condition
is key. The value of many collectibles is directly tied to the state
of the item, and the reason makes sense. Since much of a col-
lectible’s value is tied to nostalgia — and is therefore based on
emotional value — buyers are picky about the condition. That
means if you improperly store an item, you can run the risk of
losing your investment.
Again, I suggest getting a professional service to seal your
item. And when considering storage, keep in mind the environ-
ment. A damp, humid environment is a comic book killer. Direct
sunlight can fade your rare manuscripts or baseball cards, and
so on. Remember that most categories of collectibles have price
guides classifying how much an item is worth in pristine condi-
tion and what sort of damage degrades it, by what percentage
of value. For instance, a well-read copy of “The Amazing Spider-
Man No. 1” may be worth only 30% to 60% of the $6,000 list
price, depending what degree of wear it displays.
You can prevent that type of scenario by learning how to
properly store and treat your collectibles.
6. Plan your exit strategy. It’s easy to fall in love with a
purchase, hide it away and forget that you need to have an exit
plan. Years can pass as your rare movie poster signed by Marilyn
30 Endless Income

Monroe gathers dust. Trends can come and go, and you may
have missed your sterling opportunity to get the best price.
This ties directly back to my advice about staying on top
of your market and about finding a reputable dealer. First off,
being in the know means being knowledgeable enough to rec-
ognize the best opportunities for banking on your investment.
So you always want to be up to date.
Second, you should have an idea of the dealer you want to
use when you decide to sell. Dealers exist primarily to serve the
needs of collectors — so investors should proceed with caution.
Many investors do their research on which collectible to buy,
and haggle with dealers to get the best possible price, but they
forget to consider their exit options. When it’s time to sell, they
find that a large chunk of their profits are wiped out by an auc-
tioneer’s commission (which can go up to 25% oftentimes) or by
dealer margins (often more than 50%).
So even when you first buy your collectible, plan an exit
strategy. That way you’re not hit with unexpected fees upon
selling your collectible.
7. Diversify your investments. One of the reasons many
investors get into collectibles is to diversify their portfolio. It’s
the basic rule of thumb: Never have all of your eggs in one bas-
ket. So, just as it doesn’t make sense to have all of your money
in stocks, it doesn’t make sense to have all of your money in
collectibles.
Figure out how much of your wealth you’re willing to devote
to collectibles, and stick to it.
8. Be patient. It’s always nice when you can make an event-
based stock trade and collect gains within a couple of weeks or
months. Well, the collectibles market oftentimes doesn’t work
that way. Collectibles are simply not an avenue for immediate
profits. They can take years to surge in value, even decades. Of
course, there are those happy moments when you buy the first
issue of an obscure comic series right before the movie gets an-
nounced and the comic’s value soars. But that’s not something
to bank on because it’s a fairly rare event.
 Investment 31

When collecting, you generally have to think in terms of a

five to 15 year plan in order to realize profits. Just be patient,
and remember that you should love what you’re buying in the
event that you’re stuck with your item. I always like to think that
if I’m buying what appeals to me, there’s probably someone else
to whom it will appeal as well. It’s a win-win.

A Final Note
If there’s one message when starting your collection, it’s
this: Do your homework, buy what you love, deal with reputa-
ble people and have fun with it. That’s the collectibles market
boiled down.
Although this can be an area that requires some time and
effort, it’s clearly a great hobby that can reward you with fantas-
tic profits. And it’s an ideal way to diversify your portfolio with
inflation-proof wealth while doing something you genuinely en-
joy. I can’t think of many investment areas with that definition.
32 Endless Income

INCOME SECRET NO. 10:

The Low-Cost Maneuver to
Defeat Disaster … Trust Me

Do you like horror stories? Good … because the world of

asset protection is full of them.
Here’s a doozy. It involves a couple I met via an ex-colleague,
just as I was transitioning from the nonprofit world to writing
about sovereignty and asset protection.
Belinda and Ryan were at that stage in life where everything
is starting to come together … just bought a home, student loans
paid off, careers looking good, bun in the oven. Nice folks.
When I met them, though, they were pale with stress and
worry.
Besides their new Atlanta home, Belinda and Ryan also
owned a couple of inherited properties, one on the East Coast
and one in the Rockies. They were also passive co-owners of a
thriving business, managed by Belinda’s brother. Belinda’s dad,
who had started the business, had left Belinda a fair chunk of
money, which was doing nothing in particular in a bank account
except serving as collateral for a loan they’d taken to renovate
their new house.
Those renovations included construction of a new retaining
wall at the back of their house, which overlooked a wooded
stream, so common in Atlanta. A few days after a torrential
downpour had swollen that stream a bit more than usual, the
partially completed retaining wall collapsed on a workman,
killing him instantly.
Unbeknownst to them, the contractor they’d hired — at the
recommendation of their architect — had no business liability
insurance. Belinda and Ryan were therefore personally responsi-
ble for restitution to the man’s family.
When I met them, they faced a multimillion-dollar lawsuit
that would force them to sell almost everything they owned …
including their new house and their share of the business, which
 Investment 33

meant liquidating it entirely, drawing Belinda’s brother into the

turmoil and straining the family.
Two sadder faces I will likely never see. Almost there …
now, nothing.
But the really sad thing is that it didn’t have to be like that.
A simple, quick, low-cost legal maneuver would have put the
bulk of their assets out of reach of that lawsuit. Their real estate,
their business and their bank balances would have been safe.
They’d have had to pay something, but their legal shield would
have led to a quick and more reasonable settlement amount.
Nobody knows where lightning may strike. But strike it
does, thousands of times a day, all over the country. Sometimes
it does real damage. The odds of a lawsuit like the one against
Belinda and Ryan, however, are far greater than those of a light-
ning strike. The U.S. has 80% of the world’s lawyers. They file
over 15 million tort suits in U.S. courts every year. Fifty-five
percent of those are found in favor of the plaintiff. You have a
1 in 5 chance of being sued in any given year, unless you’re in
medical practice, a business owner or a landlord, in which case
it’s much higher.
But what if “you” and “your assets” can’t be sued at the same
time? A potential plaintiff can only claim what you own person-
ally. If most of “your” assets aren’t actually “yours,” you’re not
much of a target.
For a few thousand dollars, you can make that happen …
and protect yourself from Belinda and Ryan’s fate.

In Trusts We Trust … Up to a Point

The Anglo-American legal tradition is rich in mechanisms
that protect personal assets so that people can focus on wealth
building instead of wealth defense. There are lots of ways to
reduce the risk of personal loss, thereby increasing the attrac-
tiveness of innovative business activity.
One of these mechanisms is the trust. The concept of a
“trust” is fundamentally very simple: One person holds legal
title to an asset for another. If I transfer the title of the family
34 Endless Income

business to you, and say, “Hold this business for the benefit of
my family,” then a trust has been created.
The basic trust has four components:
1. The person who creates the trust (the “settlor” or “grant-
or”).
2. The trust itself and its assets.
3. The person who controls the trust and its assets
(“trustee”).
4. Those who are to receive the benefits of those assets
(“beneficiaries”).
The concept of the trust has expanded greatly over the cen-
turies. Large financial institutions often hold billions of dollars
in trust for families all over the world. There are now many
types of trusts: revocable and irrevocable trusts, grantor trusts,
qualified trusts, lead trusts, life insurance and annuity trusts,
unit trusts, and even the bizarre “intentionally defective trust.”
An asset protection trust (APT) is a trust that protects the
trust assets from potential future creditors and liabilities of the
beneficiaries. That is, as long as the assets are in a properly
formed trust, they are not the personal property of the bene-
ficiaries, and therefore not subject to claims arising from the
beneficiaries’ debts, including those generated from lawsuits,
like the one against Belinda and Ryan.
Unlike a traditional revocable living trust, an APT must be
an irrevocable trust. This is critical, because a creditor can come
after any assets over which you have control.
A revocable living trust, by design, is one in which you have
control over the assets. You can terminate the trust, withdraw
funds and so on. A creditor who is awarded a claim against you
would have the same ability to withdraw trust assets or funds to
pay the claim. Your assets are not protected at all.
But in a traditional irrevocable trust, you relinquish any
right to the assets and have no control over them. If you don’t
have control and can’t benefit from or withdraw the assets, your
creditors can’t either. Your assets are safe.
 Investment 35

Traditionally, this is achieved in a trust through inclusion of

a “spendthrift provision” in an irrevocable trust that prohibits
creditors from making claims against a beneficiary’s interest in
the trust, and prevents the beneficiaries from transferring or
pledging their interests in the trust to someone else, such as a
creditor. Even if you wanted to settle with a creditor, the provi-
sions of the irrevocable trust wouldn’t permit it.
This “spendthrift provision” protection, however, is gener-
ally unavailable to the creator of the trust — the “settlor” who
donates its initial assets. If you establish a trust of which you are
also a beneficiary — a so-called “self-settled trust” — the trust is
generally ignored for purposes of the creator/beneficiary’s debts
and liabilities, and your assets are unprotected.
In other words, the only way trust assets could be protected
from your potential creditors as creator of the trust is for you, as
the settlor, to give up complete control of and benefit from the
trust and its assets. That means, for example, that you couldn’t
put the family home into such a trust and live in it, or profit
from a business held in trust.
So it seems you face a choice of a trust where you can’t
access the assets at all or one where you can, but they aren’t
protected from creditors. Clearly, what’s needed is a way to put
assets into an irrevocable trust, so creditors can’t access them,
but still be a beneficiary of the trust’s assets — say, your house,
investment accounts or shares in a family business.
This is where the domestic asset protection trust (DAPT)
comes in. A DAPT allows the trust creator, the settlor, to be a
discretionary beneficiary, and yet the trust assets are still pro-
tected from the settlor’s creditors. That’s why, in the past, in
order to obtain such protections, U.S. citizens often looked to
offshore jurisdictions that permit spendthrift trusts that also
allow the settlor to be a beneficiary, and thereby be protected
from creditors.

Do the Nevada 2-Step

In 1999, the Nevada Legislature amended its trust statute
to permit self-settled, first-party spendthrift trusts, commonly
36 Endless Income

referred to as a Nevada asset protection trust (NAPT). Under

this law, as long as the settlors strictly comply with statutory re-
quirements, they can name themselves as beneficiaries of their
own trusts and enjoy the same creditor protection as third-party
beneficiaries of the trust. Problem solved.
It is important to remember that an NAPT is an irrevocable
trust. Once a traditional irrevocable trust is established, the
settlor cannot take back the assets and terminate the trust, or
even change how they are distributed — you can’t change your
mind later.
But Nevada law allows you, as the settlor, to keep the ability
to change where the trust assets are ultimately distributed —
“the power of appointment.” That means you can change who
the final beneficiaries are, or how the assets are distributed.
There’s more. With a traditional trust, a single trustee is
responsible for making distributions from the trust, taking care
of all administrative matters (such as filing tax returns and
bookkeeping) and overseeing investment and management of
the trust assets.
That means giving up control to someone else, even if you
are one of the beneficiaries of the trust. You couldn’t run your
own business or manage your investment portfolio, for example.
But another unique feature of the NAPT is that the powers
and duties of the trustee can be allocated to more than one
trustee. As a result, you, as the settlor, can also serve as a trustee
of the trust.
This is important because Nevada law restricts the settlor
from being the sole trustee or having the power to make distri-
butions to himself. The settlor can only serve as a trustee of the
trust with the authority to invest and manage the trust assets.
Someone else — a second trustee — has to make any distribu-
tions that benefit the settlor, such as allowing him or her to live
in a property or receive profits from a business held in trust.
With this in mind, Nevada law requires that if a non-Nevada
resident is establishing an NAPT, one of the trustees must be a
resident of Nevada — the trustee who takes care of the general
 Investment 37

administrative tasks and makes any distributions to the settlor/

trustee/beneficiary.
The only limitation is that this second, Nevada-based trustee
cannot be required by the terms of the trust to make distributions
to the settlor. While this seems like a limitation, it is outweighed
by the benefits of the powers and controls you as the settlor can
retain while still having creditor protection.

Timing Is Everything
When it comes to investment, we all know that timing is
critical. The same is true for asset protection trusts.
When you first hear about them, APTs sound almost mag-
ical. With the wave of a hand (OK, the stroke of a pen), your
assets are legally no longer yours — but you can keep using
them as if they were!
This is sort of magical, but there’s an important caveat:
The trick doesn’t work if you are aware of an impending claim
against you.
Let’s say Belinda and Ryan called a lawyer and set up an
APT the day after the accident that killed the workman hap-
pened. They knew what was coming so they moved to protect
their wealth.
Nothing would stop them from setting up such an APT, but
for the purposes of any lawsuit arising from the workman’s
death, it would be useless. That’s because the transfer of assets
to their new APT would be regarded as a “fraudulent convey-
ance.”
A fraudulent conveyance is a transfer of an asset with the
intent to hinder, delay or defraud a creditor. Just like you can’t
buy insurance after an accident has happened, you can’t transfer
assets to an APT and have them protected by it once you know
they will be pursued by a creditor — even if the lawsuit hasn’t
even been filed yet.
This is where the NAPT is unquestionably the best of its kind
in the U.S.
38 Endless Income

Specifically, under Nevada law, if a creditor was a creditor

of the settlor at the time the settlor made the transfer to an
NAPT, the creditor must commence an action to challenge the
transfer within the later of (a) two years after the transfer, or (b)
six months after the creditor discovers — or reasonably should
have discovered — the transfer.
A creditor who was not a creditor of the settlor at the time
the settlor made the transfer to an NAPT must commence an
action to challenge the transfer within two years of the transfer.
If a creditor does not bring a claim against the settlor within the
prescribed period, the claim is barred.
This two-year statute of limitations on fraudulent convey-
ance for NAPTs is one of the shortest in the country. Note that
the act that starts the statute of limitations running is the trans-
fer of assets from the settlor to the NAPT. Therefore, each time
assets are transferred to the NAPT, a new transfer has occurred,
and the statute will begin to run on a claim against that specific
asset.
Even if the statute of limitations does not bar the claim, the
creditor is required to show that the transfer was a fraudulent
conveyance. This may be difficult for the creditor to prove, es-
pecially if the creditor’s claim arose after the transfer of assets
to an NAPT.

7 Additional Benefits
In 2009, the Nevada legislature passed important changes
affecting NAPTs. These include some critical enhancements:
• The trustee of an NAPT can “decant” or transfer the trust
property to a second trust with different provisions, with-
out first obtaining court approval.
• “Directed trusts” are allowed, which permit the delegation
of the trustee’s investment powers over the trust’s assets to
a third-party investment adviser.
• “Trust protectors” are allowed. These are nontrustees who
have certain discretionary powers over an otherwise irre-
vocable trust.
 Investment 39

• No “exception creditors” are allowed. Previously, divorcing

spouses’ claims against an NAPT were not included in the
trust protections. Now they are.
Here’s what that means for you — in addition to some
pre-existing benefits of the NAPT:

Decanting
“Decanting” a trust is when the trustee distributes the trust’s
assets into a different trust with different terms for one or more
of the same beneficiaries of the original trust. In most cases,
this second trust is brand-new. Traditionally, this requires the
permission of a judge, since it could easily be used to defeat the
purpose of the original trust.
Nevada has traditionally been one of the most innovative
states when it comes to decanting. In 2015, Nevada legislators
approved SB484, which essentially gives an NAPT trustee a “do-
over” to make changes to trust terms that traditionally would
not have been permitted without a judge’s permission.
Most importantly, it is now possible to decant an NAPT to
remove a mandatory income distribution under the terms of the
original NAPT. This creates two opportunities.
First, it allows a trustee — which, remember, can be the
settlor, i.e., you — to decant trust assets that were subject to
a mandatory income distribution under the original NAPT to a
new trust where they are not. For example, if the original NAPT
called for trust-investment income to be directed to a child or
spouse who has become alienated from the settlor, the invest-
ments that generate this income can be decanted to a new trust
that does not contain such a provision.
Second, if an NAPT is designed to direct all income to one
particular beneficiary, there is no ability to shift income to
the lower federal and state income tax brackets of other trust
beneficiaries, or to retain income in the trust for taxes that the
beneficiary must pay if receiving the distribution. Decanting
income-producing assets to a second trust overcomes this by
changing the terms of distributions.
40 Endless Income

Investment Advisers
As I often recommend in the case of offshore trusts and lim-
ited liability companies (LLCs), an investment adviser can play
an important role in maximizing the investment returns of your
assets.
If you’re lucky, the Nevada-based trustee for your NAPT can
do this. But in most cases — especially where the settlor, as sec-
ond trustee, has investment expertise — it’s too much to expect
the trustee to handle this. In such cases, Nevada law allows you
to appoint an investment adviser who is authorized under the
terms of the trust to advise the trustees on investment decisions.
This could easily be someone with whom you already work and
in whom you have established trust.

The Trust Protector

The requirement that one trustee of an NAPT be a Nevada-
based person is central to the legislature’s intentions, which was
to make the state a center of business incorporation and asso-
ciated services. But, as with any relationship with a potential
stranger, you can never be entirely certain that you’ll always
see eye-to-eye … or that the trustee won’t abuse his position to
enrich himself through excessive fees, etc.
To deal with this, Nevada trust law allows an innovation
that originally appeared in offshore APTs — the “trust protec-
tor” or often just “protector.” The idea behind the protector is to
have somebody who can watch over the trustee, and terminate
the trustee for any misconduct.
Nevada law incorporates all the experience of offshore APTs
in this regard. Originally, the only power the protector had was
to fire the trustee. But as offshore APTs evolved, protectors
were sometimes given additional powers, such as to appoint the
successor trustee if one was fired. This creates the theoretical
threat if the protector has the power to both fire and appoint a
trustee, the protector might appoint herself as the trustee. Thus,
offshore APTs further evolved to prohibit a protector from being
the trustee or appointing somebody close to the protector.
 Investment 41

All trusts should have a protector — even if you are the

trustee and beneficiary of your own trust. This seems odd: You
get to control and use the trust assets freely while you are alive,
so why would you need a protector?
The problem is that you will eventually die, and whoever
you have appointed as the successor trustee in your trust doc-
ument will become the acting trustee. It’s this trustee you have
to worry about — with you gone, this new trustee could po-
tentially abuse the trust for fees, leaving the beneficiaries with
no recourse except to engage in expensive litigation. With a
protector, the misbehaving trustee can be fired.

No Exceptions!
All other U.S. states provide for some type of “exception
creditors,” typically as divorcing spouses or pre-existing tort
claims. Essentially, this means that in such jurisdictions, even if
you have made it past the statute of limitations and there are no
fraudulent conveyance issues, the exception creditor could still
get at the trust’s assets.
Nevada is the only U.S. jurisdiction that does not allow
exception creditors. This has made NAPTs an alternative to
prenuptial agreements — by agreeing to put assets in an NAPT,
prospective spouses are essentially agreeing to surrender their
right to attach them absent common agreement. By acting be-
fore marriage, you’re basically stashing away a “nest egg,” and
setting aside a certain amount of your assets to be protected in
the event the relationship unexpectedly terminates — notwith-
standing your hope and expectations to the contrary.
This is nice, but NAPT planning related to marriage shouldn’t
wait until right before a divorce — or even during a marriage.
That’s because establishing an NAPT might be regarded as a
fraudulent transfer, a breach of a fiduciary duty owed by one
spouse to the other.

Taxation
Because the settlor retains powers and controls in an NAPT,
the trust is treated as a “grantor trust” for tax purposes. This
42 Endless Income

means that all income and losses of the trust pass through and
are reported by the settlor on his or her tax return; there are no
additional taxes; and you retain any personal tax deductions.
Similarly, because transfers into an NAPT are not regarded
as a “completed” gift, there are no gift tax implications — unless
you design it so that transfers to the trust are treated as com-
pleted gifts and therefore excluded from your estate.
The values of the NAPT assets, however, are included in the
settlor’s estate for estate tax purposes … unless you adopt the
next nifty trick.

Dynasty Trusts
A dynasty trust is a trust designed to avoid or minimize
estate taxes on wealth transfers to subsequent generations. By
holding assets in the trust and making well-defined distributions
to each generation, the entire wealth of the trust is not subject
to estate taxes with the passage of each generation.
Dynasty trusts avoid the generation-skipping transfer tax
that occurs when traditional trusts attempt to bypass transfer-
ring all assets to spouses or children — for example, reserving
property assets to one’s great-great-great-great grandchildren,
to be held in trust for them, but not fully owned, by the inter-
vening generations.
In most cases, the common law rule against “perpetuities”
forbids any legal instrument — contracts, wills, trusts and so on
— from tying up property for too long a time beyond the lives
of people living when the instrument was written. (Charitable
remainder trusts are excepted.) For example, the head of a fam-
ily might stipulate in a trust document that assets be used in a
certain way forever, preventing a spouse or heirs from accessing
them after his death.
The common-law tradition is that any heritable “interest”
must vest to heirs no later than 21 years after the death of the
last identifiable individual living at the time the interest was
created. A 2005 Nevada law, however, explicitly allowed for
dynasty trusts that can last for 365 years — thus permitting
skipping many generations for estate tax purposes.
 Investment 43

Although this was challenged, the Nevada Supreme Court

ruled in March 2015, in the case of Bullion Monarch Mining Inc.
v. Barrick Goldstrike Mines Inc., that the 365-year perpetuities
law is the law in Nevada.

Combining an NAPT With a Limited Liability Company

The limited liability company (LLC) format provides an ex-
cellent form of protection, especially for real estate holdings.
There’s nothing stopping you from creating an LLC to hold cer-
tain assets under an NAPT — and plenty of advantages to doing
so.
Here’s why. All states permit personal creditors of an LLC
member (i.e., owner) to obtain a “charging order” from a court
against the debtor-owner’s “membership interest” — i.e., their
proceeds from the LLC’s operation, such as rental income from
properties owned by it. But most states’ charging orders only
give creditors the debtor-member’s “financial rights.” A creditor
with a charging order doesn’t get to participate in LLC manage-
ment, so they can’t order a distribution of cash or liquidation of
assets.
So if the LLC members direct the LLC manager not to make
a distribution to the debtor-member, or refuse to sell the real
estate in question, the creditor is stuck. Moreover, because a
creditor with a charging order has the debtor-member’s “finan-
cial rights,” the IRS could hold the creditor responsible for taxes
on the debtor-member’s share of LLC profits — regardless of
whether or not any profit distributions are made! That makes
lawsuits against assets owned by a properly constituted LLC
very unattractive indeed.
The problem is that many states allow alternative remedies
for creditors beyond the charging order. Such remedies are
known as “piercing the veil,” since they allow the creditor or liti-
gant to get directly at the LLC’s members. Not Nevada. Charging-
order protection is the exclusive remedy for the creditor of a
member of a Nevada LLC. Nevada also allows single-member
LLCs, which receive the same protection from charging orders
and multimember LLCs. That means the trustee of your NAPT
could also be the sole member of an LLC owned by the trust,
44 Endless Income

in which you could hold rental properties, for example. This

LLC will protect the other assets held by it from any claims or
liabilities arising from other assets owned by it.

How an NAPT Could Have

Helped Belinda and Ryan
If Belinda and Ryan had placed their home, other proper-
ties, business interests and inherited cash assets in an NAPT,
they would have been insulated from the lawsuit brought by the
workman’s family.
The spendthrift provision inherent in the nature of the irre-
vocable NAPT would have prevented either of them from agree-
ing to attachment of assets in trust, even if they wanted to do so.
Of course, this would have entailed some careful planning.
For example, Belinda and Ryan’s own home and inherited bank
accounts would need to be owned directly by the NAPT, which
would insulate them from liquidation (as would Georgia’s
homestead exemption for personal residences).
Their other two inherited properties should be in an LLC
owned by the trust, set up specifically as a “series” LLC, which
insulates each property for liabilities arising from the other.
Their shares in the family business managed by their brother
could have been in a separate trust-owned LLC.
Having an NAPT doesn’t mean Belinda and Ryan could dis-
pense with liability insurance on their home, however.
After all, the legal fees to defend against the lawsuit would
need to be paid, and without insurance, any award to the plain-
tiff would require liquidating assets not owned by the trust, like
vehicles, furniture and other personal items.

A Special Deal on the NAPT

The NAPT is a great vehicle for domestic asset protection.
It can do almost everything that an offshore APT can do, at a
fraction of the cost.
 Investment 45

This makes the NAPT ideal for folks who want a low-cost,
quick, easily manageable route to strong domestic asset protec-
tion. And as an exclusive for my readers, I’ve managed to secure
a great deal on getting one set up.
My good friend, attorney Josh Bennett, will set up a proper-
ly constituted NAPT for an all-inclusive cost of $12,500. That’s
about half of what you’d normally pay. That includes all of the
first-year setup and registration costs, including drafting the
trust document, appointing a Nevada-based trustee and com-
pleting all the requisite paperwork.
Now, you will find offers for rough-and-ready NAPTs on the
Internet. Don’t do it.
As should be clear from what I’ve shared with you here, it
is critical to have an experienced, qualified attorney draft the
specific trust agreement and other documents that you need to
address your particular needs. You’re not going to get that off
the internet.
Instead, I strongly encourage you to contact Josh to get
started on your personal asset protection plan right away …
after all, you can never know if and when the lightning bolt that
struck Belinda and Ryan will strike you.
Contact:
Josh N. Bennett, Esq.
440 North Andrews Avenue
Fort Lauderdale, FL 33301
Tel.: (954) 779-1661
Mobile: (786) 202-5674
Email: [email protected]
Website: www.joshbennett.com
46 Endless Income
 TAXES

N
o one likes paying taxes. Every year, it feels like the tax-
man takes a bigger and bigger chunk out of your earn-
ings. But there are some key steps you can take right
now to lower your tax obligation so that you keep more of your
hard-earned dollars in your wallet. In fact, this section contains
a tip that would help you to legally stop paying U.S. taxes com-
pletely. Improving the income in your life means taking control
of your taxes.

47
48 Endless Income

INCOME SECRET NO. 11:

Stop Giving Interest-Free Loans to Uncle Sam

People love the idea of a tax refund. It’s free money, a wind-
fall.
Nearly 80% of taxpayers get a refund after they file. Then
they spend it on new mattresses, car down payments or a vaca-
tion.
If you got a tiny refund, that’s understandable; taxes are
hard to predict in advance.
If you get a big one every year, however, then you are miss-
ing a chance to cut your taxes by lowering your tax withholding
(this is the W-4 form at work) and instead putting that money
into a 401(k) or individual retirement account (IRA).
It’s a cliché, but it’s true. By taking the refund, you essen-
tially have loaned the government money all year interest-free.
The IRS doesn’t hide this fact. In 2017, it reportedly refund-
ed $324 billion to taxpayers, averaging $2,895.
Invested in a Treasury bill at 2%, that’s $6.5 billion in free
money we give to Uncle Sam for no reason except our fear of
owing taxes.
Put another way, that’s a whole year of car payments given
up by the average taxpayer because thinking for five minutes
about your likely tax bill for the year is too hard.
If you’re getting a sizeable refund every year, contact the
accounting or human resources department of your employer to
adjust the withholding on your W-4 form — now.
Put that money to work for you rather than as an interest-free
loan to the government.
 Taxes 49

INCOME SECRET NO. 12:

Double Your Tax Break With a Spousal IRA

Proper planning for retirement not only gives you a nice

nest egg on which to survive and enjoy your golden years, but
it actually helps you lower tax burdens and save some money
right now.
If you’re already contributing to a 401(k), your next step is
to open a traditional IRA immediately. You can always put mon-
ey into an IRA, even if you have a workplace plan. The question
is whether it’s deductible, and that’s a matter of your income
level and how much you already put into your workplace plan.
For couples, the deduction for an IRA contribution begins to
fade after a modified adjusted gross income of $101,000 — if
you are covered by retirement plans at work — and then you
get a partial deduction if you earn more. If you are not and your
spouse is not, the income limit is $189,000. Pretty high. (Note:
these amounts can change each year, so check the www.irs.gov
website for updates.)
If you have previous 401(k) plans, you can roll them over
into the IRA to grow the balance and manage them more co-
herently.
With a traditional IRA, you can contribute up to $5,500 a
year if you’re under 50. The limit bumps up to $6,500 if you’re
older than 50. That’s a nice deduction you can claim at the end
of the year if you’re making under $101,000.
But what if you’re the sole breadwinner and your spouse is
unemployed or underemployed?
You can put money into his or her IRA up to the annual limit
of $5,500 (add another $1,000 if your spouse is over 50).
Effectively, you get to double the IRA contribution as a cou-
ple even though only one of you earns a salary. This money
comes off your joint taxable income and pushes you even fur-
ther down in the tax brackets.
50 Endless Income

INCOME SECRET NO. 13:

Pocket Extra Income Taking Advantage of
President Trump’s Favorite Tax Loophole (TAX)

For most of my working life, I’ve been a contractor.

No, I don’t build or remodel houses.
I just wasn’t directly employed by the people who paid me.
Instead, I sold my services to them as a product.
Sometimes my relationship with my clients was at arm’s
length. I did contractual work at a per-piece rate. Other times, I
received a regular retainer under long-term contracts.
No matter the format, this setup had several things in com-
mon:
1. I managed my financial affairs — and my taxes — as a
business separate from my household.
I had business income and expenses that were separate from
my personal finances. My personal income was whatever was
left over.
2. I was responsible for calculating and paying my own tax-
es on that “leftover” income. My clients didn’t withhold
anything or hand it over to the government. I did that
myself, every quarter.
3. Nobody told me how, where or when to do my work. I
always cooperated with my clients’ reasonable requests,
of course … but the final call was always mine.
The lifestyle had its pros and cons.
The main downside was that my income fluctuated.
I had to maintain a healthy reserve of cash to meet my per-
sonal expenses. I also had to manage my commercial reputation,
which is quite different from workplace relationships.
But the pros outweighed the cons. I was — and, above all,
felt — independent. I had more control over my income and
work effort. My time was flexible.
 Taxes 51

I worked from home most of the time … and no commute!

But the main advantage was the leverage being an indepen-
dent contractor gave me over the taxman.
This “Income Secret” — prompted by the recent tax bill
passed by Congress and signed by the president — will show
you:
• How the new tax code creates huge advantages for self-em-
ployed, incorporated individuals.
• When it makes sense to set yourself up as a “business” …
even if you’re currently an employee.
• Why you should get expert advice and where to seek that
advice.
You see, the revised tax code — which was supposed to be
fairer and simpler — in fact, creates several hacks that allow
some people to pay less taxes than others doing the same work.
These hacks are hugely contentious in the tax community …
but they are now legal and far from simple.
My goal here is to give you an accessible summary of these
new tax opportunities so you can decide whether they make
sense for you.
As is the basis for my subscription service, The Bauman
Letter, I want to show you how to take advantage of any oppor-
tunity to enhance your income and protect your wealth!

Pass-Through to Heaven
During halftime of the recent Georgia-Alabama national
college championship game here in Atlanta (sorry, Dawgs!), I
asked my pal Joey if he knew what a “pass-through” was.
He thought it had something to do with digestion. Nice try,
Joey, but no cigar.
In U.S. tax parlance, a pass-through is any corporate entity
that pays no corporate income tax. All a pass-through entity’s
profits “pass-through” to the owner(s), who pay income tax on
52 Endless Income

those profits as an individual. (Lawyers call them “disregarded

entities” because they are ignored for tax purposes.)
This contrasts with C-Corporations, which pay tax directly
on their own account, which is separate from their sharehold-
ers, who pay tax on dividends.
Pass-through entities (PTEs) include sole proprietorships,
partnerships, limited liability companies (LLCs) and subchapter
S-Corporations.
Up until now, the owners of such businesses have paid tax
on their net income at individual rates.
But the tax law that went into effect on January 1, 2018
effectively lowers the tax rate on PTE income to well below the
individual rate. This creates a big opportunity for you.

Not Quite the Same as the Old Boss

Those who drafted the new tax law had to change the way
PTEs are handled.
The new top U.S. corporate tax rate — levied on sharehold-
er-owned C-Corporations — is 21%. If Congress had left the
treatment of PTEs as it was, their owners would pay much more
tax than C-Corporations because the top five individual tax
brackets are well above 21% — 22%, 24%, 32%, 35% and 37%.
Now, let’s be clear: many PTEs aren’t small businesses owned
by Main Street Americans who would be cruelly disadvantaged
by paying more tax on their profits than corporate behemoths.
In fact, 70% of PTE equity is in multimillion-dollar business-
es. PTE structures are especially common in finance and real
estate. Almost all of President Trump’s businesses, for example,
are organized as LLCs. More than two-thirds of all U.S. PTE in-
come goes to the top 1% of U.S. households by income.
Nevertheless, the average small businessperson would be
enraged if they had to continue to pay taxes on their profits at
individual rates while the corporate rate was slashed to 21%.
 Taxes 53

Congress’ solution to this political problem creates an op-

portunity for significant tax savings for those of us who aren’t
multimillionaires.
As I mentioned, until January 1, 2018, PTE income was
taxed as personal income, up to 39.6%.
But the new rules grant a 20% deduction for “qualified busi-
ness income” (QBI) … PTE owners can now simply deduct 20%
of their businesses’ income from their taxable income, and pay
no tax on it.
For many people, this results in a big tax cut compared to
the previous pass-through system.
For example, let’s say you are married filing jointly and em-
ployed as a senior electrician at an annual salary is $75,000.
Under the new tax brackets, your tax will be $7,233, or 9.64%.
If you create a PTE, however, and pay yourself an annu-
al salary of $12,000, your tax under the new system will be
$5,721, or 7.63%.
This also creates a paradoxical situation for owners of PTEs.
Under the new rules, if you’re a PTE owner and you want to
pay less tax, pay yourself the smallest possible salary (since it’s
taxed at individual rates) and push as much income as possible
in the qualified business income category (so you can deduct
20% of it from your taxable income).
Instantly, “qualified business income” becomes hugely im-
portant. Just what is QBI?
QBI is “the net amount of items of income, gain, deduction
and loss with respect to your trade or business.” In other words,
it’s your business’ profit … what’s left after you’ve paid all your
operating costs, including your own salary.
(Of course, if QBI is less than zero, it’s treated as a loss from
a qualified business in the following year, and can be used to
offset your taxes then.)
Under the new rules, in other words, the more business in-
come you can shoehorn into QBI, the more you can save on tax,
since 20% of that amount is now tax free.
54 Endless Income

It gets even better.

You’ve probably heard that there is now a $10,000 cap on
the deductibility of state and local income and property taxes.
That’s going to hurt folks who pay a lot of those taxes.
But PTEs can deduct the full amount of any state and local
taxes they pay as a business expense. That home office makes
a lot more sense now … you’ll be able to use it to reduce your
nondeductible personal property taxes by shifting some of it to
your business accounts.
Naturally, there are some catches.
First, QBI excludes passive income such as capital gains,
dividends and interest income (unless the interest is received in
connection with a lending business). You can’t put your broker-
age accounts into a PTE and get 20% of your returns tax free.
Second, the new 20% QBI deduction phases out for individ-
uals who make more than $157,500 a year, or $315,000 for joint
filers — with an important exception, as I’ll show you below.
Third, the QBI deduction is limited to PTEs that provide a
“specified service trade or business.”
If your PTE provides services in health, law, consulting, ath-
letics, financial services, brokerage services or anything “prin-
cipally relying on the reputation or skill of one or more of its
employees or owners” (except, for some unfathomable reason,
architects and engineers), you’re not invited to the party.
The new tax law calls such excluded occupations “listed
professions.” Even if you are in one of them, however, if your
taxable income is under $157,500 individual/$315,000 joint,
then you can take the full 20% QBI deduction. After that, the
deduction phases out through a complicated formula until you
hit $207,500 individual/$415,000 joint, at which point you lose
the deduction completely and the old rules apply … you pay tax
at the individual rate.
Finally, even if you exceed this income cap, you can take
another form of QBI deduction depending on how many em-
ployees and/or how much capital your PTE has.
 Taxes 55

Simpler? Hah!
So much for filing your tax return on a postcard.
In this next section, I’m going to expand a bit on two typ-
ical types of PTEs. For simplicity, I’m going to call them the
“Independent Professional” and the “Corker Rule” cases.

The Independent Professional

This version of the PTE tax break is aimed at people who
have few employees — perhaps only themselves as a single
employee — or a small partnership. It’s limited by income to
prevent high-earners from declaring themselves “consultants”
to escape tax. The rationale is that if you are contributing main-
ly your labor and not much capital, and/or not creating many
jobs, then you can access the deduction only if your income is
below certain thresholds.
Here’s how it works.
For people in non-listed professions and for those in listed
professions earning under the thresholds above: If your taxable
income is below $157,500 individual/$315,000 joint, the tax-
free portion of QBI for any PTE you own is simply 20%.
So, if your income is $100,000 and your QBI is $75,000,
then your deduction is $15,000, or 20% of your QBI. You don’t
pay any tax on that income. Period.
As I explained above, you can continue to take a partial,
pro-rated QBI deduction until you hit $207,500 individu-
al/$415,000 joint taxable income.

The Corker Rule

All is not lost if you are above the threshold amounts, how-
ever. Two further types of PTEs can join the game:
• You have a multimillion-dollar LLC that has a dozen or so
employees — say, a car dealership. You pull in a decent
six-figure income, so you’re above the $207,500 individu-
al/$415,000 joint taxable income cap.
56 Endless Income

• You have an LLC with a lot of equity in real estate but few
employees. Again, your taxable income is above the cap.
In both cases, you have the option of calculating your QBI
deduction as the greater of:
1. 50% of W-2 wages paid by your PTE, including your
own, or…
2. The sum of 25% of W-2 wages paid by your PTE plus
2.5% of the original, undepreciated value of all qualified
property. Qualified property is physical property used to
produce QBI available for use in your PTE at the end of
the tax year. This includes all capital equipment … and,
significantly, real estate.
For example, let’s assume your car dealership pays $250,000
in W-2 wages, and owns a building worth $1 million.
• Under the first option, 50% of W-2 wages equals $125,000.
• Under the second option, 25% of W-2 wages plus 2.5% of
unadjusted basis of your qualified property is $62,000 plus
$25,000 equals $90,000.
So, your best option is to use the first method and declare
$125,000 of your QBI as nontaxable income.
In the second case, let’s say you’re a real estate mogul like
President Trump (or Senator Bob Corker of Tennessee, after
whom this rule is named. He changed his vote from a “nay”
to a “yea” after this option was slipped into the bill at the last
minute). You have few employees and a small W-2 wage bill of
$50,000, but your PTE owns $50 million worth of hotels, office
buildings, condos and so on.
• Under the first option, 50% of W-2 wages equals $25,000.
• Under the second option, 25% of W-2 wages plus 2.5% of
unadjusted basis of your qualified property is $12,500 plus
$1,250,000 equals $1,262,500.
I’m sure I don’t need to tell you which deduction you’re go-
ing to take in that case.
 Taxes 57

The Corker Rule — which was clearly created to benefit

multimillionaires, including the authors of the bill — creates an
intriguing angle for us lesser mortals, and it’s a biggie.

2018: Year of the Tax Lawyer

All the profit-shifting shenanigans that multinationals en-
gage in will now be relevant for domestic businesses.
That quote comes from a document called “The Games They
Will Play,” an evolving analysis of the new tax law by a group of
top tax-law professors.
The professors are right. The new tax treatment of PTEs is a
windfall for lawyers who design and create LLCs, partnerships
and S-Corporations.
Remember that the new tax treatment of PTEs doesn’t apply
to “specified service trades or businesses.” These “listed profes-
sionals” include doctors, lawyers, financial consultants, etc.
If they earn too much, these poor souls aren’t allowed to
take advantage of the 20% QBI deduction! Rats!
But the Corker Rule creates a new quiver of lawyerly tricks
… and I predict it’s going to generate a lot of traffic at state
company registration offices around the country this year.
Here’s why:
Assume you’re a partner in a law firm called LawFirm LLC.
You and your partners form SideCar LLC, contributing some
capital and using it to buy and hold the building you currently
rent. SideCar LLC rents the building back to LawFirm LLC at an
above- market rent.
BOOM! You suddenly have qualified “Corker Rule” income
in a real estate PTE! Before, you were shut out of the game
because you practiced a listed profession. By splitting your busi-
ness into parts, you save on tax.
All it took was some company formation work, and you’re
sending less to the IRS.
58 Endless Income

This is the same as the “transfer pricing” trick U.S. multi-

nationals use to shift income from U.S. to foreign subsidiaries.
Create a foreign subsidiary and transfer something of value that
your business uses to it — say, Apple’s patent on the iPhone —
then have the subsidiary rent it back to you at an inflated cost.
That slashes your taxable income in a high- tax situation
(Apple, Inc., subject to U.S. corporate tax) and shifts income to
a low-tax situation (Apple Cayman Islands, Inc., paying little to
no tax).
Now, under the new law “listed professionals” can play the
same game. Just split an existing PTE into an unqualified (high-
tax) professional PTE and one or more qualified (low-tax) PTEs.
The low-tax PTEs then can charge fees to the high-tax pro-
fessional PTE — for example, rent for office space, secretarial
services, a medical practice’s X-ray operation … even interest
on loans from one PTE to another. Those business-to-business
payments reduce QBI for the disqualified PTE and shift it to the
PTE that can use the 50% W-2 wage or Corker Rule deductions
… just like Apple does when it parks its patents in a foreign
subsidiary in a low tax jurisdiction.
Bam. Doctors and lawyers are now in the real estate busi-
ness!
There are other ways to hack the new system. The tax
professors who wrote “The Games They Will Play” say, “bor-
row(ing) from the terminology of gerrymandering strategies,
let’s call them ‘cracking’ and ‘packing.’”
• Cracking. The first strategy is to “crack” apart the revenue
streams from an existing PTE, so as much income as pos-
sible can qualify for the deduction. The anecdote above
referred to the real estate angle.
But “listed” professionals could also form separate service
— providing PTEs providing non-listed services — PTEs
handling their accounting, document management, soft-
ware, secretarial services and so on. Again, the game
would be to overcharge the main PTE for these services
and manipulate the two alternative QBI deduction meth-
ods to minimize taxes.
 Taxes 59

• Packing. The second strategy is to “pack” qualifying pro-

fessional activities into a PTE to transform it into one that
isn’t primarily providing a “listed” service.
For example, real estate lawyers might both provide legal
advice and manage real estate — mixing the businesses
so that the IRS can’t distinguish them to get the 20% PTE
deduction for the whole operation.
Another route is for a “listed” professional simply to join
a PTE that doesn’t provide “listed” services. For example,
a lawyer that becomes a partner in a PTE that does real
estate development could take advantage of the exception
for “architecture” or “engineering” PTEs.
Finally, the new treatment of PTEs creates an opportunity
for employees of PTEs, too. For example, associates at law firms
could band together into what the professors call “Associates,
LLC — a separate partnership paid to provide services to the
original firm.” Each associate might then qualify for the 20%
QBI deduction.
Now you see why I say that 2018 is going to be the year of
the tax attorney.

Does it Make Sense?

I can hear you thinking, “Wow, Ted, this is fascinating. But it
seems like a lot of effort!”
True. But for some of you, the time to act is now — you only
get the new tax treatment once your PTE is up and running.
First, if you own a PTE in one of the so-called “listed profes-
sions” forbidden from taking advantage of the 20% PTE deduc-
tion — whether as a sole owner or partner — you should book
an appointment with a tax lawyer ASAP. The hacks I described
in the previous section are real, and they could save you a ton
of money.
Second, if you are a non-listed professional employee of
a company — an engineer working for a power utility, for ex-
ample, or a junior architect at a large practice — you should
60 Endless Income

sit down with a tax adviser to see whether you’d be better off
“quitting” your job and becoming a “consultant” to your old
employer. If your current taxable income is less than $157,500
individual/$315,000 joint, you will save money on your taxes
by going solo.
There is one caveat: Leaving permanent employment to
become a PTE-based consultant means giving up corporate ben-
efits like medical, dental and 401(k). But there are couple of
reasons that might not be as big a problem as you might think:
1. Self-employed people can contribute up to 25% of their
QBI into a SEP-IRA, traditional or Roth.
The current annual cap is $54,000 a year; you’re not
limited to $5,500. That is a viable alternative to a 401(k)
— especially since you can manage your IRA investments
yourself, as I’ve described several times in The Bauman
Letter reports about self-directed IRAs.
2. The Trump administration recently authorized the for-
mation of independent health insurance associations,
which are ideal for self-employed people. Once they are
up and running, self-employed people will be able to
form insurance pools with others in their situation and
benefit from the same risk-spreading actuarial dynamics
that produce lower insurance premiums for corporate
health plans.
3. When you’re self-employed, you’re going to find that you
can book many “personal” expenses to your business
accounts. Your home office, your PC and laptop, your
phone, a portion of your utilities — anything that you
use for work can be written off as a business cost, at least
in part.
That means that although your overall cash flow may be
the same as a self-employed PTE owner as it was when
you were an employee, you’re going to still have access to
many things that you need — and enjoy a lower overall
tax burden since they are deductible business expenses.
 Taxes 61

And don’t forget … the new tax law eliminates all “miscel-
laneous deductions” — including the deduction for home office
expenses for employees who work remotely.
That makes setting up as a PTE even more attractive, since
all those expenses could be assigned to your business, reducing
your taxable income and keeping you below the threshold to
take the full 20% QBI deduction.

Conclusion
Though Republicans promised a simpler tax system, all
these new loopholes are certain to keep the nation’s CPAs and
tax attorneys busy.
For many people, the opportunity to game the tax system
this way will be irresistible. But if you’re on the fence about it,
consider this … you may have no choice.
Consider existing partnerships, for example. Each partner
will have to figure out their individual values for qualified busi-
ness income and qualified property to calculate their tax-de-
ductible QBI … just to file their individual 1040s. They’ll have
to figure out their individual share of the unadjusted basis of
the partnership’s qualified property. Based on how the law is
written, many tax experts think this includes everything from
real estate to paperclips.
And they’ll have to be able to document all of this to the IRS,
if necessary.
So many of us are going to have to grapple with this new
PTE tax regime even if we don’t choose to take advantage of
any new loopholes. The rules for PTEs — including the simplest
LLCs and partnerships — have changed, and you’re going to
need help figuring them out.
It’s not just an accounting issue, either. You’re going to need
advice.
Much of the actual practice of tax law is shaped by opinions
issued by the IRS in the form of “private letters” and other rul-
ings on how to interpret the tax code.
62 Endless Income

That code now has some radical new modifications. That

means the IRS is going to spend the next few years reacting to
the good-faith efforts of tax attorneys to interpret the new rules
for their clients.
The IRS can’t just throw the book at someone who adopts
a particular strategy based on good-faith efforts to interpret the
new law during the period when the IRS is trying to figure it all
out.
That creates a window of opportunity for many of us … one
we should seize … but with experienced expert advice.
To my mind, the most qualified tax attorney I know is Josh
Bennett, who has worked with me and with my father Bob
Bauman for many years.
Whether you are based in Florida or not, he’s a great place
to start if you think any of this is going to apply to you this year
— voluntarily or not:
Josh N. Bennett, Esq.
PA 440 North Andrews Avenue
Fort Lauderdale, FL 33301
Tel.: (954) 779-1661
Mobile: (786) 202-5674
Email: [email protected]
Website: www.joshbennett.com
 Taxes 63

INCOME SECRET NO. 14:

Collect $770 With a Property Tax
“Circuit Breaker” Refund

When was the last time you paid your property tax, only to
open your mailbox some time later to find a $770 refund check
inside?
If you did, it wasn’t a fluke. It meant you were a part of
a Circuit Breaker program, a little-known, special tax credit
for homeowners and renters in at least a dozen states and the
District of Columbia.
Originally, this government initiative was intended to pro-
vide property tax relief for older homeowners and renters who
met certain income and other requirements.
However, in many states (including Maryland, Michigan,
New Jersey, Vermont, Wisconsin and West Virginia) homeown-
ers of all ages are eligible for a Circuit Breaker refund — and in
some state, renters too.
Here’s how it works: Eligible property owners can claim a
credit that is equal to the amount by which their property tax
payments — including water and sewer charges — exceed 10%
of their annual income.
Meanwhile, tenants can claim a credit of 25% if the rent
they paid is more than 10% of their yearly income.
What’s more, eligible taxpayers can file for the credit up to
three years retroactively.
And that’s not all — even people who don’t typically file
returns because they don’t owe taxes can apply for the refund.
Massachusetts (along with Maine, Montana, New Mexico,
Oklahoma, Rhode Island, D.C. and the aforementioned states)
has a Circuit Breaker refund program. Out of the 86,000 tax-
payers who took advantage of it in 2012, the average refund
was $774.
64 Endless Income

Eligibility requirements may differ from state to state and

are subject to change. However, recent rules in Massachusetts
were that total income for single people could not exceed
$55,000 ($69,000 for a head of the household) or $82,000 for
a married couple. For homeowners, the assessed value of their
primary residence could not be more than $700,000.
Some beneficiaries of the Circuit Breaker program use their
refunds for necessities like food, medicine and utilities.
What would you do with an extra $774 in your pocket?
To see if your state offers a Circuit Breaker property tax re-
fund, contact your local Department of Revenue or visit https://
itep.org/category/property-taxes and select “State Policy” for
more information.
 Taxes 65

INCOME SECRET NO. 15:

Let Your Pet Earn You Some Tax Deductions

When we welcome a pet into our homes, they are looked

at as a source of companionship and entertainment. They bring
warmth, love and laughter.
But did you know that they can also potentially bring some
valuable tax deductions into your life, lowering your obligation
to the IRS?
While it is not easy to claim your pet as a business expense,
there are six avenues pet owners can potentially use to lower
their taxes thanks to their beloved pet.

1. Eliminate Pests With Your Cat

If you use your cat to keep your business free of rats, mice
and other vermin, you could potentially deduct costs associat-
ed with your cat. In one example, a court upheld a business
expense deduction of $300 for cat food when a cat was used to
deter snakes and rats from a family-owned junkyard.
In order to get the deduction, it’s important that you con-
vince the IRS that the cat is “ordinary and necessary.” That
means that using a cat must be “common and accepted in your
trade or business.” Furthermore, the cat must be “helpful and
appropriate.”

2. Guard Dog to Keep You Safe

The IRS might struggle to accept your cat is a necessary pest
deterrent, but it has been more accepting in the past of guard
dogs, particularly if a business is in a troubled neighborhood.
Keep in mind that size is key when convincing the IRS your
pet is a guard dog. It’s unlikely that your Yorkie is going to be
believed as an effective guard dog.
66 Endless Income

If you are going to deduct expenses related to your guard

dog, keep records of the dog’s hours and work-related purpose.
You could potentially deduct expenses such as dog food, train-
ing and veterinary bills on Schedule C.

3. Service Animals
Do you have a service animal to help with your medical
needs? You might be able to use it as a deduction since medical
expenses are tax deductible if you itemize.
The first step is to get a doctor’s prescription for your service
animal or at least some documentation proving that you require
a service animal as a medical necessity.
In addition, keep any documentation that shows your pet
was trained to meet your medical needs. The IRS doesn’t con-
sider an animal a “service animal” unless it’s been trained and
certified.
You can also include the costs of purchasing and training
guide dogs for the blind or hearing impaired. This includes vet-
erinary, food and grooming expenses.

4. Foster Pet Deductions

Fostering animals can earn you tax benefits for charitable
contributions. You can claim any unreimbursed expenses relat-
ed to fostering animals from qualified nonprofit organizations.
These deductions can be listed on a Schedule A as charitable
donations. These expenses could include pet food, supplies and
veterinary bills.

5. Offset Hobby Income

Has your show dog won prize money? While the IRS is hap-
py to take a chunk of your winnings, you could potentially get
some of that back by claiming related expenses such as training,
showing, etc.
 Taxes 67

If you receive a 1099 each year for your hobby income, you
can additionally deduct expenses related to that the hobby up
to the amount earned.
Unfortunately, taking this deduction can be complicated.
This deduction is subject to a threshold of 2% of your adjusted
gross income (AGI).
For example, let’s said that your AGI is $100,000 and you
made $1,000 from pet shows. However, you accumulated
$3,000 in expenses.
You would be allowed to deduct only $1,000 of expenses
since you’re allowed to deduct only up to the amount of income
earned.
In this case, the $1,000 is less than 2% of your AGI, so you
actually lose $2,000 from the pet shows — and you still have to
pay taxes on the $1,000 in income you earned.

6. Moving Expenses
Have you moved for a job? Since you’re already deducting
you moving expenses, you can also deduct the cost of shipping
your household pets to your new home.
To get this deduction, the IRS requires that you must prove:
• Your move must be closely related to the start of your
work.
• You have to pass the distance test.
• You have to pass the time test.
For example, your new workplace must be at least 50 miles
farther from your old home than your old workplace was.
Furthermore, you must work full time for 39 weeks or more
during the first year after you relocate.
68 Endless Income

INCOME SECRET NO. 16:

Never Pay U.S. Taxes Again

It was good to be some place other than the land where I

was born and raised. Maryland’s Eastern Shore has its charms.
But it just couldn’t compete with what I was experiencing.
I was in a city built on the slopes of a stunningly beautiful
mountain, surrounded by the sea on three sides. In 20 minutes,
I could escape to fragrant forests cut by cool streams flowing
from the mountain above. The air was always crystal clear,
thanks to the steady ocean breeze. A few hours’ drive to the
north, and I’d be in a gorgeous desert. Head east, and I’d find
farmland and wineries that remind everyone who visit them of
southern France.
The locals were friendly — not unlike the rough-edged but
good-natured kids I’d known back in Maryland. They liked to
drink a bit of beer, enjoy sunshine and waves, and check out live
music in the city’s numerous pubs. I made friends quickly and
easily. I met a gorgeous girlfriend.
After a few months, I landed a nice job teaching at the city’s
world-class university, also built on the slopes of the mountain.
I was a student as well, but the local tertiary education system
was built around a “tutorial” system that generated a constant
demand for tutors. It paid my tuition and then some.
After my first year, I was promoted to lecturer. By year three,
I had been recruited by a top-notch economic research team to
develop proposals for the country’s manufacturing sector.
One thing led to another, and by year five I was a senior ex-
ecutive at a nonprofit financial institution with a great salary, a
permanent resident and had settled in for good. I had acquired
a home in a quaint seaside village. I fell asleep to the sound of
Indian Ocean surf.
And for the whole time, I didn’t pay a dime in U.S. income
tax.
 Taxes 69

Many of you have probably heard that there’s a way you can
pay no U.S. tax on a certain amount of your household income.
In fact, it’s probably the single most popular topic with new
subscribers to The Bauman Letter. People want to know how this
works … and for good reason! Who likes paying taxes?
It’s not a hoax. Under certain circumstances, you can pay
no U.S. tax on a portion of your income. After all, I did this for
more than 20 years. It’s something called the foreign earned
income exclusion (FEIE). It allows you to exempt — completely
— a certain portion of your annual earnings from U.S. tax. You
report the income, but you just don’t owe any tax on it.
The FEIE is the reason I didn’t pay any U.S. income tax from
1985 to 2007. I paid South African income tax, of course, but it
was much lower than U.S. rates.
That meant I could save more and acquire a car, a house
and other essential capital goods much more quickly than if I’d
stayed in the U.S. Which I duly did.
You don’t have to go as far as Cape Town to benefit from the
FEIE. It’s not for everyone, but it does provide a major incentive
to move offshore. And when combined with the right business
strategy, it can save you huge amounts in tax over your lifetime.
Let me tell you how.

The Strange Logic of U.S. Taxation

To understand the foreign earned income exclusion, you
need to understand the way the U.S. government thinks about
us, as citizens and taxpayers. It’s not how most governments
think.
That’s for sure.
Most sensible countries only tax income earned within their
own borders. There are exceptions, of course, but as a rule,
most countries use a “territorial” tax system. This is based on
the sensible logic that your earnings from the national econo-
my are a proxy for your consumption of that economy’s “public
goods,” like roads, policing, courts, defense and so on. If you’re
70 Endless Income

not earning money inside the country, you’re assumed not to be

consuming those goods — at least, not as much of them. Hence,
no taxes on foreign income.
The U.S. government — by pretty much full bipartisan
agreement — takes the opposite course. Unlike most other
countries, our tax system doesn’t end at our borders. Instead,
we Americans are taxed on our global income, no matter where
we earn it or where we live. This is known as a worldwide tax
system.
I never could figure out why the U.S. does this. My best
guess is that two American peculiarities are at work.
First, Americans — government and citizens alike — tend
to see the country as exceptional, a unique case in the world.
We’re so powerful, and there are so many benefits to being a
U.S. citizen, that it’s a bargain, not a burden, to be taxed on our
global income.
We should gladly contribute to our glorious tax authorities,
so the U.S. can continue the important work of being great and
powerful. After all, so many foreigners want to live here!
Second, Americans living or working abroad come from
many different states and congressional districts. There’s no U.S.
jurisdiction where there are so many U.S. voters living abroad
that it would be worth a congressman’s time to introduce and
push a bill to change the worldwide tax system for Americans
living abroad.
If they did, moreover, political opponents would scream
bloody murder, claiming that “foreign Americans” were getting
special treatment.
Whatever the reasons, when it comes to U.S. taxes, there’s
no essential difference between living in the U.S. and living
abroad. American “persons” (i.e., a U.S. taxpayer, whether citi-
zen or green card holder) living abroad must still report all their
income, file their returns and pay their income taxes to the IRS.
As you may imagine, that poses a problem … and creates
an opportunity for you. There are a lot of American “persons”
working abroad. They pay taxes to the countries where they
 Taxes 71

work (unless they work for an American firm or the U.S. govern-
ment, in which case they pay the IRS).
If the U.S. taxes them too, they’re gonna be major league
unhappy — as will foreign employers and governments that
benefit from their work.
The solution, practiced by most countries in the world today,
is what’s known as a double-taxation agreement, or DTA.
DTAs aim to eliminate the taxation of income by more than
one country. The U.S. has dozens of such agreements covering
all major economies. They allow the country where the income
arises to deduct income tax through their own withholding sys-
tems and require the IRS to grant the U.S. person taxed by them
to receive a compensating foreign tax credit on their U.S. tax
return.
The same applies in reverse for foreign taxpayers in the U.S.
That way everyone ends up paying what they would pay if they
were working in their own country — unless, of course, the in-
come tax rates between the two are very different.
To make DTAs work, however, the two taxation authorities
must exchange information. That requires time and effort. In a
rare instance of common sense, Congress decided that income
earned by certain U.S. persons abroad below a cutoff would be
exempted from U.S. income tax entirely … because anything
less than that just isn’t worth pursuing.

Tax-Free Income … Literally

Double-taxation agreements are the reason we have the
foreign earned income exclusion.
The FEIE is essentially an admission that it’s not worth the
U.S. government’s time and effort to reconcile tax records for
individual filers earning under a certain amount. As odd as it
may seem to us, the cost of pursuing tax on roughly $100,000
in annual foreign income cancels out the benefit.
Exempting such income saves the IRS lots of hassle over
nothing … and presents an opportunity for us.
72 Endless Income

The desire for tax efficiency also explains why the FEIE isn’t
a tax credit. It’s a tax exemption.
Under the FEIE, the IRS literally exempts the first $102,100
of your foreign income from U.S. federal income tax.
For a two-person household of U.S. persons where both are
working, the amount is double — $204,200. The FEIE is in-
dexed annually for inflation and so increases every year.
In other words, if you qualify for the FEIE for 2017, and
you earn $102,100 or less in wages, you will pay zero federal
income taxes — zip, nada. You still must file your 1040 and
some other forms, but you’ll owe no tax.

Examples
1. Fred and Joyce, in their mid-60s, retired to a
Central American country that has a tax treaty with
the U.S. They sold their U.S. home and closed their
U.S. business, investing the proceeds in a mix of
U.S. and offshore financial vehicles.
They planned to live on the proceeds of these
investments and annuities, which would be trans-
ferred to their accounts in their new home country
as needed. Before long, Fred began to get requests
from local businesses for help in his areas of exper-
tise.
Unable to resist the lure of a little extra income, he
began to oblige. Joyce also began to make and sell
craft goods in local markets.
Fred and Joyce pay U.S. tax on their U.S.-based
investment income, receive U.S. tax credits for in-
vestment taxes paid in foreign countries, and pay
no U.S. tax on their limited local earnings, since
they qualify for the FEIE.
 Taxes 73

2. Rob decided to give life in the Mediterranean a

try. The island nation where he hoped to settle
didn’t tax his investment income from the U.S.,
so he left it in U.S. investments for the first year.
Once he decided to buy a home and stay, he
transferred most of his U.S. capital to invest-
ments in his new home country, since the tax rate
on his earnings was much lower than in the U.S.,
as were the brokerage fees.
He no longer pays U.S. taxes on these offshore
investments and receives a credit on his U.S. tax-
es for the taxes he does pay on these now foreign
investment earnings.

If you earn more than $102,100, however, you’ll be liable

for U.S. income tax on the excess. For example, if you earn
$202,100 in salary, you will pay U.S. federal income tax on
$100,000 at 28% to 33%.
Note that even with the FEIE, your tax bracket is determined
by your full earnings of $202,100. You are paying a rate on your
last $100,000 as if you had earned $202,100 in wages, not just
$100,000.
The FEIE exempts the first $102,100 from tax, but it doesn’t
change your overall tax bracket. If you pay tax in the country
where you work, however, your U.S. tax on this $100,000 over
and above the FEIE will be reduced: Every dollar you pay in
foreign income tax should reduce your U.S. tax by one dollar.

Catch No. 1: You Must Leave

The FEIE is there for the taking. But it does come with a cost
… at least, depending on your definition of cost.
74 Endless Income

You see, to qualify for the FEIE, you must be:

a. Physically out of the U.S. for 330 days during any
12-month period, or…
b. A legal resident of a foreign country for a full calendar
year, and…
c. Earning foreign source income from employment or a
business.
The 330-day test is simple math. It doesn’t matter where
you are in the world, so long as you’re not in the U.S. You don’t
have to be a resident of any other country. You just can’t be in
the U.S.
That’s what some folks call being a “perpetual traveler.” If
you are traveling physically outside the U.S. for 330 days out
of 12 months, you qualify for the FEIE on your foreign income,
even if you are using temporary visitor visas abroad and don’t
acquire residence anywhere other than the U.S.
I know a few folks who do this. For example, one guy I know
spends three to four months each year in a variety of different
countries. He owns homes in some of them and uses hotels or
stays with friends in others. His income comes from a publishing
business registered in a tax-free jurisdiction.
All the income earned by that foreign business is considered
foreign-sourced, even if it results from sales in the U.S. itself,
because it is first booked to the foreign business, which then
pays him a salary that is covered by the FEIE.
The residence test is more complex. It’s based on your “in-
tentions.” This test involves moving to a foreign country for the
“foreseeable future” and making it both your home and your
home base — i.e., it’s where you return when you travel. For
that reason, it also must be a place where you’re a legal perma-
nent resident, with a residence permit or passport.
Finally, you must follow the country’s tax laws as a legal
resident, paying taxes if they are levied on income.
The residence test has one major advantage over the 330-
day rule: It allows you to spend more time in the U.S. Under the
 Taxes 75

330-day test, you can spend a maximum of 36 days a year here.

If you qualify for the residency test, you can spend four or five
months a year in the U.S.
But remember that any income earned directly in the U.S.
by you personally is taxable — the FEIE doesn’t apply to U.S.-
sourced income. If you work for 10 days in the U.S., the income
from those days counts as a U.S. source of income and will be
taxed.
As I’ve already noted, I’m a perfect example of residence-test
FEIE. From 1985 to 2007, all my income from employment and
self-employment was foreign-sourced. Most of it was in South
Africa, but I also received contract income from international
agencies based in Europe.
From 1985 to 1990, I was a legal resident of South Africa
on a student visa. After that, I became a permanent resident. In
2002, I became a South African citizen. The whole time I paid
South African income tax. My income never exceeded the FEIE
limits, so I paid no U.S. income tax at all.

Catch No. 2: Unearned Income

The FEIE doesn’t apply to income that’s not “earned.”
“Earned” income is money made in the current period from
employment or a business.
“Unearned” income is passive income such as dividends,
interest, capital gains, alimony, pensions, annuities and Social
Security benefits. It’s called that because you really earned this
income years ago, but deferred using it until now.
In many cases, you may receive unearned income from a
variety of sources around the world. The typical U.S. retiree
abroad, for example, will receive a variety of unearned income,
including Social Security, corporate pensions, private pensions,
annuities and dividends on investments.
In most cases, this unearned income will be taxed exactly as
if you lived in the U.S. Any U.S.-sourced investment income you
receive, even if it is paid out abroad, will be taxed by the IRS just
as if you were living here, at U.S. rates.
76 Endless Income

For example, if you live in Mexico on the proceeds of U.S.

investments and Social Security, you’ll report, file and pay tax
on that income just as if you were living in the U.S. itself.
On the other hand, any foreign-source unearned income
you receive — such as dividends or interest — will be taxed per
the laws of the country where the investment resides, at their
tax rates. As I explained above, in most cases that foreign tax
can be taken as a credit on your U.S. taxes.
For example, if you live in Mexico on the proceeds of in-
vestments located in Switzerland, you will pay tax to the Swiss
government as per their laws. Any Swiss tax you pay can be de-
ducted from your U.S. tax obligations, so you pay the same tax
you would as if you received all your income in the U.S. itself.

Catch No. 3: Tax Rates Matter

One critical thing to understand about the FEIE is that only
people living in low-tax countries will get much benefit.
If you are based in a place with a tax rate that is the same
or higher than the U.S., then the foreign tax credit will prevent
double taxation, without the need for the FEIE.
For example, if your U.S. federal tax rate is 35%, and your
rate in France is 40%, you don’t need the FEIE because you are
already paying more in French tax than you would in the U.S.
You can deduct your French tax on your U.S. tax return without
concerning yourself with qualifying for the FEIE. Of course, you
will end up paying more tax overall because the French rate is
higher.
Conversely, if you are living tax-free in a place like Panama,
drawing a salary of $100,000 and fail to qualify for the FEIE,
100% of your income is taxable in the U.S. Without the FEIE,
there is no benefit to working in a low-tax country.

The Big Opportunity: The Offshore

Business Loophole
The FEIE creates one of the greatest tax plays I know. Here’s
how it works.
 Taxes 77

Let’s say you operate a small business through an offshore

corporation. You pay yourself a salary up to $102,100. That
makes it eligible for the FEIE. If spouses are both operating the
business, they can draw a combined $204,200 and leave the rest
of the money in the corporation.
But what if your net profits exceed the FEIE amount? What
if you earn $1 million? Must you pay U.S. tax on $897,800? Yes
… unless you structure your business to provide for retained
earnings in your offshore corporation.
If you do that, you can shield those retained profits from
U.S. tax until you decide to draw them down … including in the
form of an FEIE-compliant future salary, making them tax-free.
In other words, if you take more than the FEIE out of the
corporation as salary, you will pay tax on the excess as earned
income. But if you leave the excess in the corporation’s accounts,
it will be classified as retained earnings and won’t be taxable by
the U.S. until it’s distributed as a dividend.
It may even be possible to pay out retained earnings as FEIE-
qualifying salary in future years, as long as the business is still
in operation, and you can demonstrate a legitimate business
need to pay salaries from retained earnings rather than current
revenue. If you can’t, it’s considered a dividend and is taxable
unearned income.
Bear in mind, as I noted above, that all this assumes you are
living and working in a jurisdiction that levies no or low income
taxes on the $102,100 that you draw as salary. If you’re trying
to do this in France, where the tax rate is 40%, you’re not going
to save anything … in fact, you’ll pay more.
There are two important caveats to this trick. First, inter-
est or capital gains on the retained earnings may be taxable,
depending on the jurisdiction. Second, you may not borrow
retained earnings or use them for your personal benefit. They
must remain in the corporation.
So, what counts as a “properly structured offshore corpora-
tion”?
78 Endless Income

1. It must be a corporation — not a limited liability compa-

ny (LLC), foundation, partnership or other pass-through
entity. In other words, it must have a separate tax and
legal identify from you.
2. It must be incorporated in a country that will not tax
your profits. Otherwise, there is no point.
3. Retained earnings must arise from ordinary business
income — income received from the sale of a product at-
tributable to the normal and recurring operations of the
company. You can’t just book profits from other activities
through a corporate shell.
The product doesn’t have to be physical; it is possible, for
example, to sell your writings via a foreign corporation
as a product. There are limits to this, as I’ll show below.
4. You must report your activities and retained earnings of
the offshore corporation on IRS Form 5471, report the
corporation’s foreign bank account under FATCA and
keep up on all other U.S. reporting requirements.
One tricky aspect of this corporate loophole is the notion of
an “ordinary business.” Yours must be an ordinary business to
qualify for the tax deferral on retained earnings. The definition
of an ordinary business has two parts:
First, you must sell something on a regular and continuous
basis; you should make a profit in at least three of the last five
years; you should work at the enterprise full-time; and it must
be a business, not a hobby.
Second, you should be selling a product, not providing a
professional service such as consulting.
Now, it can be hard to determine where consulting ends
and selling a “product” begins; this is where getting good legal
advice is essential.
But if you are deemed by the IRS to be operating a consulting
or professional service business, you may utilize the FEIE, but
you are not allowed to hold retained earnings in your offshore
corporation.
 Taxes 79

Other Useful Facts

1. The FEIE doesn’t apply to self-employment tax
(FICA), only income tax. A self-employed person
living abroad and qualifying for the FEIE will still
pay 15% in self-employment tax, i.e., $15,330 on a
FEIE-qualifying income of $102,100.
2. Unearned passive income from interest, dividends
and investments isn’t active income and thus
doesn’t qualify for the FEIE. Unearned passive in-
come flows through to you as shareholder of the
foreign corporation and is taxable on your personal
1040 return.
However, you can elect to pay U.S. tax on the
appreciation in your corporate account each year,
or you can pay U.S. tax on the gain when you sell
funds or shares from your account. If you elect to
pay tax when you sell, however, a punitive interest
rate is added to the tax due to eliminate any benefit
from deferral.
3. An offshore corporation may have shareholders
who live in the United States. These shareholders
must be passive investors who have no control over
the company’s day-to-day operations. The offshore
corporation should not have a U.S. office or em-
ployees, or any U.S. agents working exclusively to
market or distribute its goods in the U.S.

Reporting
Remember that you must file U.S. tax returns regardless of
your FEIE status. I filed every year for two decades in South
Africa without paying any U.S. taxes.
80 Endless Income

If you go the offshore business route, you must maintain

records of income and expense in accordance with U.S. account-
ing principles. Offshore corporations must file many U.S. tax
forms, under threat of major penalties:
• Form 5471 — Information Return of U.S. Persons With
Respect to Certain Foreign Corporations (http://www.irs.
gov/pub/irs-pdf/f5471.pdf).
• Form 926 — Report of Transfer to Foreign Company, filed
when you fund the offshore corporation (http://www.irs.
gov/pub/irs-pdf/f926.pdf).
• FBAR — Financial Crimes Enforcement Network (FinCEN)
114, Report of Foreign Bank and Financial Accounts
(https://www.irs.gov/businesses/small-businesses-self-
employed/report-of-foreign-bank-and-financial-accounts-
fbar).
• A foreign corporation or limited liability company must
make an election to be treated as a corporation, partner-
ship or disregarded entity using default classifications in
Form 8832, Entity Classification Election (http://www.irs.
gov/pub/irs-pdf/f8832.pdf).
• Form 8858 — Information Return of U.S. Persons With
Respect to Foreign Disregarded Entities (http://www.irs.
gov/pub/irs-pdf/f8858.pdf).
• Form 5472 — Information Return of a 25% Foreign-Owned
U.S. Corporation (http://www.irs.gov/pub/irs-pdf/f5472.
pdf).
• Form 8938 — FATCA (https://www.irs.gov/pub/irs-pdf/
f8938.pdf). This applies to your personal accounts as well
as the accounts of any corporate entity you control.

Conclusion: Not a DIY Matter

One thing that should be clear by now is that although FEIE
can be simple — as it was for me in South Africa — it can quick-
ly become very complicated indeed, especially if you opt to form
an offshore corporation.
 Taxes 81

That’s why I strongly recommend that you engage qualified,

experienced tax counsel if and when you decide to eliminate
taxes by moving abroad. Here are some of the key things to
consider:
• An expatriate’s tax return is more complicated than a nor-
mal U.S. tax return. That should be clear from what I’ve
said here.
• You may have to reconcile your host-country tax year to
the U.S. tax year. The U.S. tax year begins on January 1
and ends on December 31. Not all countries operate on
this calendar. For example, Australia, Hong Kong, New
Zealand and the U.K. all have different tax-year schedules
that don’t coincide with the calendar year.
• The IRS requires that you (or your tax preparer) prepare
your return per the U.S. tax year, which means taking your
tax statements from your host country for two years, ex-
tracting the appropriate information and then plugging it
into your U.S. tax return.
• You must keep up with all changes in U.S. tax rules and
legislation from afar. The U.S. tax code changes every year,
especially when there are major changes in the political
landscape. If you’re not a tax professional, you probably
don’t have the time or inclination to keep up with these
changes.
• You may be required to file a state return, even if you have
not lived in the U.S. for a few years. Every U.S. state has
its own rules, and certain states make it more difficult to
avoid filing their tax return. You may have a state tax do-
micile if you maintain a state driver’s license, state voter
registration or bank accounts or property in that state.
• Commercial tax software isn’t designed with expats in
mind and may miss deductions or exclusions that could
cost you money. You may save a few dollars upfront by us-
ing them, but you could end up losing a significant amount
in overpaid taxes or missed credits in the long run.
82 Endless Income

My go-to guy on these matters is my good friend Josh

Bennett. He specializes in the intersection between U.S. and
foreign tax and corporate rules. He can be reached as follows:
Josh N. Bennett, Esq.
440 North Andrews Avenue
Fort Lauderdale, FL 33301
Tel.: 1-954-779-1661
Mobile: 1-786-202-5674
Email: [email protected]
Website: www.joshbennett.com
 RETIREMENT

A
recent Gallup poll revealed that roughly 49% of people
don’t expect to have saved enough money to live com-
fortably in retirement. Americans already have a poor
track record when it comes to saving and when you throw in
the multiple options available for retirement planning, many
are simply too overwhelmed. In this section, there are tricks for
boosting your Social Security payments, how to choose between
a traditional IRA and a Roth IRA, and even how you can boost
your retirement investment options by opening a self-directed
IRA. Learn the steps you need to take to maximize your retire-
ment savings.

83
84 Endless Income

INCOME SECRET NO. 17:

Boost Your Social Security Benefit
by Retiring Earlier

Social Security is a huge entitlement program that shells out

more than $950 billion in benefits annually to about 67 million
Americans. Most beneficiaries derive 50 percent or more of their
retirement income from the program, while 21% of married re-
cipients and 43% of unmarried individuals depend on it for 90%
or more of their income.
You spend your working years contributing to the program,
so why not try to get as much income out of the program in
retirement as you can? After all, isn’t that what Social Security
is for?
Well, if you think the Social Security Administration is look-
ing out for your best interest by encouraging you to delay draw-
ing your benefits until your age 70, you may want to reconsider
that assumption.
At first glance, this might seem like a good idea since your
benefits at 70 will be 32% higher than those you would receive
at age 62. However, contrary to popular belief, you stand to
make more money by taking your benefits as early as possible.
How can that be?
As you probably know, 62 is the earliest age you can start
collecting your Social Security retirement benefits, but you earn
delayed retirement credits equal to 8% per year plus inflation
for every year you delay claiming benefits past full retirement
age, which is 66 for people born between 1943 and 1954, and
67 for those born after 1960.
On the next page is a table showing how much smaller your
benefits will be if you elect to collect them before you reach your
full retirement age:
 Retirement 85

Start Full Full Full

Collecting Retirement Retirement Retirement
At: Age of 65 Age of 66 Age of 67
62 80% 75% 70%
63 86.7% 80% 75%
64 93.3% 86.7% 80%
65 100% 93.3% 86.7%
66 100% 93.3%
67 100%
(Data source: Social Security Administration)

It would appear from that table that you’d be better off wait-
ing until your full retirement age to collect Social Security. But
there’s a factor you must consider — namely, how long do you
intend to live?
You see, the Social Security system is designed in such a
way that if you live an average length time, your total benefits
received will be more or less the same regardless of when you
start collecting them. Payments that begin at age 62 will be
substantially smaller, but you’ll receive many more of them. So
whether you live a little longer or shorter than average, there
isn’t that much difference.
Nevertheless, many Americans refrain from claiming Social
Security benefits as soon as they reach 62 because they’ve been
told that the longer they wait, the more they will be paid —
which is true on a short-term basis. But since the average U.S.
lifespan is 78, you’re more likely to lose money in the long run
by waiting.
True, if you live a little longer or shorter than average, your
total benefits received will not be vastly different whether you
start collecting at age 62 or age 70. And if longevity runs in your
family and you can keep working longer, waiting might make
more sense. But why gamble on living a very long life, if you can
start enjoying that retirement income now?
86 Endless Income

Besides, the sooner you start collecting Social Security ben-

efits, the more money you’ll receive in the long run. Consider
this:
A 50-year old who earns $60,000 annually stands to make
$199,212 by age 75 if he or she retires at 62, versus $145,140
from retiring at 70. That’s $54,072 more in Social Security ben-
efits!
Of course, not everyone can afford to retire at age 62. It
depends on how much money you’ll need to live comfortably for
the rest of your life. Social Security is just one source of income
— and not a lucrative one at that.
The average monthly retirement benefit was recent-
ly  $1,371, amounting to $16,452 per year, while the overall
maximum  monthly Social Security benefit for those retiring
at their full retirement age in 2017 is $2,687 — or roughly
$32,000 for the whole year. Those who retire at age 70 in 2017
can collect monthly checks as large as $3,538, for $42,456 per
year — though most people will receive less.
To find out what you can expect to receive from Social
Security, go to www.ssa.gov, and set up a “my Social Security”
account. It will provide you with information on your estimated
benefits. Even if the numbers don’t seem all that impressive,
you may still be able to retire early depending on how far from
retirement you are. Why? Because your money is growing at an
annual average rate of 8%, as illustrated in the following table.

Growing at $10,000 $15,000 $20,000

8% For: Invested Invested Invested
Annually Annually Annually
3 years $35,061 $52,592 $70,122
5 years $63,359 $95,039 $126,719
10 years $156,455 $234,682 $312,910
15 years $293,243 $439,864 $586,486
20 years $494,229 $741,344 $988,458
25 years $789,544 $1.2 million $1.6 million
 Retirement 87

But even if you take longevity out of the equation, there may
be other good reasons to start collecting Social Security early:
• So you can retire earlier. Early retirement means you
can enjoy your money while you’re still relatively young,
healthy, active and able to travel. Provided, of course, you
have other savings or sources of income. Note, however,
if you take your benefits before your full retirement age,
you’ll be taxed for your benefits if you are still employed,
depending on how much you earn.
• You’re married and want to take advantage of an over-
all spousal strategy. If you and your spouse have very dif-
ferent earnings records, you might start collecting the ben-
efits of the spouse with the lower lifetime earnings record
early, while delaying the start of collecting the benefits of
the higher-earning spouse. That way, you both get to enjoy
some income earlier, and when the higher earner hits 70,
you can collect their extra-large checks. Also, should that
higher-earning spouse die first, the spouse with the small-
er earnings history can collect those bigger benefit checks.
• You have no choice but to retire early. Sometimes, you
aren’t the one who gets to decide when to retire — your
circumstances choose it for you. Some retirees are forced
to leave the workforce sooner than they planned due to
health problems or a disability. Others corporate down-
sizing or because their company went out of business. In
those situations, having Social Security benefits available
sooner rather than later provides a relative modest, but
nevertheless welcome safety net.
This is just one of several hidden strategies to boost your
Social Security income. In the next Income Secret, we’ll show
you how you can significantly increase your income by NOT
filing for two types of Social Security benefits simultaneously.
88 Endless Income

INCOME SECRET NO. 18:

How to Collect an Extra $5,600 per Year
in Social Security Benefits

Marriage certainly has its perks — love, companionship,

emotional support … and potentially extra Social Security ben-
efits.
There are numerous strategies that enable married couples
to maximize their benefits by coordinating the timing of their
claims.
For example, they have the option of claiming benefits based
on their own earnings or choose to receive up to 50% of the
amount for which their spouse is eligible at full retirement age.
This game plan can provide an important safety net for parents
who stayed out of the workforce for an extended period of time
in order to care for their children.
There is also the strategy of claiming twice. Dual-earner cou-
ples who have reached their full retirement age may be able to
claim spousal benefits and then later switch to payments based
on their own work record, which will then be higher due to
delayed claiming. That way, if you’re planning to delay drawing
benefits until age 70, you can receive some benefit between age
66 and 70.
However, there is another marriage-related income booster
that stands out among the rest — and it comes right out of the
Social Security Administration’s public documents but is buried
amid so much other confusing information that many retirees
completely miss out on it.
It enables you to collect an extra $5,600 in Social Security
benefits each year by filling out two forms instead of one. The
trick, however, is to NOT file for two types of Social Security
benefits simultaneously, but rather to file for one (typically the
smaller on) at 62, then wait until age 66 and file for the other.
If you’re eligible for a retirement benefit and a survivor
benefit, for example, you’ll lose out on one if you file for both
 Retirement 89

simultaneously. That’s because, under Social Security rules, you

can only collect the larger of the two. The better strategy is to
take the smaller benefit first, then claim the larger one later.
Here’s an example: Edith is a 62-year-old widow. She lost
her husband before he could claim any Social Security benefits.
At her age, Edith is eligible for her own monthly retirement ben-
efit ($1,800) and a survivor benefit ($2,000). But if she claims
both at once, she’d only receive a check for $2,000 a month for
the rest of her life.
Edith would do better to claim her retirement benefit at 62,
and wait until age 66 — her full retirement age — to claim her
survivor benefit, which will now equal what would have been
her husband’s benefit at his full retirement age — $2,469. That
way, she’d get $1,800 a month for four years (from 62 to 66),
then $2,469 a month for the rest of her life.
That’s a 23% higher real benefit from age 66 to her death,
than had she settled for the $2,000 a month survivor benefit. It
means that Edith would pocket an extra $5,628 per year.
With that higher payment, it would take Edith less than two
years to make back the $200 a month she forfeited from ages
62 to 66.
Not only that, but let’s say Edith lives at least another 20
years (to age 86). That’s approximately $5,600 per year times
20 equals $112,000 in extra benefits … not including Social
Security cost-of-living adjustments.
You’ve already discovered two ways to significantly boost
your Social Security income. Next, however, you’ll learn how to
potentially score the biggest payoff of all…
90 Endless Income

INCOME SECRET NO. 19:

Boost Your Social Security Benefits by
$1,140 per Month … or More

Rules are funny things — especially when they pertain to

government entitlement programs.
For example, just because you’ve elected to take your Social
Security benefits at an earlier age — say, 62 — doesn’t mean
you’re locked into collecting only the minimum monthly allow-
ance due to you. Not when there’s an often-overlooked Social
Security “reset” rule that can boost your benefits by a whopping
$1,140 per month.
Let’s say you jumped at the opportunity to claim Social
Security benefits when you reached 62, but now realize that
you don’t need this source of income just yet.
Or perhaps you changed your mind about retiring and de-
cided instead to continue working.
Or maybe you just have beneficiary’s remorse and wish you
would have waited until you reached your full retirement age —
or even 70 — to take advantage of your Social Security benefits.
Well, you can. You’re entitled to a “do-over” and can actually
postpone collecting benefits until you’re older. In fact, making
such a move could be the difference between collecting only
$1,277 per month at age 62 and getting $2,419 per month at
age 70.
Perhaps financial need was behind your initial decision to
take those early benefits. Or maybe you were worried about the
long-term viability of the Social Security program, which many
have warned will go bankrupt within the next two decades.
Regardless of the reason, the consequences of taking early
Social Security benefits can be significant.
If your full retirement age is 66 and you start taking pay-
ments at 62, it would result in a permanent 25% reduction in
benefits. Put another way, if your full retirement age (FRA)
benefit was expected to be $2,000 per month, electing to col-
 Retirement 91

lect benefits at age 62 would reduce that amount to $1,500 per

month. It would produce a shortfall that — when you take into
consideration that Social Security benefits are indexed for in-
flation — would add up to thousands of dollars in lost income.
But there is a way to mitigate such a decision after the fact,
and it’s perfectly in compliance with Social Security rules.
Upon reaching full retirement age, you can stop receiving
benefits until later in the future. In the meantime, under the
program rules, delayed benefits after full retirement age are
entitled to earn credits of 8% per year up to age 70. Which
means that if your FRA is 66 and you delay your benefits until
you reach age 70, you will receive delayed credits totaling up
to 32% (or 132% of your primary insurance amount (PIA) as
shown in the chart below).

Age when you claim Amount of

retirement benefits retirement benefit
5 years before FRA 70% of PIA
4 years before FRA 75% of PIA
3 years before FRA 80% of PIA
2 years before FRA 86.67% of PIA
1 year before FRA 93.33% of PIA
at FRA 100% of PIA
1 year after FRA 108% of PIA
2 years after FRA 116% of PIA
3 years after FRA 124% of PIA
4 years after FRA 132% of PIA

Here’s an example of this strategy…

John was gainfully employed up until he lost his job at age
62. Unable to find other work, he decided it best to just re-
tire and live off his savings, a modest pension and his Social
Security benefits. Had he waited until his full retirement age
of 66, John’s monthly Social Security benefits would have been
about $2,000. Instead, it was reduced to $1,500 (or 75% of
92 Endless Income

what he would have collected at age 66) due to his decision to

take an early benefit.
However, John belatedly learns about this “reset” rule. So,
when he reaches his full retirement age of 66, he decides to
suspend his benefit until age 70. This benefit now starts earning
delayed credits at a rate of 8% per year. Which means that at
age 70 (four years after his full retirement age), he will be enti-
tled to 132% of his PIA.
So, when John resumes taking his benefit at age 70, he
recovers 99% of the original primary insurance amount (0.75
times 1.32 equals 0.99) and receives $1,980 per month for the
rest of his life, along with any inflation adjustments.
Of course, had John originally delayed taking his benefit un-
til age 70 (four years beyond his FRA), it would have increased
to $2,640 per month with delayed credits ($2,000 times 1.32
equals $2,640). Nevertheless, by suspending his benefit for a
time, he has considerably improved his financial circumstances
despite his prior decision to take an early benefit.
Thanks to the “reset” option allowing suspension of Social
Security benefits at full retirement age, many beneficiaries can
not only undo the impact of having taken early benefits, but
also significantly boost their monthly and yearly income to meet
their spending needs throughout retirement.
In fact, doing so could be one of the best “secret” income
moves you’ll ever make.
To apply, simply fill out the SSA-521 form within 12 months
of becoming entitled to your retirement benefits. You are limited
to one withdrawal. For more details on applying for a “do-over”,
visit https://www.ssa.gov/planners/retire/withdrawal.html.
 Retirement 93

INCOME SECRET NO. 20:

Roth or Traditional IRA: Don’t Let
Taxes Eat Into Your Retirement

Quick: How do you set your annual retirement savings goal?

Very wealthy households usually seek professional assis-
tance. Once you get to the point where planning for estate tax
is an issue — when you and your spouse expect to leave more
than $11 million in gross estate — it’s indispensable, since you
must juggle multiple types of tax.
But if you’re like most people, you base your savings on a
combination of IRS contribution limits (for IRAs), 401(k) em-
ployer matches (if you’re employed) and rules of thumb, such
as 10% of pretax income.
A recent study found that most American retirement savers
do exactly that. They let the system decide for them how much
to save based on the tax rules and their employers’ whims.
That’s understandable. But the interesting fact is that they
do so regardless of the type of savings vehicle they use … with
remarkable results … results that provide a fascinating free les-
son in retirement planning.

To Roth or Not to Roth: That Is the Question

Individual retirement accounts (IRAs) and 401(k) plans
come in two flavors: traditional and Roth. Contributions to the
former are tax-exempt — i.e., you don’t pay tax on the income
you set aside for them. Your accumulated contributions plus
investment growth are taxed when you withdraw them in re-
tirement.
Since the IRS gave you a tax break when you saved into a
traditional vehicle, it insists on its pound of flesh when you retire
in the form of annual required minimum distributions (RMDs).
Those can create massive headaches and tax complications for
retirees.
94 Endless Income

Contributions to a Roth vehicle, on the other hand, are sub-

ject to tax … but the proceeds are tax-free when you retire —
and there are no RMDs.
At the level of logic and math, the decision to go the tradi-
tional or Roth route should depend on a combination of your
cash flow needs during your working life and your expectation
of future tax rates.
All else being equal, if you need more money now and/or
expect taxes to remain the same or fall in the future, you’d go
the traditional route. If you can spare the extra tax now and/or
expect tax rates to rise in the future, you’d choose Roth. That’s
because if you expect future taxes to be higher, it makes sense
to pay them now when they’re low.

Dumb Luck
In 2018, a married couple filing jointly can contribute a
maximum of $11,000 to their IRAs, whether Roth or traditional.
Contributing to a traditional IRA lowers their current tax bill;
they’ll pay later. Contributing to a Roth leaves it unchanged, but
future withdrawals are tax-free.
In theory, that sets up a complex net present value calcula-
tion of current versus future income, tax rate expectations and
other factors.
But most Americans don’t think about that. They contribute
the same amount whether it’s to a traditional or Roth vehicle.
As Harvard Business School researchers found, that’s because
they simply save according to the IRS maximum, whether it’s a
traditional or Roth IRA.
If they have a Roth IRA, this accidental choice creates a huge
unintended retirement windfall.
Let’s say the couple saved $5,000 a year in an IRA for 40
years, earning a 5% annual return. Their balance at retirement
will be more than $600,000.
If the IRA is a Roth, the full balance is available for their
retirement spending. If it’s traditional, taxes are due on the bal-
ance.
 Retirement 95

Let’s say their tax rate is 20% in retirement. That’s what

they’ll pay on withdrawals from their traditional IRA — which
they must take whether they need them or not, due to the RMD
rules.
If they opt for a Roth, on the other hand, their taxes will
already have been paid, and they’ll enjoy $120,000 extra spend-
ing power in retirement — about $700 a month more.

A No-Brainer
I’ve said it before, and I’ll say it again: U.S. income tax rates
will be higher in the future. That makes a Roth IRA a more
sensible choice.
Our current income tax rates are the lowest in over a centu-
ry. Our national debt is enormous and growing. Those in charge
of the federal government show no signs of reining it in — quite
the opposite. The population is ageing, but retirement benefits
are politically sacrosanct. Our national infrastructure requires
urgent and expensive repairs. And so on.
When taxes do go up, having a Roth IRA and/or 401(k)
means you’ll be able to ignore them. Some people will be in that
situation accidentally.
You, on the other hand, can choose it consciously. My advice
is to do so … it’s a no-brainer.
96 Endless Income

INCOME SECRET NO. 21:

Why the Self-Directed IRA is Your Key
to Long-Term Prosperity

I’m a do-it-yourself (DIY) sort of guy. It’s taught me some-

thing I want to share with you.
In my personal life, my research and writing, I’m biased
toward solutions that give me maximum choice and control. I
like to service my own motorbike. I do my own basic electrical
repairs and plumbing. I file my own taxes … unless they get
really complicated, in which case I know where to draw the line
and bring in an expert. DIY doesn’t mean do it alone.
I’ve learned — often the hard way — that trusting big, re-
mote institutions to make decisions or do things for me is asking
for trouble. Retirement planning is an excellent case in point.
For a few years I had a 403(b) plan from a previous employ-
er. It offered a fixed range of investment options. Some of them
were superficially attractive, but once I took into account plan
fees and the costs associated with specific funds, it became clear
that I’d do better by ending my participation in the plan, paying
tax on the compensation that would have gone to contributions,
and investing it myself.
That’s why I now manage my own retirement funds … with
the help of the right experts.
The fact is that most garden-variety institutional retirement
plans — including individual retirement accounts (IRAs) — are
designed to gather people’s retirement savings and direct them
to U.S. stock markets. An entire “food chain” has grown up
around the U.S. retirement system, that more or less guarantees
that you won’t do any better than inflation, even if the underly-
ing investments occasionally do.
But the biggest problem with conventional retirement plans
is a lack of investment options. Why should you have to limit
yourself to someone else’s choices, made for their own conve-
nience and profit? You don’t. You don’t have to limit yourself
 Retirement 97

to dollar-based U.S. equities and bonds. You can pursue almost

any investment option imaginable … real estate, business start-
ups, intellectual property, precious metals … you name it.
You want more for your IRA. And you can have it … a lot
more.

Take Control of Your Future … and Your Present

There’s about $17.5 trillion in all U.S. private pensions.
More than 25% of it in personal IRAs. For a clever few, some
of that money is in “self-directed” IRAs … about 2% of the to-
tal. Those are the folks who have found that a more flexible
approach to retirement planning provides the best returns and
asset protection.
A self-directed IRA is a critical tool, regardless of how DIY
you are. It’s legal, profitable and can be as simple or as complex
as you’d like it to be. And it can open up offshore opportunities
for your retirement investment that are unavailable any other
way. A self-directed IRA is just like a conventional IRA in all the
important ways:
• You can have multiple IRAs, so a self-directed IRA can
coexist with others.
• Capital gains, dividends and interest earnings within the
account incur no tax liability.
• Contributions are tax deductible (subject to conditions).
• Distributions are taxed as ordinary income and can begin
when you turn 59 ½ or if you become disabled.
• You can withdraw funds for qualified unreimbursed med-
ical expenses that are more than 7.5% of your adjusted
gross income (AGI), or for qualified higher education ex-
penses for yourself, your children and grandchildren.
• When you die, your spouse can roll both of your IRA ac-
counts into one IRA account.
The big difference is that with a self-directed IRA, a special-
ist IRA “custodian” permits you actively to choose and design
investments far beyond everyday stocks, bonds and mutual
98 Endless Income

funds. You can invest in real estate, private mortgages, private

equity, precious metals, intellectual property ... and much else.
You can reap incredible gains, tax-free, both the income
from your investments and their underlying appreciation …
gains that go way beyond what a conventional IRA custodian
can provide.
And if you like, you can do it outside the U.S.

Who’s Who in the IRA Zoo

In strict legal terms, a self-directed IRA is a bit of a mis-
nomer. In most cases — with one important exception that I’ll
show you — your IRA assets will actually be held by a custodian,
like the trustee of a trust. The Internal Revenue Code requires
a custodian for all IRAs — and they must be based in the U.S.
The custodian is responsible for records management and
safe-keeping of your IRA, processing transactions, filing required
IRS reports, issuing statements and other administrative duties
on your behalf. Custodial firms generate revenues from fees, not
from trading your money for themselves. In fact, your IRA funds
must be “segregated” from the firm’s own funds, so they’re safe
if the company goes bust. That’s their core business, and they do
it for millions of Americans.
But some provide a lot more value for that service than oth-
ers. There are two types of IRA custodians.
One offers garden-variety securities, such as stocks, bonds
and funds. This is what you’ll get if you have an IRA with most
big U.S. commercial custodians, such as Fidelity, American
Express, Entrust or T. Rowe Price. Although you can choose
from a variety of investment profiles, most of these plans are
focused on the plain-vanilla U.S. market. You can forget about
most “alternative” investments … especially if they are located
outside the U.S.
The other type of IRA custodian, often called “self-directed
custodian,” is willing to entertain alternative investments that
you choose yourself. They add value by helping you to decide
what your IRA is going to invest in, and if you wish, put them
 Retirement 99

in safe offshore jurisdictions. There aren’t many of them, but I

watch them carefully to make sure you can access the best of
them.
Self-directed IRA custodians allow you, the IRA owner, to
choose and design specific investments, or have it done by an
independent asset manager (IAM) of your choice, either in the
U.S. or abroad. That’s the key to supercharging your IRA, DIY-
style.
We’re at a time when the U.S. economy is looking shaky.
Unemployment is down, but there has been a dramatic decrease
in labor force participation as well as quality of jobs created.
U.S. equities are peaking … at any moment, a U.S. interest-rate
hike could bring them crashing down. And the ever-present
threat to wealth confiscation looms. That’s why these alterna-
tive investments are where you want to be.

The World’s Your Oyster … Even Oysters

Can Be Your Oyster
I’ve heard of a case of a self-directed IRA investing in an
oyster-farming venture … hence the cheeky section title.
But the U.S. Internal Revenue Code places some restrictions
on IRA investments, as I will show.
Most mainstream IRA custodians impose additional restric-
tions of their own, limiting you to garden-variety U.S. investment
funds. That’s because their job is to generate mass investment in
U.S. equity markets, not to allow for customization.
But customization is exactly what you need. That’s why
self-directed IRA custodians, on the other hand, allow alternative
investments, and embrace the increased complexity involved.
What sort of alternative investments are we talking about?
The range is enormous … and most of these investments can be
in the U.S. or abroad.
In fact, the Internal Revenue Code doesn’t describe what
a self-directed IRA can invest in, only what it cannot invest in.
100 Endless Income

Let’s start with some of the things people have invested in suc-
cessfully:
Real estate: A self-directed IRA can purchase any type of
real estate, including residential and commercial properties,
farmland and raw land — both U.S. and foreign. It can be new
construction or renovation of an existing property. Your self-di-
rected IRA funds can be used for purchase, maintenance and ex-
penses such as taxes and utilities. When the property generates
income, either from rental or sale, those funds go back to your
IRA, tax-free. They can then be used to invest in other assets.
For example, your IRA could buy a home now that you’d
plan to use in retirement. Your rental income goes back to your
IRA and is used to maintain it, and to fund other investments.
Unlike an annuity or private insurance policy, where you
can’t self-direct your investments, with a self-directed IRA you
can select the property and negotiate the terms of the deal
yourself. You just direct your self-directed IRA custodian to pay
for the purchase. The custodian must be the legal owner, so all
documents associated with the offer and purchase, as well as
anything associated with the ownership of the property, must be
in the name of the custodian. Although, specifically referencing
you as the IRA owner, such as “XXX Company Custodian for
Benefit of (Your Name) IRA.”
If you wish, real estate purchased in a self-directed IRA can
even have a “non-recourse” mortgage against the property (i.e.,
one where neither you nor the custodian have personal liability
for the mortgage — only the property as collateral). That can
help leverage your self-directed IRA funds. However, according
to Section 514 of the tax code, if you do this on a real estate in-
vestment, some of the income from the property will be subject
to Unrelated Business Income Tax (UBTI).
Bear in mind that an IRA-owned property won’t qualify for
tax deductions for property taxes, mortgage interest or depreci-
ation. Also, neither you nor any “disqualified person” may live in
or vacation in the property. You can make decisions about how
the property is maintained, but you can’t do the work yourself.
(A disqualified person is basically you and your descendants, as
 Retirement 101

well as any entity that you control. Investments involving your

self-directed IRA must always be handled in a way that benefits
your retirement account and not you or others close to you right
now. Your self-directed IRA has to avoid any investment that
would appear to involve immediate benefit for you, any descen-
dants or any entity in which you hold a controlling equity or
management interest.)
One of the interesting aspects of real estate in a self-directed
IRA is that you could purchase a retirement home for yourself
with it. You’d have to avoid any involvement in the property
while it is in your IRA, but you could rent it out and use the
income to fund renovations and improvements in anticipation
of moving in one day. When you do, taking the title of the house
will count as a “distribution” from your IRA. You will then pay
an ordinary income tax on the appreciation of the house’s value
since the IRA purchased it, at the current rate.
For example, let’s say you establish a self-directed IRA LLC
with $100,000 to purchase a house. Assume you operate the LLC
open for 10 years and that it appreciates at an average annual
rate of 8%. Your rental income is all tax-free, since it all returns
to the IRA. After 20 years your $100,000 investment would be
worth $215,890, and you’d pay income tax on the $115,890.
Business investments and private equity: Self-directed
IRA funds can be invested in private companies. Ownership is
usually expressed as a percentage or number of shares of stock.
A self-directed IRA can even fund a start-up business or other
venture, as long as it’s managed by someone other than you or
a disqualified person. This is especially attractive if the start-
up does well: Your IRA’s value will increase along with the fair
market value of the company. And of course, it’s all tax deferred.
The IRS does put a few restrictions on private equity invest-
ments by a self-directed IRA. It can’t purchase stocks that you
already own. In most cases, neither you nor any disqualified
persons can be employed by the company while the IRA has
an equity position in that company. Also, the IRA cannot be a
general partner in a limited partnership, nor can it invest in an
S-Corporation.
102 Endless Income

Private loans: The IRS also allows self-directed IRAs to

make private loans. You can choose the borrower, the principal
amount and interest rate, length of the term, payment frequen-
cy and amount of the loan, as well as whether or not the loan
will be secured. The IRA custodian makes the actual loan in
its name, for the benefit of your self-directed IRA. (Such loans
cannot be made to yourself, or to prohibited persons.)
Other investments: You can choose self-directed IRA invest-
ments based on your own expertise. Depending on your area
of specialty, you could direct your self-directed IRA to invest
in currencies, commodities, hedge funds, commercial paper,
royalty rights, intellectual property or equipment and leases.
Self-directed IRAs have invested in golf courses, race horses and
mineral rights.
Precious metals: I know that metals are of big interest to
people like us. You want them, and you’d prefer them to be
offshore. That’s smart thinking these days. Fortunately, self-di-
rected IRAs are an ideal way to hold part of your retirement
kitty in precious metals.
A self-directed IRA can hold gold, silver, platinum and pal-
ladium. The Taxpayer Relief Act of 1997 created this option for
you.
The rules for taking distributions from a “gold IRA” are the
same as those for a regular IRA. You can liquidate your IRA
metals for cash or take physical possession of them. Both actions
are equivalent to taking a taxable IRA distribution.
Your self-directed IRA can hold coins — as long as they ar-
en’t considered collectibles — and bullion.
• Coins: In order for coins to be held inside a self-direct-
ed IRA, they must be 99% pure (or better). They must
be “bullion coins,” not “collector’s coins.” That rules out
Krugerrands, older Double Eagle gold coins and numis-
matic coins. Allowed bullion coins include one, one-half,
one-quarter or one-tenth ounce U.S. gold coins; other
gold coins, such as the Australian Kangaroo/Nugget,
Austrian Philharmonic, Canadian Maple Leaf, Australian
Kookaburra, Mexican Libertad, Isle of Man Noble and
 Retirement 103

Australian Koala; one-ounce silver coins minted by the

Treasury Department; or any coin issued under the laws of
any U.S. state.
• Bullion: Your IRA can hold bullion, such as gold, silver,
platinum or palladium in bars, as long as it’s of the requi-
site fineness.
What about storage? Unless you opt to use an LLC as the
vehicle for your IRA assets (see below), your bullion coins or
bars must be in the physical possession of an IRS-approved
trustee, which must be a U.S. bank or approved depository, not
a foreign bank. The one exception is the American Gold Eagle
coin. Because these are legal tender — like the paper U.S. dollar
— they can be held in an offshore account.
Of course, there are other options for including metals in
your self-directed IRA:
• The Hard Assets Alliance (HAA), offers you the ability to
own gold, stored internationally, inside a pre-existing IRA
without having to go through a complex process. That’s
because they use the American Gold Eagle, which is con-
sidered a form of U.S. currency.
• Another IRS-approved option is to buy shares of an ex-
change-traded fund (ETF) that tracks the value of particu-
lar precious metals.
• You can have your self-directed IRA buy stock in a mining
company.
LLCs and IRAs: I’m sure you’re wondering about the safety
of keeping your IRA metals inside the U.S. After all, the federal
deficit is about the same amount as the total U.S. retirement
savings. That’s an ominous thought.
The answer to this threat is an offshore IRA LLC.
In this structure, your self-directed IRA exclusively owns an
offshore LLC, and you as the IRA owner become the manager of
the LLC. This gives you the ability to manage your retirement
funds directly, as long as you play by the “rules.”
104 Endless Income

By forming the LLC offshore, you can hold metals offshore,

open brokerage accounts in foreign countries, hold or trade
foreign currencies and make more aggressive investments. Plus,
you get the added benefit of having your assets securely offshore
as an extra layer of protection from the greedy U.S. government.
When you form an offshore IRA LLC, no one has access to or
control over your investments but you. Your custodian is merely
responsible for moving your IRA assets into your new LLC and
for reporting your offshore LLC to the IRS, since it’s your only
self-directed IRA asset. All the other assets are under the LLC
itself.
From there, it’s up to you — as a member of the LLC — to
determine how and where to invest, including offshore gold or
other precious metals.
As an added benefit, the custodian will no longer charge a
transaction fee on your investments in the LLC, saving you a lot
of money.
When it comes to precious metals offshore, LLCs are criti-
cal. Several European banks and other financial institutions are
willing to hold American IRAs, offering a variety of precious
metal storage programs. But to access them, you must have an
offshore LLC — IRS rules prohibit your U.S. custodian from do-
ing this on your behalf.
Sounds too good to be true? Don’t worry: It’s perfectly legal.

Getting Expert Help

I mentioned that although I’m a DIY guy, I know when to
trust the experts. For example, before I start soldering the circuit
board on my precious Fender Deluxe Reverb guitar amplifier, I
run my plans by a trusted specialist in Seattle who knows a lot
more than I do about such matters.
The same applies to your self-directed IRA. Whether your
IRA is managed by your custodian or by you via an LLC, you are
welcome to use the services of an independent asset manager
(IAM) to help you plan and execute your investments. For a fee,
 Retirement 105

the IAM can help you decide what to instruct your custodian to
do with your self-directed IRA assets.
This is especially useful — even essential — when it comes
to offshore investments, especially via an offshore LLC. IAMs
in Europe, for example, have well-developed relationships
with European banks and other institutions that can host LLC
accounts and arrange precious metal transactions and storage.
And of course they know European markets much better
that most U.S. advisers. With the European economy looking
up these days, an offshore IAM can help you take advantage of
the rising tide.

Play by the Rules

The IRS has rules about IRA investments, and you don’t
want to break them. They’re not too complicated, but it’s critical
to be aware of them … especially if you take the offshore LLC
route with your self-directed IRA.
Here’s why: If the IRS decides that there’s been a “prohibited
transaction” under Internal Revenue Code Section 4975, your
IRA loses its tax exempt status. The entire fair market value of
your IRA is treated as a taxable distribution, subject to ordinary
income tax. You’d also pay a 15% penalty as well as a 10% early
distribution penalty if you’re under the age of 59 ½.
You don’t want that to happen. But it won’t, if you know the
rules and obtain and follow good advice from a qualified tax
attorney like the ones I recommend.
There are three types of prohibited transactions: those in-
volving specific investments, those involving disqualified per-
sons and self-dealing.
Prohibited investments: Your self-directed IRA can’t invest
in life insurance. It can’t invest in collectibles such as artwork,
rugs, antiques, gems, stamps, alcoholic beverages or collectible
coins (there are exceptions, as I explained above).
Disqualified persons: This is based on the premise that
investments involving your self-directed IRA must always be
handled in a way that benefits your retirement account and not
106 Endless Income

you or others close to you right now. Basically, your self-directed

IRA has to avoid any investment that would appear to involve
immediate benefit for you, any descendants or any entity in
which you hold a controlling equity or management interest.
That means things such as:
• Borrowing money from your IRA.
• Selling property to your IRA.
• Receiving compensation for managing your IRA.
• Receiving compensation from a disqualified entity, such as
a company your IRA owns.
• Personally guaranteeing an IRA loan.
• Using your IRA as security for a personal loan.
• Using it to pay for a personal expense.
• Living in a property owned by your IRA.
Self-dealing and conflict of interest: This is when the IRS
can show that you or a disqualified person received some indi-
rect personal benefit from your IRA. Examples include issuing a
mortgage on a residence purchased by a disqualified person, or
buying stock from yourself, from any entity in which you have a
controlling equity position or from a disqualified person.
Fortunately, there are excellent tax attorneys who specialize
in staying on top of the rules and case laws involving prohibited
transactions … they are an essential part of your self-directed
IRA strategy.

How to Convert Your IRA to a Self-Directed IRA

Moving money from your existing IRA (or even from a
401(k) or 403(b)) to a self-directed IRA can be done in two
ways. They’re both legal and tax-free, as long as they’re done
the right way.
• A transfer is the method used to move your retirement
funds from your existing IRA to a new IRA. In a direct
transfer, the distribution check is not sent to you. Instead,
your IRA’s assets are transferred from your old custodian
 Retirement 107

directly to the custodian of your new self-directed IRA.

You can choose to transfer your existing plan at any time,
tax-free.
• A rollover is used to move your retirement funds between
two qualified retirement plans, such as from your current
401(k) to a self-directed IRA.
With a rollover, the distribution from your existing retire-
ment plan is paid directly to you. This distribution is tax-free
as long as you redeposit your funds into your new IRA within
60 days. It is important to note that if the 60-day period is ex-
ceeded, you will be liable for taxes and penalties on the funds
withdrawn. You may rollover funds from an existing IRA tax-
free once per year.

Choosing a Custodian
Self-directed IRA custodians aren’t responsible for your in-
vestment choices … you are. If you tell them to invest in some-
thing that doesn’t work out, it’s not their problem. Indeed, most
IRA agreements clearly state that investors are solely responsible
for making investment decisions in connection with their funds.
Some investment promoters seeking self-directed IRA busi-
ness require exclusive use of certain custodians. With a few ex-
ceptions, I’m wary of such arrangements. The exception is when
an offshore IAM has an existing relationship with a trusted U.S.
custodian and prefers to work with them.
On the other hand, an investment scheme that says “you can
buy in as long as you use custodian ‘X’” should be treated with
caution.
Needless to say, it’s critical to choose the right self-directed
IRA custodian. Here are some of the things to consider:
Specialization: Make sure you work with an IRA custodian
that genuinely specializes in alternative investments. A few IRA
custodians will custody both types of investments. An IRA cus-
todian who specializes in traditional investments typically won’t
be the best choice also to custody your alternative investments.
108 Endless Income

The reverse holds true as well. When you work with a self-di-
rected IRA custodian, you want one whose specialty matches up
with your needs. Remember, you can have more than one IRA.
Fees: Every IRA custodian charges fees for their services.
They are often surprisingly low — several hundred dollars to set
up and between $100 and $150 a year thereafter. Nevertheless,
there are two fee models — either a per-transaction fee model or
an asset-based percentage fee model. Make sure the custodian’s
fee schedule aligns with your investment strategy. Your choice
will affect the total returns of your self-directed IRA. The bigger
your account, the more negotiating room you’ll have when it
comes to fees.
Number of transactions: Your investment strategy might
involve frequent transactions. Some custodians also offer au-
tomated investment services. Make sure your IRA custodian
understands and is prepared to handle your investment habits.
Miscellaneous Costs: Many alternative investments pro-
vide a variety of services as part of the investment strategy and
almost all IRA custodians charge fees for them. They include
federal funds wires, notarizing documents, document storage,
account setup fees, statement fees, transfer fees, account termi-
nation fees and servicing fees such as check writing, processing
documents and so on. Some custodians include these services
in their custody fees, others itemize the fees and charge them
separately. My preference would be for most fees to be included
in your custody fees, unless they are unavoidable pass-through
fees, such as federal funds wires or postage. Make sure your
expected return on investment takes all these miscellaneous
fees into account.
Service: This is really the key and why due diligence is
so important. You want to consider your custodian’s depth of
knowledge, timeliness of response, precision, consistency of a
process, speed of resolution of any issues and willingness to
adapt to a changing environment. Remember, investing in a
piece of real estate inside a self-directed IRA requires the custo-
dian to process all documentation associated with the property
(e.g., paying taxes, expenses, insurance, maintenance personnel
or other expenses). If the service team at the custodian isn’t
 Retirement 109

experienced at this, are slow in their response time or are sloppy

with their documentation processing, your investments could be
negatively affected.

A Final Example
Let’s wrap up our tour of self-directed IRAs with an example.
Rob is in his late 50s, self-employed and in the real estate
business. He knows U.S. markets reasonably well enough, but
he’s not convinced that they are the key to his retirement future.
He knows property, however, and how to make money out of it.
Rob has three current IRAs: two self-employment IRAs with
about $500,000 in each and a Roth IRA with $250,000. He also
has an old 401(k) from earlier in his career worth about another
$250,000. He wants to keep the Roth as a place to put occasion-
al windfalls. But the two SEP-IRAs are weak performers.
So he decides to look for an appropriate custodian who has
a lot of experience in handling U.S. real estate transactions. He
also wants to form an offshore Nevis LLC to hold any self-di-
rected IRA property acquisitions, and also so he can open gold
accounts in Europe via an independent investment manager.
Rob identifies a suitable custodian and has an attorney to
execute due diligence on them. His attorney also advises him
on the mechanics of the process of setting up and running his
self-directed IRA before he takes the plunge.
When he’s ready, he decides to request that his current IRA
custodian transfer his two SEP-IRAs to the new self-directed IRA
custodian, who invests them in an offshore LLC set up by his
attorney. But he decides to take a rollover of his old 401(k),
because he wasn’t sure whether he wanted to put it into his
existing Roth or his new self-directed IRA. New IRS rules, his
attorney told him about, stipulate that he can only this once a
year — the reason he decided to move his SEP-IRAs by direct
custodian-to-custodian transfer.
Within a few months, money that had accumulated in his
SEP-IRAs purchased a range of investment properties in the U.S.
and abroad that he knew well, thanks to his real estate exper-
110 Endless Income

tise. He chose high-growth markets in the U.S. and Panama,

where returns were in the double-digits. He used about 50% of
his IRA value to do that. He put another 30% of his self-direct-
ed IRA value into offshore gold storage in Liechtenstein. The
remaining 20% he invested in a variety of foreign stocks, bonds
and currencies.
With three years, the value of Rob’s retirement portfolio had
doubled. That’s because he had the flexibility to invest in areas
he knew intimately.
Before that, he’d just been a spectator as someone else man-
aged his money … and not very well.
If that sounds like a story you’d like to be part of … start
now. There’s no reason to wait.
 Retirement 111

INCOME SECRET NO. 22:

Use Your “Secret IRA” to Save as Much as $591,000

PLANNING for retirement is no easy task. With the likelihood

of Social Security and even pensions failing on the rise with
each passing year, the burden of supporting yourself through
your golden years is falling more and more on you.
In fact, a GOBankingRates poll revealed that one-third of
Americans have no retirement savings and 28.6% have less than
$10,000 saved.
But many people are looking for ways to maximize their
retirement savings while still getting the best tax benefits. There
are, of course, the standard 401(k) and IRA savings plans …
assuming that you are even eligible to enjoy the tax benefits of
an IRA.
However, what if you could grow your money for retirement
in a “Super IRA” that allows you to invest tax free and withdraw
the money without incurring taxes?
I know, it sounds too good to be true.
The truly remarkable thing is that this incredible retirement
savings plan isn’t technically meant for retirement. It’s part of
your health insurance.
The health savings account (HSA), or sometimes referred
to as an (H)IRA, was created as a way to put more control over
health expenses into the hands of individuals in hopes of bring-
ing down costs. When it was pushed through Congress in 2003
as part of the Medicare Prescription Drug, Improvement, and
Modernization Act, few realized that it provided Americans with
an interest loophole when it came to their retirement savings.
A loophole that could save you as much as $591,000.

What Is an HSA?
A health savings account (HSA) is similar to a regular per-
sonal savings account that you stash away for a rainy day. The
112 Endless Income

only difference is that this money is being stored for qualified

health care expenses. An HSA can be established with you as the
sole beneficiary, or for you plus your spouse and/or dependents.
However, to establish an HSA, you must be enrolled in a
high-deductible health plan (HDHP). These HDHPs have much
smaller monthly premiums than most health insurance plans,
which makes them enticing to individuals who are attempting
to cut down on up-front health care costs. The goal of HDHPs is
to cover serious injury or illness.
But HDHPs require that you first meet your annual deduct-
ible in medical costs each year before your plan starts to pay
any benefits. This is where your HSA comes in handy. Out-of-
pocket medical expenses that aren’t covered by your HDHP can
be funded by the savings you’ve stored away in your HSA.
But what if you don’t use all the savings you’ve stored over
the year for medical expenses?
The great thing about the HSA is that it’s not a “use it or
lose it” scenario. If you don’t use all the funds that you’ve stored
in your HSA during the year for medical expenses, then that
money rolls over and continues to accumulate.
Year after year. On and on and on … you can see where
I’m going with this. It’s just like a savings account, but better
because the money that you’ve invested in the HSA is pretax
dollars. The savings are growing tax-free. And if you withdraw
the money for qualified medical expenses, you won’t be taxed
on those withdrawn funds either.
That’s something an IRA or a 401(k) can’t even claim.

The HSA Tax Advantage

The HSA is a great way to save for, as well as pay for, health
care expenses, but one of the great added bonuses is that it
offers some great tax advantages.
A HSA is largely funded through pretax contributions. For
the most part, contributions to your HSA are made through pay-
roll deposits (through your employer) using pretax dollars. Your
employer can also make contributions on your behalf, and the
 Retirement 113

contribution is not included in your gross income. As a result,

you will owe fewer taxes because your gross annual income is
lowered by the amount that you paid into your HSA.

Your Estimated Tax Savings

Without HSA With HSA

Gross annual pay $60,000 Gross annual pay $60,000
(estimate) (estimate)
Estimated tax rate -$18,000 Maximum annual -$6,750
(30%) family coverage
HSA contribution
Net annual pay =$42,000 Adjusted gross =$53,250
pay
Estimated current -$6,750 Estimated tax -$15,975
+ future healthcare rate (30%)
expenses
Final take-home =$35,250 Final take-home =$37,245
pay pay
Take home this much more $2,025

All figures in this table are estimates based on an annual salary of

$60,000 and maximum contribution limits to the benefit account. Your
salary, tax base, healthcare expenses and tax savings may be different.

What’s more, contributions are not subject to state income

taxes either (unless you are a resident of Alabama, California or
New Jersey — these are the only states that require you to pay
state income taxes on your HSA contributions).
But what if you pay into your HSA with after-tax dollars?
Don’t worry. You’re covered. You can deduct any after-tax dollar
contributions from your gross income on your tax return.
Now remember that those contributions to the HSA aren’t
just sitting in cash. That money can be invested in a variety of
vehicles such as stocks, bonds, mutual funds and exchange-trad-
ed funds. What’s more, any growth enjoyed during the year
— whether through price appreciation, dividends or interest
payments — is also growing free of federal taxes as well as most
state taxes. Right now, the only states to tax HSA earnings are
New Hampshire and Tennessee.
114 Endless Income

And finally, with an HSA, withdrawals can be tax-free.

Withdrawals from your HSA are not subject to federal (or in
most cases, state) income taxes if they are used for qualified
medical expenses. As you can see from the table below, other
retirement savings plans such as the 401(k), IRA and Roth IRA
can’t even claim all of those tax benefits.

401(k) IRA Roth IRA H(IRA)

Tax-free before investing
  X 
Tax-free while growing
   
Tax-free withdrawls X X  
The Other Benefits of an HSA
The tax benefits of an HSA are tempting enough to entice
most investors into this kind of savings plan, but those aren’t the
only advantages offered.
Did you know that other people can actually contribute to
your HSA?
Contributions to your health care savings account aren’t
limited to the funds pulled from your paycheck. In fact, anyone
from your employer, your spouse or a relative can add to your
HSA. The Kaiser Family Foundation reports that 72% of em-
ployers contribute to HSAs — an average $920 for singles and
$1,600 for families.
In addition, the funds in your HSA don’t disappear at the
end of the year if you don’t use them. Many people have been
burned over the years using flexible spending accounts to help
pay for medical expenses.
They would dutifully contribute to the account all year, but
if they overestimated what their medical expenses would be and
didn’t spend all the money … poof! Gone when the year ended.
That’s not the case at all with an HSA. If you have money
left in your HSA at the end of the year, it rolls over to the next
year. That allows you to keep the money invested and growing
for the future and your retirement.
 Retirement 115

What if you change health insurance plans?

Don’t worry. The money is still yours and is available for
future qualified medical expenses.
Life comes with many shifts and changes, and you need your
HSA to follow you. Should you change your health insurance
plans, employer or even retire, your funds will remain in your
HSA to grow tax fee.
What if you don’t want to bother with mailing in copies of
receipts and waiting for reimbursement?
HSAs are far more convenient than other savings accounts
as most HSAs issue a debit card. This will allow you to pay for
your prescription medication and other expenses right away. If
you wait for a bill to come in the mail, you can call the billing
center and make a payment over the phone using your debit
card. You can even use the card at an ATM to withdraw cash.

The Drawbacks of an HSA

No plan is perfect, and it is critical that you understand the
few disadvantages that come with an HSA.
The first and most important is that an HSA requires you to
have a high-deductible health plan (HDHP).
And while you may be enjoying smaller insurance premiums
each month, it can be difficult — even with help from money in
an HSA — to come up with the cash to meet a high deductible.
Furthermore, if you have health care expenses that surpass
what you had planned for, you may find that you have not saved
enough money in your HSA to cover your costs.
While you can add pretax money, allowing the fund to grow
tax free, and even withdraw funds tax free for qualified purchas-
es, there is a chance that you could pay taxes and penalties. If
you withdraw funds for nonqualified expenses prior to turning
65, you’ll owe taxes on the money withdrawn from the HSA plus
a 20% penalty.
After the age of 65, you’ll owe only taxes on the money
withdrawn, but not the penalty. (Keep in mind that this is a bit
116 Endless Income

different from an IRA, where there’s no 10% penalty tax for

withdraws from an IRA if you’re over the age of 59 ½.)
It is important you are organized, because you will need to
keep your receipts to prove that withdrawals from the HSA were
used for qualified health expenses.
And finally, some HSAs charge a monthly maintenance fee
or a per-transaction fee, which can vary from one institution to
another. While these are usually low, they can easily eat away at
the savings and growth that you’ve achieved.
These disadvantages are not insurmountable in the least.
They simply require some careful planning, a little bookkeep-
ing, and some research on the best place to set up your HSA to
keep fees to a minimum.

Taking Advantage of Qualified Expenses

Health care costs might have finally slowed from their years
of double-digit growth, but PwC’s Health Research Institute is
still predicting a medical-cost increase of 6.5% for 2018, which
is substantially higher than our rate of inflation and economic
growth in America. What’s more, prescription-drug prices are
projected to rise 12% throughout the rest of the year.
And even without an HDHP, we find ourselves paying more
and more of those medical expenses out of our own pocket —
and those expenses tend to skyrocket as we get older.
In fact, Fidelity reports that a 65-year-old couple leaving the
workforce today can expect to spend $220,000 on health care.
So why not use tax-free funds to pay for those medical ex-
penses?
The fact is that there are hundreds of health expenses that
qualify for tax-free payments from an HSA. Some of those ex-
penses include:
• Acupuncture.
• Alcoholism treatment.
• Ambulance services.
• Chiropractors.
 Retirement 117

• Contact lens supplies.

• Dental treatments.
• Diagnostic services.
• Doctor’s fees.
• Eye exams, glasses and surgery.
• Fertility services.
• Guide dogs.
• Hearing aids and batteries.
• Hospital services.
• Insulin.
• Lab fees.
• Prescription medications.
• Nursing services.
• Surgery.
• Psychiatric care.
• Telephone equipment for the visually or hearing impaired.
• Therapy or counseling.
• Wheelchairs.
• X-rays.
What’s more, health insurance premiums are not eligible
as qualified medical expenses if you are under the age of 65.
However, after the age of 65, you can use the fund from your
HSA to pay for health insurance premiums including Medicare
Part B premiums and long-term-care insurance premiums.
To see a full list of medical and dental expenses that you
can use tax free with your HSA funds, please read the IRS
Publication 502, Medical and Dental Expenses (https://www.
irs.gov/forms-pubs/about-publication-502).

Can You Open an HSA?

So, you now understand what an HSA is, the advantages
and the few disadvantages.
118 Endless Income

You’ve gone over your past medical expenses and made es-
timates on what you think your future medical needs are likely
to be.
You believe that an HSA will not only fit your current med-
ical expenses, but that it will allow you to save on taxes that
you’re paying right now on your income, and grow a nice tax-
free nest egg to help fund your retirement.
Yes, it looks like a great plan for you.
But are you eligible?
Just as there are limitations on whether you can deduct your
IRA contribution due to your income levels, there are federal
guidelines on whether you can open and contribute to an HSA.
To open an HSA, you must be:
• Covered under a HDHP on the first day of the month.
• Not covered by any other non-HDHP plan (with some ex-
ceptions for certain plans with limited coverage, such as
dental, vision and disability).
• Not enrolled in Medicare.
• Not claimed as a dependent on someone else’s tax return.
Each year, the IRS sets up guidelines for HSAs and HDHPs,
based on individual and family coverage.
For 2018, all HDHPs must have a minimum deductible of
$1,350 for individuals and $2,700 for families. The out-of-pock-
et maximum (including deductibles, copayments and coinsur-
ance, but not premiums) cannot exceed $6,650 for individuals
and $13,300 for families.
As long as you can check all these boxes, you can open an
HSA.

Establishing Your HSA

First step, of course, is to join a high-deductible health plan.
Then you can sign up for a health savings account. Your
health insurance provider can provide you with more informa-
tion on setting up an HSA through its recommended bank.
 Retirement 119

But you don’t have to use the bank your health insurance
provider recommends … and that might prove to be in your
best interest.
Not all HSA providers are equal. Some will require that you
hold a minimum amount in cash (which obviously limits the
amount that you have invested and growing toward your retire-
ment), and others will have a variety of fees that can cut into
your savings.
When you’re shopping for the provider of your HSA, here
are some things to look for:
• No minimum balance. Most HSAs don’t require you to
maintain a minimum balance, but some can require that
you keep a certain amount in cash to cover potential med-
ical expenses. However, some providers may waive certain
fees if you do.
• Beware of fees. Some accounts charge for monthly ac-
count maintenance, debit cards and various transactions.
Carefully read all information regarding fees and ask
questions about any charges that you don’t understand.
• Shoot for the highest interest rate. In this environment of
low interest rates, finding a good return for your invest-
ment isn’t an easy task.
That doesn’t mean you can’t find some good deals. Some
accounts are similar to a regular bank savings account that
pays a modest interest rate. Others have an investment
option where you can choose securities, such as mutual
funds or individual stocks.
• The best payment options. Look for accounts that offer
both paper checks and a debit card. This will allow you to
pay for medical expenses in just about any situation, either
in person or online.
• Get online convenience. Use an account that you can ac-
cess online for transactions, statements and records. This
allows you to save time and makes electronic payments for
your medical expenses.
120 Endless Income

The thing to remember is that unlike medical savings ac-

counts or health reimbursement arrangements that are con-
trolled by employers, an HSA belongs exclusively to you, the
account holder. You can spend the funds at your discretion
(though nonqualified medical expenses will result in taxes and
penalties) and are free to take along with you if you change
jobs.

Maximizing Your HSA

Just like with IRAs, there are limits on how much you, your
employer or anyone else can contribute to your HSA each year.
The IRS makes adjustments to these limits each year based on
inflation calculations.

2017 2018
Individual $3,400 $3,450
Family $6,750 $6,900

However, if you are 55 or older, you are permitted to con-

tribute an additional $1,000 as a “catch-up” contribution similar
to 401(k) or IRA contributions.
If you are married, and both of you are at the age of 55, each
of you can contribute an additional $1,000.
Unfortunately, it gets a little more complicated if you and
your spouse aren’t both 55 or older. That’s because an HSA is
in an individual’s name — there is no joint HSA even when you
have family coverage. Only the person age 55 or older can con-
tribute the additional $1,000 in his or her own name.
If only the husband is 55 or older and the wife contributes
$6,750 to her HSA for their family coverage, the husband has to
open a separate account for the additional $1,000.
If both husband and wife are age 55 or older, they must
have two HSA accounts if they want to contribute the maximum
$8,750. There’s no way to hit the maximum with only one ac-
count.
 Retirement 121

You can make contributions to your HSA at any time during

the calendar year and up to April 15 of the following tax year.
Funds can be added to your HSA in regular amounts or in one
lump sum.
One great way to fund your HSA is with a one-time tax-free
transfer of funds from your IRA to an HSA. This is not like a
rollover, as it counts toward your annual HSA contribution limit.
It does allow you to move a small amount of money from
an IRA. It’s a smart move, particularly if you would have been
using those IRA funds to pay medical expenses. In that case, you
would have had to pay taxes on that IRA disbursement. If you
take the money out of your HSA for medical expenses, you don’t
have to pay taxes on those funds.

Investing for Tomorrow With Your HSA

One of the key things to remember if you plan to use your
HSA as a way to fund your retirement is that you must have
funds leftover at the end of the year to roll over into the next
year.
While it might seem a little counterintuitive since the HSA
was designed to help cover your annual medical costs, the ben-
efits of having a vehicle that allows you to triple the tax benefits
can’t be overlooked when saving for your retirement.
The more you can have left over at the end of the year from
your annual contributions, the better. In fact, many financial
planners will argue that to really grow the HSA, you could ded-
icate it to retirement by paying health costs with other savings.
If possible, use other savings to pay for smaller expenses so that
you can allow the funds in your HSA to grow.
When you are planning the investments for your HSA, be
sure to carefully look over your options and make sure that your
HSA custodian will meet your investing needs.
Some custodians offer fewer than 20 mutual funds.
While HSA Bank, for example, offers a full brokerage via TD
Ameritrade. And HealthSavings Administrators lets you pick
from 22 low-cost Vanguard funds.
122 Endless Income

One way to compare your options is through HSASearch.

com.
Keep in mind that your HSA withdrawal strategy can influ-
ence your investment strategy. If you are planning to use your
HSA to pay for current medical expenses, you may want to avoid
substantial stock market investments that can decline at any
time and look for liquid investments that conserve principal.
If you are planning to use your HSA more for future medical
expenses during your retirement, you may have a longer time
frame that will allow you to take on more risk through signifi-
cant stock investments to grow your nest egg.
In fact, if you can postpone accessing your HSA account until
your 80s, when you might have high medical or long-term-care
expenses, you would benefit from a very long investing horizon.
When it comes to funding and ranking your retirement
accounts, it’s important to not only take into account the tax
benefits, but the potential penalties on withdrawals as well. It
may be best to set your hierarchy of contribution at:
1. 401(k) or IRA up to any match.
2. HSA to contribution limit.
3. 401(k) nonmatched limit.
4. IRA nonmatched limit.

Building Your Retirement

With Triple-Tax Benefits
How does the math actually shake out for an HSA over other
retirement accounts?
As an example, let’s say you start out with $100,000 to in-
vest in your retirement account.
In a Roth IRA, you will have to pay taxes on it at both the
state and Federal level. For the sake of simplicity. Let’s assume
that you pay the U.S. average of 32%, which reduces your initial
investment to $68,000.
 Retirement 123

401(k) IRA Roth IRA H(IRA)

Tax-free before $100,000 $100,000 $68,000 $100,000
investing
Tax-free while $1,000,000 $1,000,000 $680,000 $1,000,000
growing
Tax-free $680,000 $680,000 $680,000 $1,000,000
withdrawls

As you can see, the HSA is the only account that can truly
grow 100% tax free … leaving you with a $1 million retirement.
That’s an additional $320,000 — money you don’t get to keep
with an IRA, Roth IRA or 401(k).
Of course, this is a pretty simple example. It assumes you
make only one initial deposit and nothing more.
Most people contribute money to their retirement account
on a regular basis.
Let’s look at another example, where you just put an extra
$5,000 into the account each year…
The total amount for each retirement plan would look like
this:

401(k) IRA Roth IRA H(IRA)

Tax-free before $100,000 $100,000 $68,000 $100,000
investing
Tax-free while $1,848,810 $1,848,810 $1,257,191 $1,848,810
growing
Tax-free $1,257,191 $1,257,191 $1,257,191 $1,848,810
withdrawls

As you can see, the 401(k), IRA and Roth IRA end up at
nearly the exact same amount … $1,257,191.
But the HSA soars to $1,848,810, thanks to its triple tax
benefit — giving you an extra $591,000 for your retirement.
None of those traditional retirement plans can give you this
level of freedom.
124 Endless Income

All you have to do is put your money into an HSA … and

watch it grow.
And, unlike a traditional retirement plan … you can with-
draw money tax free before you are 59 ½ for some of retire-
ment’s most worrisome and unexpected expenses … like health-
care costs.
Plus, if you don’t need the extra money during retirement,
you’re not required to take it out. Unlike IRAs, Roth IRAs, and
401(k)s, you can leave it in, and let it grow … even after you
are 70 ½.
The HSA may have been born as out of a health care plan,
but it has become the “Super IRA” you need to grow your nest
egg and see yourself through a worry-free retirement.
 Retirement 125

INCOME SECRET NO. 23:

Get Paid $565 a Month, for LIFE, Simply
for “Insuring” Your Nest Egg

“Son, you scared the heck out of us.”

The two ladies’ gentle Southern drawls strained at the bur-
den of speaking of such distasteful matters. Where I live in the
Deep South, dignified ladies don’t talk to strangers about their
financial affairs.
And they hadn’t actually said “heck,” either. But I wasn’t
exactly a stranger.
The ladies had been reading The Bauman Letter for some
time now. They got it as a trial with one of my colleagues’ prod-
ucts. If they weren’t sure about renewing before, they certainly
were now, they told me.
We had just emerged from one of my presentations at the re-
cent Total Wealth Symposium in Hollywood, Florida. I’d spoken
about something I call the “red zone” — the five years before
and after retirement.
It’s the decade of your life that matters most … at least when
it comes to the way you’ll be able to live the rest of it.
I had just presented a chart showing what happens when
you retire in a down market and have to liquidate stocks at dis-
count prices to satisfy the IRS’ required minimum distribution
(RMD) requirements — or simply to survive.
Not to mention supporting an Oscar de la Renta shopping
habit.
Taking distributions from a stock portfolio during a histori-
cally average 34%, 18-month long bear market drop would mean
running out of money in 20 years instead of 30, I’d warned.
I showed scarier charts illustrating why I feel the current
bull market is at its top. Lots of red.
126 Endless Income

“Low interest rates have lashed investors into a stampede

to equities that has little to do with the underlying economy
or future earnings,” I’d said. Everyone is chasing yield … often
using dangerous margin debt to leverage their investments. It’s
like a loaded mousetrap.
Testing the convention against mixed metaphors, I’d gone
on to compare markets to a ballistic missile. A rocket keeps go-
ing upward for a while even after the motor cuts out. But gravity
ensures that it starts to curve downward at an ever-accelerating
pace.
Thus terrified, the ladies had asked to know more about
my Alpha Stock Alert service, designed to hedge such calamities
before they happen.
“But there is another way to avoid running out of money, as
well,” I told them. Their blue eyes stared at me as if I were the
Delphic oracle itself. At least I knew I was making more sense
that a half-drugged chief priestess of Apollo.
“But it requires adopting an attitude like Zen Buddhism. You
have to take a leap of faith. You need equanimity.” I wasn’t sure
how well references to the Buddha played in Baptist country,
but it seemed OK. And I was deep in mixed-metaphor territory
now.
“I don’t mean pure faith without evidence. In fact, as the
Dalai Lama himself would tell you, true faith is always backed
by empirical science. I simply mean having faith that what you
are doing is the wisest course based on all the factors at play
and all the information available … even if others are telling
you differently based on less rational forms of faith.”
This Income Secret is about the money-preserving strategy I
offered the ladies: The humble annuity.
After all, it’s the only thing guaranteed to ensure that you
don’t run out of money in retirement.
After all, that’s the single most common concern I hear from
my faithful readers of The Bauman Letter.
 Retirement 127

Why an Annuity?
Let’s get one thing straight: If you haven’t retired yet, you
shouldn’t consider investing in an annuity unless you are already
contributing the maximum to other retirement plans, such as an
individual retirement account (IRA) or 401(k).
That’s because traditional retirement plans provide the same
tax deferral as annuities — but without the fees (more on that
in a moment). Of course, you can invest in an annuity inside a
tax-advantaged account, as I’ve suggested in previous Bauman
Letter reports, but you get no extra tax benefit.
Also, be aware that early-withdrawal penalties and sur-
render (early termination) fees mean an annuity is useless for
short-term saving. You’d need to hold a variable annuity at least
15 years for the benefits of tax deferral to outweigh the extra
costs.
That means the ideal pre-retirement annuity buyer is some-
one:
• Who is making the maximum contributions to other retire-
ment plans.
• Who can live without the money until after age 59 1/2.
• Who is in at least the 25% tax bracket to take advantage of
the tax deferral.
But that’s only relevant to folks still working. The focus here
is on those in the “red zone” — five years before and five years
after retirement (or longer). If that’s you, you also might be a vi-
able candidate if you’re concerned about outliving your savings
… as so many of my readers are.
That’s because annuities can provide a guaranteed stream of
income in retirement. Here are some pros:
1. To provide a hedge against longer life spans.
According to the Centers for Disease Control, people who
were 65 years old in 2017 will likely live into their 80s. After
reaching 65, men can expect to live another 18 years and wom-
en an additional 20.5 years.
128 Endless Income

The longer you expect to live, the more annuities make

sense. A longer life span means your money needs to last longer,
too.
Because annuities provide a guaranteed lifetime income,
you can avoid depleting all your assets. And since an annuity
is a form of insurance, some of the “longevity risk” — the risk
of running out of money — moves to the company offering the
annuity product.
2. To impose budget discipline.
Annuities help — no, force — you to manage your money
better. Because the payouts are predetermined and the form of
annuity I’m going to recommend can’t be cashed in, you must
live within your means.
As many retirees know, it’s easy to tap your retirement port-
folio more often than you intend. The biggest threat is “lifestyle
creep.” You start retirement with 75% of your expenses covered
by a pension or other stable monthly income source, but five
years later, it’s down to 50%. It’s all those extra trips to see the
grandkids or vacations in Saint Maarten.
The bottom line is that with the right annuity, you can spend
only what it’s going to pay out every month.
Of course, you can generate additional income beyond your
annuity payments, but the annuity becomes your baseline.
3. To ensure peace of mind.
You may be a risk-taker. I know I am. But retirement has a
funny way of curing you of that … and fast.
I hear from many folks who are essentially forced to gamble
on high-risk investments because they don’t have enough mon-
ey to last. They take huge risks … and, as is often the case, they
lose.
On the other hand, many people are forced to sell stocks
during a big market pullback — or worse, they panic. Selling
a large chunk of your portfolio in a down market means you’ll
have less equity to generate income over the rest of your retire-
ment.
 Retirement 129

Consider two 30-year periods. The first has three down

years, minus 20%, minus 15% and minus 10%, followed by an
average annualized return of 6% over 30 years. The second 30-
year period has exactly the reverse sequence of returns — av-
erage annualized returns of 6% over 30 years with three down
years at the very end.
With a $500,000 portfolio with an initial 5% annual with-
drawal, the first model runs out of money in 20 years. The sec-
ond never does.
By forcibly preserving capital in the present and generating
guaranteed income in the future, the right annuity can ensure
that you don’t end up like the first model.

How Do Annuities Work?

Oddly, annuities are insurance products, even though we
tend to think of them in terms of investment.
To start one, you make a payment to an insurer — either
an up-front lump sum or a series of payments over time. The
money grows tax-deferred, like a traditional IRA or 401(k), at a
fixed or variable rate — the “accumulation phase.”
You pay taxes at regular income rates when you take annu-
ity payments, which the insurer undertakes to make to you for
the rest of your life — the “payout phase.”
The thing that makes an annuity an insurance product is
the guaranteed payouts. Even if the insurer loses money on its
investments, it is still obligated to pay you. Moreover, annuities
can also include a death benefit. This entitles the beneficiary
of the annuity — a spouse or children — to the value of your
annuity or a guaranteed minimum, whichever is greater.
There are two types of annuities: deferred and immediate.
The distinction overlaps with the “accumulation” and “payout”
phases of annuities. Here’s why.
Accumulation Phase Annuities: Deferred
There are three subtypes of accumulation annuities: fixed
deferred, indexed and variable. The key variable is how much
exposure to the equity market they involve.
130 Endless Income

With a fixed deferred annuity, you lock in a guaranteed rate

of return for periods ranging from one year to 10 years. They
offer a guaranteed interest rate for a certain term, such as five or
10 years. The rate is set by the insurer, based on market rates. It
can fluctuate, but will never drop below your guaranteed rate.
As a result, you won’t lose money, but you won’t have the
potential for growth you’d get by investing in stocks or stock
funds. A fixed-rate annuity is worth considering if you have low
risk tolerance and a shorter time horizon to retirement.
Fixed deferred annuities are like certificates of deposit (CD).
As with a CD, if you hold the money in the annuity to maturity,
you will receive a scheduled amount of interest. Unlike a CD,
the annuity’s interest isn’t taxed along the way. Tax is deferred
until the earnings are withdrawn.
If you pull your money out before the term ends, however,
you could incur a surrender charge. At the end of the annuity’s
term, the insurer will offer a renewal rate with no new surren-
der charges.
Indexed annuities are a type of fixed deferred annuity with
a growth rate pegged to the performance of an equity index
over a certain term, such as the S&P 500. But the money isn’t
invested directly into the market. Instead, the market becomes
the benchmark for your interest payout.
The key with these annuities is understanding the formula
behind your return. You might have a “participation rate” of
50% of S&P 500 Index gains during the contract term. If the
market rises 10%, you’re only going to get 5%. If the market
falls, it has a floor, which is generally zero.
While some indexed annuities are tied to the performance
of a well-known index, others are tied to one developed by the
insurance company. Make sure you ask what investments com-
prise the index.
The surrender period is usually seven or 10 years for in-
dexed annuities.
A variable annuity is the riskiest type. Your money is invest-
ed in accounts that are like mutual funds.
 Retirement 131

You can see substantial gains — or the opposite. That means

you have unlimited upside but also unlimited downside. It is
possible, however, to buy some downside protection by paying
extra for a rider that offers a guaranteed minimum withdrawal
benefit.
You defer paying tax on earnings while your money is in-
vested by the annuity. You can take a cash distribution after the
annuity reaches maturity, and without IRS penalties, after age
59 ½. Those withdrawals are taxable at your ordinary income
rate. Because you contributed post-tax money to the annuity,
however, part of the payout will be considered a return of capi-
tal and not taxable.
When a variable annuity matures, you can choose to “an-
nuitize” it: You turn the accumulated money into an immediate
annuity, which I will discuss below.

Payout Phase Annuities: Immediate

There is nothing preventing you from buying deferred annu-
ities in retirement. But because the surrender period is typically
seven to 10 years — and life is uncertain — many people avoid
deferred annuities, which are inaccessible until maturity, in fa-
vor of immediate annuities.
With immediate annuities, you turn over a lump sum to the
insurer, who agrees to give you guaranteed payouts over a cer-
tain term — 10 to 20 years, perhaps — or for as long as you live.
The guarantees never change. Payouts begin anytime within 13
months of starting the annuity.
The most important variables with an immediate annuity
are the size of the contract and the interest rate. But age is im-
portant too. The older you are when you buy, the bigger your
regular payouts.
That’s because immediate annuities are based on actuarial
values of life span. The insurance company looks at your age
and possibly your health and lifestyle, and estimates how long
you are expected to live. It then designs the payout of the annu-
ity based on that lifespan.
132 Endless Income

That means men and women receive different payouts for

the same size of annuity and interest rate. Women have longer
average lifespans, so their payouts are smaller than men’s.
Immediate annuities also offer the flexibility of inflation
adjustments and death benefits. For example, you could buy a
rider that provides five years of income to you or your beneficia-
ries, or lets you or your heirs receive your full investment. But
there’s a cost: Reducing risk this way reduces the payout.
For example, a 72-year-old man in Washington, D.C., who
invests $100,000 will receive about $675 in immediate lifetime
monthly income. But that payout would be cut to $579 a month
if he opted for an heir to receive a lump sum of any premium
balance at his death.

Interest Rates and “Laddering”

In recent years, low interest rates have depressed monthly
annuity payments. But rates have begun to move up and are
expected to climb higher. As a result, annuity payouts are rising
as well.
For example, right now, a 65-year-old Georgia man who in-
vests $100,000 in a single-life immediate annuity would receive
an average monthly payment of $543. The average monthly
payment was $506 in late 2016. That’s a 7.3% difference in less
than a year.
But there’s a risk in waiting for interest rates to rise to buy
an immediate annuity.
The Federal Reserve has signaled that it plans more hikes.
That may prompt you to postpone an annuity purchase until
those hikes take effect. But if the market nose-dives, the Fed
could put off those increases or reverse them. Buying an annuity
then would mean you take a chance to lock in current rates.
One way around this problem is to build an annuity ladder.
Say you have $300,000 to invest in an immediate annui-
ty. You would invest $100,000 this year, another $100,000 in
two years and the remaining $100,000 the year after that. By
 Retirement 133

spreading out your purchases, you’d potentially benefit from

higher interest rates in later years.
Laddering also allows you to vary the type of annuity.
Immediate annuities can be tailored to all sorts of variables. You
can specify the number of years you get guaranteed income. You
can include life insurance. You can opt for an immediate payout
rider.
Here’s a table showing the options available to a 65-year-old
man in Georgia, where I live:

Life $543
Life insurance & 5 years guaranteed $542
Life insurance & 10 years guaranteed $532
Life insurance & 15 years guaranteed $514
Life insurance & 20 years guaranteed $489
Life insurance with cash refund $492
5-year period guaranteed $1,705
10-year period guaranteed $914
15-year period guaranteed $661
20-year period guaranteed $546
25-year period guaranteed $482

As you can see, you have many options — each of which can
be implemented for each annuity in your ladder.

How Much?
Even if I’ve convinced you to consider an annuity, don’t put
your entire portfolio into one. That’s certainly not what I’m sug-
gesting!
Instead, add up your guaranteed income sources, including
Social Security. Then add up your basic expenses, such as hous-
ing costs and food. Don’t cheat. Factor in nonessential things
you know you’ll be doing, like traveling and buying gifts for the
grandkids.
134 Endless Income

If there’s a gap between your steady income and these essen-

tial expenses, buy an immediate annuity to fill it and no more.
That allows you to use the rest of your retirement funds
to play the market — to the extent of your risk preferences, of
course.
To take an admittedly self-interested example, if you set up
your laddered annuity plan and then invested $100,000 in my
Smart Money system, your pretax return at the end of August
would look like this compared to the S&P 500:

Investment: $100,000
Smart Money return $10,569.45
S&P 500 return $4,886.64
Excess: $5,682.80 • Excess %: 116%

That extra return is a nice trip to the Bahamas, or a lot of

presents at Christmas.
Of course, the Smart Money system is quite low- risk, so it
might be possible to do even better if you have the appetite for
it.

Beware of the Fees Monster

A recent study by Senator Elizabeth Warren (D-Mass.) ex-
amined 15 major annuity providers. It found that all but two
offer perks to reward agents for selling their products. The
perks include cruises, luxury car leases, theater tickets and golf
outings. None of the companies clearly disclosed the sales in-
centives to annuity purchasers.
Sales rewards like these drive advisers to recommend an
annuity based on his reward, not your needs. Here’s how to
combat that.
First, when you shop for an annuity, ask two questions, and
don’t let the salesperson distract you from them:
• What do you want the annuity to guarantee?
• When do you want that guarantee to start?
 Retirement 135

Second, avoid being distracted by “hypothetical return” il-

lustrations or costly bells and whistles, such as stepped-up death
benefits, that you may not really need. Focus on the bottom line.
Third, ask the agent to show you annuities from multiple
companies. If he’s only offering products from a single company,
or if you’re having trouble comparing different products, seek
out another opinion from another agent, and pit them against
each other.
Third, as you narrow your options, ask for a “specimen
policy.” This is a copy of the actual contract you’d receive after
purchasing the annuity. It will help ensure that you see every-
thing before buying.
Finally, after purchasing an annuity, you typically have a
“free look” period of about 10 to 30 days, depending on your
state. You can review all the details of the contract … and if you
decide you’ve made a mistake, you can terminate it and get a
full refund.

Don’t Choose Poorly

In the great flick “Indiana Jones and the Last Crusade,”
there’s a memorable scene where a greedy Nazi drinks from the
wrong cup and disintegrates into dust. The ancient knight who’s
been guarding the real grail comments drily: “He chose poorly.”
That sense of caution applies to annuities, too, although the
stakes aren’t so high — and the odds are far, far better than pick-
ing one cup out of dozens. That’s because in addition to interest
rates and actuarial values, immediate annuities can vary based
on the financial strength of the insurer.
There are two issues involved: your return and the safety of
your money.
First, all else being equal, an insurer with a high credit
rating will be able to finance their operations at lower rates.
That means they will be able to pay higher average payouts than
other insurers.
136 Endless Income

Second, the insurer’s rating also offers the expectation of

financial stability. If you’re using annuities to generate income
over two or three decades, you want to make sure the insurer
will be around for the whole time.
That raises an issue that many people ask me: What happens
if an insurer goes bankrupt, like a bad holy grail copy?
Unlike bank accounts and other types of financial accounts,
annuities are governed by state law, not federal law. Each state
has its own rules and regulations, and the degree to which they
ensure annuities depends a lot on the size of the state’s insur-
ance guaranty association pool. That’s one reason why many
annuity insurers are clustered in states like New York, which
have large insurance pools.
The good news is that only six insurers licensed to sell an-
nuities and life insurance have entered receivership since 2008,
and most were small, regional companies. Even so, protect your
investment by narrowing your search to insurers rated A-minus
or better.
Above all, find out how much of your investment is covered
by the state’s insurance guaranty association. Most state guar-
anty associations cover $250,000 or more in annuity benefits
per insurer. (You can check state guaranty limits at the National
Organization of Life & Health Insurance Guaranty Associations,
at www.nolhga.com.) If you plan to invest more than your state’s
limit, divide your money among several companies.

Conclusion
Annuities are a great option if you are uncertain about how
long your money can last. As long as you discipline yourself and
are realistic about your expenses over the years to come, you
can decide how much to put into this type of product — which
is essentially “income insurance.”
But be careful. As one commenter has said, annuities are the
“Wild West” of U.S. financial markets. Salesmen have powerful
incentives to sell you products that may not be your best choice.
 Retirement 137

So, shop for an annuity the way you’d shop for something in
which you take a special interest. For me, it’s guitars. For you,
perhaps it’s cars or jewelry.
In other words, don’t buy the first thing that comes along.
Look for the absolute best you can get for your money.
After all, it’s a big chunk of all the money you’re ever going
to have.
138 Endless Income

INCOME SECRET NO. 24:

13 States That Won’t Loot Your Retirement

I met Billy at the county dump.

“Salt of the earth.” Billy was it.
If there was a uniform for his part of the country, Billy was
wearing it. Black work boots, heavy dark-blue cotton work
pants, a lighter-blue short-sleeved shirt with his name on it, and
a baseball cap with mesh on the back and sides for ventilation
in the Virginia heat.
He had a face like a gnarled oak tree … one sunburned by
years of working as a Chesapeake Bay waterman. By the looks
of it, he’d been chewing tobacco while he was at it.
Billy was born in a house near the village where I was stay-
ing.
He was still living in the same house. But the taxes were
getting high, he complained.
Didn’t he already own his family plot? Why did he have to
keep paying for it?
Billy got me thinking.
If you graphed the proportion of Americans who lived their
entire lives in a small radius around their birthplace, over time,
what would the curve look like?
It was flat from the birth of the United States until the Civil
War. After that, the upheavals of Reconstruction sent it down-
ward. It maintained a steady fall until the Depression, when
the pace picked up, driven by refugees from the Dust Bowl and
jobless migrants in search of work.
The decline began to gather steam after World War II.
Industrialization, the GI Bill, the automobile and openness to the
outside world got many Americans moving. The pace quickened
again in the 1980s, when the deindustrialization of America’s
manufacturing heartland sent the jobless packing.
 Retirement 139

But even now, more than a third of Americans live in the

same town where they were born and raised. Another 20% live
in the same state.
There’s a lot of regional variation. About half of
Midwesterners live near where they were born. Only a third of
Western state residents do. Three-quarters of people in the big
cities must call long distance to talk to mom and dad.
But here’s the funny thing. In the last 30 years or so, that
trend has slowed and started to reverse.
Americans have become less mobile than they were in the
second half of the 20th century. More two-job households, an
illiquid rural housing market and the high cost of city living
have kept people from moving around.
But there’s other factors … the weakness of the U.S. social
safety net and our chronic lack of retirement savings.

Stuck in a Retirement Rut

Families without alternative child care need to live near
parents and grandparents to look after the little ones while they
work. Families with an unemployed breadwinner need to rely
on relatives for support until they get back on their feet.
And elders with only Social Security to go on depend on
their kids to help.
But that immobility doesn’t always make sense … after all,
some parts of the United States are a lot more expensive than
others.
At what point does it make more sense to move somewhere
less expensive when you retire? After all, the gap between the
highest cost of living states and the lowest is so big that retirees
who live in the latter have enough extra money to travel home
to see the kids and grandkids several times a year.
I don’t think that calculation had anything to do with why
Billy was still living in Tidewater, Virginia. It was all he’d ever
needed. No point in change just for the sake of it.
140 Endless Income

But it came with a cost for Billy. Virginia levies income taxes
and sales taxes. He lived in a county that levies property taxes.
Since he lives near the water, the plot of earth where he was
born and lived was worth a lot. Health care costs are higher
there than in half of U.S. states.
What about you? Have you ever run the numbers to see
whether it would make sense to migrate somewhere less expen-
sive in retirement?
If not, this book is your chance to start. I’ve taken a hard
look at the pros and cons of retiring in various parts of these
United States. I looked at taxes, the cost of health care and the
cost of living.
Money isn’t everything, of course. Family ties and geogra-
phy also matter.
But with a nearly bankrupt government, a refusal to fund
the Social Security system, diminishing returns in the stock mar-
ket and the extinction of private pensions, money matters a lot
more than it used to.
That means the choice of your home in retirement does, too.
Households run by someone 65 or older spend an average of
$45,756 a year, or roughly $3,800 a month.
How much will you spend? How much can you afford?

The Things That Matter

Most people don’t think much about the question: “Why do
we live where we do?” It’s a given.
Maybe, like Billy, you’ve lived in one place your whole life.
Or, like me, you’ve lived in various places and have settled down
in one because it’s convenient.
That’s not to say that people don’t have dreams about living
somewhere else. Many people would like to live somewhere
abroad perfectly suited to their wants and needs. The obstacle
to realizing this dream is often financial. Besides the expense of
living in a beautiful foreign environment, there are often high
financial requirements for retirement visas.
 Retirement 141

On the other hand, thousands of Americans have moved

abroad because the cost of living is cheaper than the U.S. For
example, most people don’t think of Ecuador when it comes to
retirement in Latin America — but it’s one of the most popular
destinations, thanks to its easy lifestyle and low cost of living.
But the same logic applies within the United States. Consider
the following examples:
• Paul and Alecia have always loved Cape Cod. It would be
their perfect retirement location. But property on the Cape
is expensive. As much as the environment would suit their
lifestyle, acquiring a home there would dig far too deeply
into their retirement kitty. And Massachusetts income and
property taxes would eat up a lot of their monthly income.
• Stephen and Rita, on the other hand, love the mountains.
But they wanted to make their retirement stretch as far
as possible, so they decided to pull up stakes and move to
Idaho. Property is cheap, and the cost of living is among
the lowest in the U.S. The downside is that health care and
health insurance are more expensive in the rural part of
the state where they live.
• Dan and Emma have lived their whole lives in upstate
New York. They’d like to move somewhere warmer and
closer to their children and grandchildren. But the high
taxes and high cost of living in the state have cut into their
income over the years, reducing the amount they’ve been
able to save for their retirement. At least their house is
paid for. They’ve convinced themselves that they’re stuck.
But those New York state income and property taxes aren’t
going down anytime soon. In fact, things are getting worse
thanks to the recent tax overhaul, which limited their de-
ductibility. On top of that, health care in New York is the
most expensive in the country.
One thing jumps out from all these examples: There are
many variables to consider. Maintaining the same standard of
living in various parts of the country can require radically dif-
ferent incomes.
142 Endless Income

That means, besides things like crime, culture, weather,

amenities, attractions and senior citizen well-being, you need to
consider the “brass tacks,” as well:
• What’s the overall cost of living?
• What is the state tax burden?
• How much does the state tax structure matter, given your
specific retirement strategy?
• What’s the cost of housing?
• How much will health care cost you?
As you can see, this all involves trade-offs. Clearly, we need
a framework!

Values and Cents

Having a firm grasp of your likes and dislikes is the first step
to creating a framework to identify the perfect place to retire
inside the U.S. Knowing beforehand the things you’ll get — and
the things you’ll lose — when you move to a new state is critical.
And you’ll never know which of those things are truly the most
important to you until you sit down and think about it honestly.
However, I’m going to focus on the financial variables. I’m
going to take it as a given that you know your own preferences
when it comes to things like weather, culture, city versus country
life, and so on. Because, ultimately, it all depends on whether
you can afford to live your dream retirement.
Nevertheless, I encourage you to keep your lifestyle values
in the back of your mind. As I was researching for this income
secret, I came across some data that showed that six of the
least-expensive states to live in were also in a list of the 10 worst
states for retirement!
In other words, it’s not all about money. Some very inexpen-
sive locales are also unpleasant places to live.
Let’s start our assessment with the most important variable
of all.
 Retirement 143

Cost of Living
Surveys of retirees routinely show that cost of living is the
most important issue determining retirement strategies.
As I researched, I came across many different tabulations of
state-by-state cost of living. Ranking states this way is harder
than it looks. One reason is that nonfinancial factors can affect
the cost of living.
For example, the high cost of living in a place like Vermont
or Maryland can be offset by the many free or low-cost things to
do, such as skiing in Vermont or boating on the Chesapeake Bay.
The reverse is also true. You could move to a low-cost state
like Arkansas or Alabama and be bored to death … forcing you
to spend lots of money traveling elsewhere.
Another complication is that cost of living is tangled up with
taxation and the cost of health care, two of our other critical
variables. The best rankings of cost of living take this into ac-
count.
Eventually I decided to use an index that included costs as-
sociated with six categories: housing, utilities, groceries, health
care, transportation and miscellaneous expenses. Taxation is
excluded.
On the next page are the 10 cheapest and 10 most expensive
states on that list.
As I said earlier, there is a clear pattern. The cheaper states
are clustered in the Deep South and the lower Midwest. The
most expensive states are in the Northeast or on the Pacific. (My
own home state, Maryland, is a bit of an outlier … the inflated
cost of living in the D.C. suburbs skews the state, even though
many parts of it are more affordable.)
The next five lowest-cost states are Texas, Nebraska, Georgia
(my current home), Iowa and Wyoming. Rounding out the top
20 are Utah, Ohio, Michigan and North Carolina.
That gives you a lot of options geographically and climati-
cally.
144 Endless Income

10 Cheapest Cost 10 Most Expensive

of Living States Cost of Living States
1 Mississippi 1 Hawaii
2 Arkansas 2 California
3 Oklahoma 3 Alaska
4 Indiana 4 Connecticut
5 Idaho 5 New York
6 Tennessee 6 Massachusetts
7 Alabama 7 Maryland
8 Kansas 8 Vermont
9 Missouri 9 Rhode Island
10 Kentucky 10 New Jersey

Taxation
Determining a state’s tax burden is also complicated. In
addition to income tax, you must also consider property and
sales taxes. Another important consideration is whether the
state taxes Social Security benefits, and how it treats retirement
investment income.
The table on the next page lists the 10 highest and 10 lowest
tax states.
The highest tax states have several features in common.
They tend to be in the Northeast, which is highly urbanized,
densely populated and has a lot of transportation infrastructure
to maintain. They tend to be “blue” states politically and make
significant investments in social services for their residents.
(That accounts for the presence of Minnesota and California in
the mix.)
Hawaii’s high tax burden is a result of its unique location,
its strong social services system, and, above all, high property
values and, thus, property taxes.
 Retirement 145

Top 10 States With Top 10 States With

the Highest Taxes the Lowest Taxes
1 New York 1 Alaska
2 Hawaii 2 Delaware
3 Maine 3 Tennessee
4 Vermont 4 Florida*
5 Minnesota 5 New Hampshire
6 Connecticut 6 Oklahoma
7 Rhode Island 7 South Dakota*
8 Illinois 8 Alabama
9 New Jersey 9 Montana
10 California 10 Virginia
* No income tax

On the other hand, four of the 10 lowest tax states have

no income tax. The other six states have an income tax, but
it’s either so low or so favorable to retirees that they are still
considered comparatively low tax.
There are, in fact, eight U.S. states that levy no income tax:
Nevada, Texas, Washington, Wyoming, South Dakota, Florida,
Tennessee and Alaska. (Once you’ve established residency in
Alaska, the state actually pays you every year from its oil indus-
try trust fund.)
But again, as I mentioned above, much depends on how you
plan to finance your retirement. All else being equal, if you were
going to continue receiving business income in retirement — say
you continue to retain ownership interest in a medical practice,
or a car dealership or some other family business — you’d want
to live in a state with low or no income tax, especially on out-
of-state income.
On the other hand, if you were going to rely largely on
Social Security benefits, the income tax system wouldn’t matter
146 Endless Income

as much as whether those benefits were subject to taxation. In

fact, 36 U.S. states don’t tax Social Security benefits. Eight of
them have no income tax at all, and one — Alaska — has no
sales tax:

States With No Social Security Tax

Alabama Iowa Ohio
Alaska* Kentucky Oklahoma
Arizona Louisiana Oregon
Arkansas Maine Pennsylvania
California Maryland South Carolina
Delaware Massachusetts South Dakota*
Florida* Mississippi Tennessee*
Georgia Nevada* Texas*
Hawaii New Hampshire Virginia
Idaho New Jersey Washington*
Illinois New York West Virginia
Indiana North Carolina Wyoming*
* No income tax

If you look for overlaps in the two tables, you’ll find 10

states that are at the bottom of the tax burden list that also
don’t tax Social Security benefits. They are Wyoming, South
Carolina, Idaho, Virginia, Alabama, South Dakota, Oklahoma,
New Hampshire, Florida, Tennessee, Delaware and Alaska.
Of those 10, Idaho, Alabama, Oklahoma, and Tennessee are
all amongst the 10 lowest cost of living states in the country.
Rounding out the top 20 are Georgia, Texas, Wyoming and Ohio.
One of the biggest components of America’s cost of living is
housing. For a variety of reasons, the cost of a place to “be” in
the United States has skyrocketed over the last two generations.
Of course, as with everything else, this rise has been uneven.
The fastest rise in housing costs has been in the older cities of
 Retirement 147

the Northeast, coastal Florida, the urban areas of Texas and

practically everywhere west of the Great Plains.
By contrast, housing prices have not risen much in the last
20 years in the Midwestern states around the Great Lakes, or
in the small towns and rural areas of the South and the Plains
states.
Overall, the states with the most affordable housing costs
are geographically within the same range as lowest cost of living
states. They are located between the Appalachians in the east
and the Great Plains in the west, and between the inland regions
of the Deep South and the Great Lakes and Canadian border.
That doesn’t tell the whole story, however. After housing,
the second biggest expenditure for retirees is transportation. For
most people that means a car or two, fuel, maintenance and
insurance.

Housing
One of the defining features of the states with a low-cost
housing environment is lack of good public transportation
systems. Few of the cities in the big swath of Middle America
where housing is cheap have well-developed train systems. That
means a car is a necessity.

Housing Affordability Rank

1 Ohio 11 Missouri
2 Iowa 12 Kentucky
3 Indiana 13 Wisconsin
4 Nebraska 14 North Dakota
5 Michigan 15 Minnesota
6 Oklahoma 16 Illinois
7 Kansas 17 Arkansas
8 West Virginia 18 Georgia
9 South Dakota 19 Connecticut
10 Pennsylvania 20 Louisiana
148 Endless Income

On the other hand, popular retirement states like Florida

also have poor public transport, but their low tax burdens offset
this to a degree.
Once again, this highlights the importance of trade-offs in
determining the best environment for retirement … and there-
fore of doing your homework to see the best fit for you.

The Big Picture

A widely accepted rule of thumb is that you’ll need to replace
from 70% to 90% of your preretirement income to maintain
your standard of living in retirement.
That suggests that the first step to discovering the best value
in retirement locales is to compare where you are now — like
Billy — with where you might go. The two calculators at the
links on the next page allow you to do just that. They show you
how far your expected retirement income will go in different
locales:

Retirement Costs

Entertainment
5%
Other
12%

Housing
Cash 33%
Outlays 5%

Insurance
6%

Food
12%
Transportation
14%
Heathcare
13%
 Retirement 149

• https://smartasset.com/mortgage/cost-of-living-
calculator
• https://money.cnn.com/calculator/pf/cost-of-living/
index.html
For example, the first calculator shows that you’d need to
have an income of $50,279 in El Paso, Texas, to have the same
standard of living that $65,000 provides in Boston — a drop of
23%!
The second calculator shows that you’d save 62% on hous-
ing, 38% on utilities and 28% on health care by moving to the
city on the banks of the Rio Grande.
Finally, using these techniques, I came up with my own list
of the 30 cheapest cities to retire in the U.S. The cheapest is
indeed El Paso … indeed, seven of the 10 cheapest places to
retire in the U.S. are in the Lone Star State.

30 Cheapest Cities for Retirement

1 El Paso, TX 16 Greensboro, NC
2 Brownsville, TX 17 Mobile, AL
3 Fort Wayne, IN 18 Louisville, KY
4 Pasadena, TX 19 Beaumont, TX
5 Amarillo, TX 20 Fayetteville, NC
6 Corpus Christi, TX 21 Tulsa, OK
7 Laredo, TX 22 Columbus, OH
8 Montgomery, AL 23 Akron, OH
9 Lexington, KY 24 Birmingham, AL
10 Lubbock, TX 25 Augusta, GA
11 Oklahoma City, OK 26 Des Moines, IA
12 Columbus, GA 27 Macon, GA
13 Omaha, NE 28 Wichita, KS
14 Winston-Salem, NC 29 Huntsville, AL
15 Pittsburgh, PA 30 Shreveport, LA
150 Endless Income

Unfortunately for Billy, none of these low-cost locales are in

Tidewater, Virginia. Whether he — or you — would benefit by
making a move in retirement is all down to the numbers.
Unlike Billy, though, you’ve got this book to give you a head
start.
 TRAVEL

J
umping on a plane and flying off to some remote spot in
the country or even around the world has long represented
a chance for adventure, exploration, and even relaxation
— as well as a big drain on your wallet. But you can easily turn
your vacation into a source of steady income. In this section,
learn about the island escape that’s far cheaper than you might
expect for this exotic location, how to make money living in
amazing homes, and even how you can live in your dream lo-
cation and get paid for it. Get paid to take that next vacation.

151
152 Endless Income

INCOME SECRET NO. 25:

That’s the Spirit: Use This “Gift-Giving”
Key to a Bon Voyage

What could be better than a fun-filled, relaxing sea cruise?

How about a fun-filled, relaxing sea cruise where the drinks
are about one-third the usual cost?
Too good to be true? Not if you’re traveling on a cruise line
that allows you to purchase a “bon voyage” gift for yourself in
the form of pre-cruise orders of wine, beer or liquor.
Instead of paying individually for drinks or running up a
huge bar tab during your cruise, you can purchase an alcohol-in-
clusive drinks package before you depart. These preordered
beverages can be two to three times cheaper than individual
drinks, and they’ll even deliver them to your cabin before the
cruise embarks. Whether you prefer top-shelf cocktails or vin-
tage wines, with this nifty travel tip you can sip like royalty all
cruise long for a fraction of the cost.
Most mainstream cruise lines allow passengers to pay one
base price that covers most — if not all — nonalcoholic and
alcoholic drinks onboard. It’s a great way to save money and
reduce the overall cost of the cruise.
There are a variety of standard, premium, elite and ultimate
packages ranging in price from as little as $14.50 to $63.19 per
person, per day. Depending on how many members are in your
travel party and how much you imbibe, it can save you hun-
dreds of dollars per cruise.
Besides the cost savings, preordering drinks has other ad-
vantages:
• It’s easy and convenient. Beverage packages make the
process of ordering drinks as simple as placing your order,
having your card swiped and getting whatever you order.
• There’s plenty of selection. There are multiple levels of
cruise beverage packages ranging from soda only to basic
 Travel 153

packages that also include bottled waters, beers, wines,

coffee and cocktails to premium plans that include fine
wines, liquors and liqueurs. So, if you’re a teetotaler, you
can still enjoy a wide selection of nonalcoholic beverages
at a much more reasonable price.
• You can sample as you like. Beverage packages enable
you to try drinks you’ve never had before. And if you don’t
like one, you don’t have to fret over the fact that it cost you
$10 to $15 and it would be a waste not to finish it. You
can just try something else instead, since your drinks are
already paid for.
Here’s a rundown of select cruise lines offering preorder
beverage packages. For current prices and specific details, visit
their websites.
• Azamara Club Cruises
(https://www.azamaraclubcruises.com/booked-guests/
onboard-packages/beverage-packages)
• Carnival Cruise Line
(https://www.carnival.com/onboard/cheers)
• Celebrity Cruises
(https://www.celebritycruises.com/things-to-do-
onboard/onboard-packages/beverage-packages)
• Costa Cruises
(https://www.costacruise.com/usa/all-inclusive-cruise.
html)
• Holland America Line
(https://www.hollandamerica.com/en_US.html)
• Viking Ocean Cruises
(https://www.vikingcruises.com)
• MSC Cruises
(https://www.msccruisesusa.com/en-us/Manage-Your-
Booking/All-Inclusive-Packages.aspx)
• Norwegian Cruise Line
(https://www.ncl.com/onboard-packages/beverage-
packages)
154 Endless Income

• Oceania Cruises
(https://www.oceaniacruises.com/value/beverage-wine-
packages)
• Princess Cruises
(https://www.princess.com/ships-and-experience/food-
and-dining/beverages)
• Royal Caribbean International
(https://www.royalcaribbean.com/experience/beverage-
packages)
• Windstar Cruises
(https://www.windstarcruises.com/why-windstar/
services)
While the idea of paying one large amount for your drinks
before your ship sets sail may seem extravagant at first, you’ll
be glad you did once you realize you have the luxury of being
able to order your favorite beverages at most onboard bars and
restaurants and not think twice about the bill — not to mention
the satisfaction of knowing that you paid much less than the
other guy.
 Travel 155

INCOME SECRET NO. 26:

Save at Least 85% on Airfare With This Quick,
“Old-School” Travel Tip

The price of airfare these days can be outrageous, depend-

ing on where you’re going and when.
The key word, however, is “can.”
It’s just as easy to fly anywhere in the world — Cleveland,
Ohio; Cancun, Mexico; or Cologne, Germany — at bargain-base-
ment prices.
How? By using a decades-old, yet often forgotten, travel tip.
Even in this digital age with all its integrated travel plat-
forms and supposedly cut-rate, third-party booking websites
at your disposal, it is often more advantageous to book your
travel arrangements directly through the airline either on their
website or by calling them.
Travel writer Akash Gupta recently related his experience
booking a flight from Los Angeles to Dallas/Fort Worth wherein
the airline’s website displayed a round-trip ticket price of just
$68 as opposed to the prices ranging from $126 to $176 on
various online travel agencies. That’s a whopping difference of
at least 85%!
And guess what? This is also true for hotel accommodations.
Even if you find a lower fare or room rate elsewhere, major
airlines and hotel chains usually have a “best rate guarantee.”
Sometimes, they’ll even throw in credit vouchers or discounts
for use on future bookings too.
While it may be just as convenient to use an online travel
agency (OTA) for your travel arrangements, it’s also costlier.
With an airline or hotel, you don’t have to pay additional book-
ing, change or cancellation fees.
Some airlines (e.g., Southwest and Allegiant) don’t even
bother listing their fares on OTAs, while others (e.g., Lufthansa
and British Airways) impose surcharges when you reserve
156 Endless Income

through one instead of through their booking channel. That’s

how fierce the competition is for your business.
Dealing with airlines and hotels directly also gives you more
leverage in case you need to change, delay or cancel your travel
arrangements. That’s because the reservation is just between two
parties — you and the airline or hotel — with no middleman. In
fact, some third parties add an additional charge for changing
or canceling your flight — on top of the airline’s change fee.
Another advantage of booking directly with an airline or ho-
tel is that you can leverage any elite benefits and pile up loyalty
points. You can earn frequent flyer miles through an OTA if the
fare class is eligible, but most hotel chains do not award points
or recognize elite status for your stay if it is booked through a
third party.
You can also cash in on special deals or amenities when you
work one-on-one with airlines and hotels. These can include
additional miles or points, room upgrades, free Wi-Fi, food and
beverage credits, special packages, and more that are not avail-
able through any third party.
And when you factor in the poor — or at best, mediocre —
customer service you might receive from an online travel agency
in the event of a discrepancy or an overbooking situation, who
needs the aggravation?
Take a tip from the pros and book directly with your airline
carrier and hotel of choice. It’s cheaper, simpler and just as con-
venient.
 Travel 157

INCOME SECRET NO. 27:

Stay 6 Nights in a South Pacific Island Paradise
for Less Than $900

When it comes to visiting the tropical islands and coral atolls

of the South Pacific, two images come to mind. One is crystal
blue waters, palm trees and coral reefs. The other image is how
thin your wallet’s going to be after you finish paying for the trip.
Visiting an exotic South Pacific island like Vanuatu or Bora
Bora is expensive. It costs a lot to fly there and back; there’s not
much anyone can do about that part. But once you get to these
fascinating locales, visitors often find that the accommodations,
food, island transportation and entertainment options aren’t
cheap either.
But veteran travelers say there is one island that the bud-
get-minded among us would be happy to visit: Fiji.
Actually, Fiji, more accurately, is not one island, but an ar-
chipelago of 333 palm-fringed islets with names such as Viti
Levu, Mamanuca and Yasawa. Only about a third of the islands
are inhabited, but there is plenty to explore.
The official languages are Fijian and English. The country
has a mix of indigenous, Asian and European cultures and re-
ligions, offering travelers a mix of the familiar and the exotic
when they visit.
Fiji is the perfect destination no matter the time of year. The
tropical island has a year-round temperature of approximately
86 degrees Fahrenheit, while trade winds keep visitors cool. The
drier months tend to be May through October, while there is
a potential for tropical storms between November and April.
Late March through early December tends to be the most pop-
ular time for vacationers to visit, while June and July are peak
months for tourists.
The main island is Viti Levu, which is where most Fijians live
and is home to the capital, Suva. You can travel to the island
Nadi where you can visit the Sri Siva Subramaniya Temple or
158 Endless Income

purchase wooden artifacts. Yasawa Island offers a hike through

a rainforest or scuba diving around some colorful reefs. Through
the months of May to October, you can swim with manta rays
around the waters of Nanuya Balavu Island.

On Fiji, you will find exquisite beaches, rich jungles, colorful

reefs, exotic cuisine and a welcoming atmosphere. Upon arriving
in Fiji, you will be able to take part in ancient ceremonies, eat
traditional foods, go fishing, snorkeling, diving, golfing, shop-
ping, surfing, cycling, horseback riding, jet boating, ziplining,
hiking, windsurfing, parasailing, and much, much more.
Or maybe your idea of relaxation is to kick back under an
umbrella on the beach with a good book. Well, Fiji can definitely
handle that demand as well.
If you love unpretentious opportunities for diving, hiking,
rafting and island hopping, Fiji is the place to go.
Just how cheap is it?
 Travel 159

As of 2018, you could book a memorable vacation’s worth

of beachside accommodations, island hopping (and a lifetime of
experiences) for as little as $900.
Three-star hotels can be found for as low as $63 per night,
while five-star beachfront hotels can be found for as low as $130
per night.
No wonder this island chain is so wildly popular with Aussies
and New Zealanders already!
160 Endless Income

INCOME SECRET NO. 28:

Vacation for Free — as an
International House Sitter

What if you could spend a month, a summer or even an

entire year in any idyllic getaway of your choice … without
spending a dime on a place to stay?
I’m not talking about ramshackle accommodations like
some closet-sized spare bedroom, or crashing on a lumpy fold-
out couch…
I know, it sounds like a pipe dream. But many people are
shocked to discover they can have a luxurious, two-bedroom
apartment in London or spacious waterfront cabana in Bermuda
all to themselves … for free.
House sitting is a great way for retirees, or anyone for that
matter, to spend extended periods of time in dream locations, in
beautiful homes, without paying a penny on lodging.
In fact, one Canadian couple — Dalene and Peter Heck,
who run their own website called Hecktic Travels — chronicled
how they saved more than $30,000 in accommodation costs by
house sitting their way around the globe.
All you have to do is keep an eye on someone’s home while
they’re away, and you get to stay in it for free, saving money on
accommodations and food expenses since your lodging includes
a kitchen. In return, the owners get peace of mind knowing their
house is safe. It’s a win-win situation.
Another great thing about house-sitting jobs is that they can
last anywhere from two weeks to six months, if not longer. That
extended stay can enable you to immerse yourself in the local
culture and to visit places that regular tourists rarely have the
time to cram into their schedule.

How Do You Become a House Sitter?

It’s simple: You start by asking family, friends and colleagues
about the possibility of watching their home while they’re away.
 Travel 161

It’s a good way to get some experience — and references —

under your belt.
Next, you join house-sitting websites. There you can review
available listings and apply for house-sitting jobs, carefully
choosing them according to your desires based on location, time
and other needs.
These websites provide listings for a fee, ranging from $20
to $60 depending on the membership. If you create an account
on multiple websites, it can increase your chances of being cho-
sen for a house-sitting job.
Some of the most popular house-sitting websites include:
• TrustedHousesitters
(https://www.trustedhousesitters.com/us)
• House Sitters America
(https://www.housesittersamerica.com)
• The Caretaker Gazette
(http://www.caretaker.org)
• Mind My House
(https://www.mindmyhouse.com)

Preparing Your Application

Once you join a house-sitting website, create a profile that
emphasizes the following:
• Your experience as a house-sitter or a previous homeown-
er;
• Your fondness for pets (house sitting often involves pet
sitting as well);
• Any special skills you have, such as speaking a foreign lan-
guage or being handy with tools or gardening; and your
enthusiasm for the job.
While reviewing available listings, be flexible in your plans
and throw as wide a net as possible.
162 Endless Income

Also, check out Visa requirements for countries you plan to

apply for since many countries — including at least two dozen
in Europe — only allow Americans to stay up to 90 days at a
time.
Then strike while the iron is hot. When a house-sitting op-
portunity is posted, try to apply within minutes since attractive
house sites go fast. To be able to act quickly, sign up for email
alerts in your desired area. Pay close attention to the listing and
draft an email according to specific details in that listing.
When applying for a house-sitting gig, be sure to provide
references. It helps to have quality people who’ll vouch for you,
such as former landlords, previous neighbors, ex-bosses or any-
one who can attest to your character, reliability and trustwor-
thiness.
It’s also important to know as much as possible about the
residence and folks who are entrusting you with their house
keys to avoid any inconvenient or unpleasant surprises. So, ask
a lot of pertinent questions before you arrive, such as:
• Are you allowed to have visitors?
• Can you leave the property overnight?
• Will there be a vehicle available for local transportation?
• Is there a home security system? If so, what is the activa-
tion code?
• Will there be internet service? Wi-Fi? Is there a password?
House sitting is a great way to see the world without techni-
cally leaving home. And think of the hundreds — or thousands
— of dollars you’ll save!
 Travel 163

INCOME SECRET NO. 29:

Get a 200% Retirement
“Pay Raise” for Taking a Trip

Rest and relaxation aren’t the only reasons the wealthy love
to travel. Too often, we dream of living, only part time in these
amazing locations. However, we have convinced ourselves that
some places are so beautiful they must be more expensive than
where we are currently living.
But the truth is that an idyllic summer getaway could double
the value of your retirement!
Rent, restaurants and grocery costs are up to 55% lower in
countries such as Portugal, Costa Rica and Spain. This means
every dollar of retirement income will give you DOUBLE the
purchasing power … e.g., last twice as long as would in the U.S.
Most tourists who only spend a week in such places won’t
really see/feel this boost in savings.
But folks who stay longer term, say three to six months, will
save tons on rent and food.
And they can even rent out their house back in the United
States while they’re gone to cover what oversees living costs
they do have.
Easy to say, almost impossible to achieve, right?
Suddenly, the “impossible” isn’t so impossible after all. Just
take a look at the chart on the next page, looking at six catego-
ries of living expenses (food, housing, transportation, personal
care, entertainment and cost vs. U.S.) in a variety of sunny off-
shore retirement locales.
164 Endless Income

Country Food Rent Trans. Personal Entmnt. Cost

Care vs U.S.

Punta -24% -50% -49% -35% -12% -35%

del Este,
Uruguay
Granada, -46% -32% -17% -20% -34% -30%
Nicaragua
Panama City, -9% -13% -44% -29% -2% -18%
Panama
Seville, -28% -41% -20% -24% -32% -30%
Spain
Lisbon, -31% -42% -3% -36% -13% -25%
Portugal
Source: Expatistan

In other words, moving offshore is like giving yourself a

large jump in income, simply because prices in these locations
(and many others) are so much cheaper, and your money goes
so much further in value.
You can take this one step further and buy your own place
overseas. The prices vary, depending on the country in question,
foreign exchange rates and the property’s location (beachside,
mountains, urban, etc.), but it’s something that most people
should at least take a look at when considering their retirement
options.
Some people buy a place, live in it part-time and rent it out
(with the help of a real estate management firm) for a number
of months. Others buy a place and make it their full-time resi-
dence.
It should not come as a surprise that the United States isn’t
the most inexpensive place to live. There are actually a number
of amazing places around the globe that have a lower cost of
living — allowing you to easily stretch your nest egg even fur-
ther — while adding a sense of adventure and discovery to your
retirement.
 Travel 165

INCOME SECRET NO. 30:

Summer in a Dream Vacation Spot for Free —
and Earn Money Doing It

Returning home from a vacation can be really tough. There’s

usually a five-stage cycle after unpacking your things.
First comes telling anyone who will listen — and some who
won’t — about the amazing cuisine and culture you experienced
abroad.
Next, you find yourself in a staff meeting or stuck in traffic,
daydreaming about quitting your job and selling everything to
move to your dream destination.
After that comes some research to check out that country’s
job market and housing prices. Then, reality sets in: You think
you can’t afford a drastic lifestyle change after all. The best you
can do is settle for planning your next trip (as soon as you’ve
accrued enough time off work), instead of living a “permanent
vacation” lifestyle in the overseas destination of your choice.
But what if the post-vacation cycle didn’t have to end that
way?
What if there was an affordable way to acquire a second
citizenship, buy property in your favorite Caribbean island or
Latin American getaway and rent it out to cover all the costs
when you’re not using it?
That’s the idea behind this Income Secret. You can do it and
enjoy the privileges that come with dual citizenship … and a
retirement rental property that pays its own way.
After all, people do this all the time with vacation properties
located inside the U.S. … but there’s nothing stopping you from
doing it abroad too.
Now may be the best time to make this investment in your
future. Not only are you creating a retirement haven for your
later years, but you’re also creating a safe haven for yourself in
the event of turmoil or economic unrest at home. And with the
strength of the U.S. dollar, there’s no better time to buy overseas.
166 Endless Income

Choosing a Country
If you’ve spent some time exploring the world, you may
already have a pretty good idea of where you’d like to spend
more time. Perhaps it’s the ocean breezes and laidback lifestyle
that lures you back to your apartment in Montevideo, or your
getaway on the Caribbean island of Grenada each year or the
architecture and culture of Italy that make you feel relaxed, like
you’re visiting a simpler time.
But before you make an emotional decision, consider the
practical issues:
1. Restrictions on foreign ownership: Not all countries
allow foreigners to own property outright. This is obvi-
ously important when you purchase property for the first
time, but it could also be critical if and when you decide
to sell it to realize its value. Unrestricted foreign owner-
ship rights mean you’re operating in a global market, not
just a national one. You can sell to other foreigners as
well as locals.
2. Market stability and liquidity: Obviously, you want to
invest in places that will maintain the conditions that
prompted you to buy there in the first place. It’s impos-
sible to predict the future, but there are many countries
that can boast decades of stability on the issues that mat-
ter — property rights, taxation, openness to foreigners
and so on. That’s where you want to invest in property.
But you also want to be sure that you can liquidate your
property holdings when the time comes, so choosing a
country with an active property market is important too.
The good news is that the two factors — stability and
liquidity — tend to go hand-in-hand.
3. Title security: Some countries with seemingly attrac-
tive upfront property deals also have weak titling and
deeds registry systems. This can come back to haunt you
if someone comes along with a stack of old paperwork
and claims that your land was actually stolen from his
grandfather. Even if it isn’t true, it can tie your property
up for years.
 Travel 167

4. Buying costs: Every country levies some form of tax or

duty at the time of a real estate transaction, which is
usually shared by buyer and seller. It’s important to an-
ticipate this cost so you can balance it against expected
land value appreciation and other cost factors.
5. Property tax: Some countries don’t levy any property
tax. But most do, and like transaction taxes, these need
to be taken into account when working out how much
of your wealth you’re going to be preserving, and how
much you’re going to be giving to the foreign taxman for
the privilege.
6. Capital gains tax: Capital gains taxes on property sales
vary widely. Some countries don’t levy any at all, or tax
it as ordinary income. But some — including some of
the most popular expat destinations — have capital gains
rates in the double-digits. You want to know up front if
you’re going to be trading low transaction and property
taxes now for big capital gains hit when you sell and vice
versa. But bear in mind that the IRS is going to tax you
on any gains from foreign property sales — so the most
important thing is to ensure that the foreign rate is below
or equal to U.S. rates — which are 15% to 20% for most
households. That way, you can deduct the foreign capital
gains tax from your U.S. tax obligations and come out
even. If you invest in a country with a capital gains rate
above the U.S., you will pay more in taxes.
7. Choosing the right property agent: In many countries,
the real estate agent sets the sale price, not the prop-
erty owner. The seller specifies the minimum amount
they want from the sale, but the agent tries to sell for
a lot more to make a profit. There’s often no U.S.-style
multiple listing service that allows you to compare what
different agents might be asking. So it’s important to
seek out trustworthy agents and advisers who can help
you understand the local property market, values and
opportunities.
168 Endless Income

Country Foreign Title Average Property Capital Stability

Ownership Security Buying Tax Gains
Restrictions Costs Tax
Belize None Medium 6.5% 1.00% 0% High
Cayman None High 7.5% 0.00% 0% High
Islands
Costa Rica Minor High 5.0% 0.25% 0% High
Dominica Minor High 21.0% 0.00% 0% High
Dominican None Medium 5.0% 1.00% 29% High
Republic
Ecuador Coastal Medium 3.0% 0.25% 35% Medium
Malta Minor High 12.0% 0.00% 0% High
Mexico Coastal High 3.0% 0.28% 30% High
Nicaragua None Medium 6.5% 0.25% 20% High
Panama Minor High 2.3% 2.10% 10% High
Turks & None High 10.0% 0.00% 0% High
Caicos
Uruguay None High 8.0% 0.25% 12% High

For a variety of reasons, the Caribbean and certain parts

of Latin America have distinct advantages for Americans com-
pared to other regions around the world. For instance, the
Caribbean islands (as well as Central American countries like
Panama, Costa Rica and Nicaragua) have relatively short travel
times from U.S. airports, in terms of hours spent in the air, and
therefore closer for your friends and family to come for visits
and vice versa.
The one downside of Latin America, however, is the lan-
guage. You may already speak Spanish or have a knack for
picking up the local lingo and adjusting quickly to living in a
new culture. If you don’t, you may feel isolated and feel like
you’ve made a mistake — although most locals are very tolerant
of language issues. Everyone is different when it comes to these
kinds of questions and the only person who can provide the
honest answer is you.
 Travel 169

Paths to Citizenship
Once you’ve zeroed in on a dream destination for your sec-
ond home abroad, you may want to consider what it would take
to acquire citizenship there someday. A second passport gives
the right of residence as well as all the protections of being sub-
ject to a foreign government. Second passports are especially
handy for those who want to be able to use that document to
get around the visa requirements imposed on their compatriots
while traveling. Of course, it also provides an escape route to a
friendlier clime should the need arise.
• Economic citizenship: The fastest way to obtain a second
passport — but certainly not the cheapest — is through
an economic citizenship program, where you essentially
buy a second citizenship. These programs often take the
form of an investment program where you either invest
in real estate or in certain funds as specified by the local
government.
One well-known program is the island country of St. Kitts
and Nevis, where you make an investment in the country
and in return get a St. Kitts passport and citizenship. You
have two options: Either invest $400,000 in qualified real
estate or donate a nonrefundable amount of $250,000 to
the Sugar Industry Diversification Foundation. You’ll enjoy
visa-free access to 120 countries, including the U.K., Hong
Kong, Schengen and Singapore. This route is also avail-
able in Antigua, Barbuda, Dominica and Grenada.
None of these citizenships are automatic; all involve a due
diligence process and subjective evaluation by an immi-
gration board. Aside from the fee imposed on individuals,
couples or families, there are also government fees and
agency fees to factor in. Some countries, such as Antigua
and Barbuda, have a residence requirement and others,
like Dominica, have an interview process.
• Naturalization: There are far cheaper dual citizenships
to go after if you’re willing to wait out the naturalization
period. This usually involves a specific period of prior res-
idence in the country and/or marriage to a citizen. Almost
170 Endless Income

all countries have a route to obtain permanent residence,

often linked to marriage, a job, starting a business or other
commitments to the country. But this means actually living
in the country for a period — usually five years — before
acquiring citizenship. Note that marriage to a citizen does
not always confer automatic residence.
• Sanguinity: This option is available by descent or other
affinity to the national community (e.g., religion). The
most common is for people born in the U.S. to parents
from a foreign country, who often acquire that citizenship
automatically. Some countries give citizenship to foreign-
ers descended from at least one grandparent (sometimes
further back) from that country. Countries that offer this
route include: Italy, Greece, Turkey, Bulgaria, Lebanon,
Armenia, Romania, Afghanistan, the Philippines, Croatia,
Estonia, Hungary, Ireland, Israel, Lithuania, Malta, Poland,
Rwanda, Serbia, Slovakia, South Korea and Ukraine.

Economic Citizenship at a Glance

Dominica St. Kitts/ Antigua/ Grenada
Nevis Barbuda

Fee (individual) $100,000 $250,000 $200,000 n/a

Fee (couple) $175,000 $300,000 $200,000 n/a

Government Procedural $50,000 for $50,000 Included

Fees fees of applicant; (investment for main
$1,765; due due option only) applicant,
diligence diligence $5,350 for
fees of fees of spouse
$4,000 $15,000

Agency Fees $20,000 $25,000 $45,000 plus Unknown

due diligence
costs

Residence None None Five days over None

Requirement five years

Interview Yes No No No

Visa-free 90 countries 120 139 countries 110

Access (U.K., countries (U.K., Canada, countries
Switzerland, (U.K., HK, EU, HK, (U.K., HK,
HK, Singapore) Singapore) Singapore)
Singapore)
 Travel 171

Important Factors to Consider

for Your Overseas Vacation Property
Once you’ve narrowed down your choice of countries, you’re
ready to make your real estate decision. Of course, it isn’t quite
that easy. Let’s explore some of the immediate considerations,
some of which will seem foreign if you’re used to only handling
stateside residential real estate transactions.
1. When buying foreign real estate, make sure you know
the rules and laws governing foreign ownership of the
specific land you want, since they often vary within the
country — say near coasts or borders, as in Mexico or
Ecuador. If foreign ownership limits are an issue, always
get a written guarantee from the authorities.
2. Also, you’ll want to make sure you can use your property
for your intended purpose. This includes such things as
“build requirements.” If you’re buying a residential lot,
you may have to build a home within a certain time
frame of months or years. Check the style of house you’re
allowed to build, the height, size and any other rules
you’ll have to comply with. In some countries foreigners
have to build a house of a certain size and value within a
relatively short time of buying a lot.
3. Make sure you research as much as possible about your
intended usage of the land. For instance, if you’re buying
land that you intend on renting out as a farm or ranching
property, get an expert to carry out a soil analysis test
and give you a full report on its condition and local rain-
fall patterns. Also, whether the usage you have in mind
is appropriate to what the soil and topography of the
property can support. Sometimes there are restrictions
on the use of property; get your attorney to check the
deed with the local municipality.
4. You’ll also want to consider infrastructure — your con-
nections for electricity, fresh water, sewer and the in-
ternet. Check out the standard of the water supply and
sewage treatment systems. Ask if they comply with local
regulations. If the land doesn’t have access to water or
172 Endless Income

sewage, figure out how much it will cost to install them.

Find out how reliable the electricity supply is — will you
need a back-up generator? If you need to install it, how
much will that cost and how long will it take? If you
want cable, high-speed internet or cell coverage, make
sure you can get it on your property.
5. What about road access to your property? If access is via
a right-of-way, make sure that it’s recorded in the deed.
And investigate to see if anyone else has access to your
land. If they’ve used it to get from Point A to Point B or
lived on it for long enough, they may have acquired legal
rights to carry on doing so.
6. Property boundaries are another important area you’ll
want to research. Get a proper survey done to establish
the legally recognized boundaries of your land. The sur-
vey will tell you exactly how much land you’re getting.
That’s very important if you’re buying a big parcel of land
and paying a price per acre. You need to know you’re
getting all the acres you’re paying for.

Financial Considerations of Renting

Your Offshore Property
There’s more to think about than just the purchase price of
a property. If you want to rent it out — for example, to finance
you own annual vacation and/or eventual retirement there —
you’ll want to make sure you cover all your bases. There are
important considerations when it comes to properly handling
your offshore real-estate:
• Hiring a management company — It’s important to get a
handle on the yearly expenses in relation to the property,
including management fees. It’s important to have a per-
son or company on the ground that can deal with mainte-
nance issues while you’re hundreds or thousands of miles
away. These companies’ services can vary, so it’s important
to choose a really competent and trustworthy real estate
management company and manage the relationship the
correct way.
 Travel 173

• Banking and income taxes — If you earn any rental

income from your property, it must be reported on your
personal U.S. income tax return (Form 1040, Schedule E),
regardless of the amount and regardless of whether you
are required to report the existence of the property itself
to the IRS. If you open a foreign bank account to facilitate
the purchase of the property — or to receive rental income
and that account has more than $10,000 in it on any one
day of the year — then you also must report the bank
account to the government, commonly referred to as the
Foreign Bank Account Report (FBAR).
• Double taxation — When operating your home abroad as
a rental property, you will owe taxes in the country where
the property is located. To avoid double taxation, you can
take a tax credit on your U.S. tax return for any taxes you
paid to the foreign country, relating to the net rental in-
come. Bear in mind that you can’t take a credit for more
than the amount of U.S. tax on the rental income, after
deducting expenses, but you’re allowed to claim a foreign
tax credit if you sell your property and pay capital gains
tax in the foreign country.
• Additional taxes and fees — You’ll likely be faced with
some other expenses you hadn’t bargained on before all is
said and done. For instance, for real estate in St. Kitts, a
buyer needs to pay something called a stamp tax, which is
12% of the cost of the property. In Antigua, the stamp tax
is about 7%. Depending on how you purchase a property,
either through a company or individually, these taxes can
go up or down. You’ll also want to think about attorney
fees. In most common law countries (British-based law),
attorneys charge a percentage of the cost of the property
in order to do the legal work related to transfer of title (in
the U.S., this is called the closing legal fees), which can be
up to 2.5% of the cost of the property. These details simply
work differently in different countries, so it’s important to
get a handle on them in advance to avoid ugly surprises.
174 Endless Income

Foreign-property ownership and tax laws are complicated

and change suddenly, so it’s wise to consult with a qualified tax
accountant and/or real estate attorney both abroad and in the
United States.

My Favorite Areas
As you’ve probably realized by now, you have a wide array
of choices for your offshore haven. It all depends on the many
variables that have been presented. I have some long-held fa-
vorites I’ll detail below:
Uruguay: The South American nation of Uruguay is increas-
ingly popular as a destination for foreign property investment.
It’s a longer flight from the United States, true, but there’s a
reason that this nation has long been called the Switzerland of
the continent. Land prices have been climbing higher over the
years, due to the country’s many attractive attributes for expat
real estate ownership: a strong, stable government, the well-es-
tablished rule of law and international ownership of property is
welcomed and respected. The country also has a mild climate,
ample annual rainfall and attractive pieces of farm, ranch and
urban real estate to consider for purchase.
Panama: Panama, like Uruguay, has a strong tradition of
respect for liberty, property and privacy. Its strong economy is
based on its service sector, such as Panama Canal operations
and the Colón Free Trade Zone (second only to Hong Kong in
trade volume). It’s also a key offshore financial center and is an
excellent place to consider for your asset protection options as
well. As far as “welcoming” goes, two years ago Panama created
a new category — “Immediate Permanent Resident” — aimed
at attracting foreign nationals. This fast-track program targets
professionals, managers and business entrepreneurs. By all
accounts, the country is one of the best places to live in the
Western Hemisphere. If you love beaches, watersports and trop-
ical landscapes, Panama has all that and more.
 AROUND
THE HOUSE

G
reat sources of potential income and cost-cutting ideas
don’t have to be limited to your investments and retire-
ment planning strategies. There are plenty of amazing
opportunities to increase your savings around your own home.
From making smarter decisions with your brand-name prescrip-
tions to taking advantage of the cash-back rewards to attending
a class that could potentially trim up to 15% off your auto in-
surance to making money off the clutter you’re already planning
to clear out, there are several overlooked options that could put
money back into your pocket.

175
176 Endless Income

INCOME SECRET NO. 31:

Save 85% on leading Brand-Name Prescriptions

The global pharmaceutical business is pretty messed up,

as I am sure you would agree. The prices we pay here in the
United States are many times over what people pay abroad for
the same medication.
Why is that? A lot of it has to do with how drug companies
try to make back the billions they spend in developing new
drugs, regulations and, of course, the money they hope to make
for their shareholders.
That means different prices for different buyers, so many
drug buyers in the “rich world” countries pay more as a result.
Even Canada is much cheaper!
But that doesn’t mean you have to pay the full cost for every
drug your doctor prescribes — or even buy a drug at all.
Start with your doctor, right at the moment he writes the Rx.
Ask him: Is this drug really the only solution to my problem? It’s
counterintuitive, but many of our modern ailments are “solved”
by drug consumption, but aren’t necessarily “cured.”
Take heartburn medications. Would a change in diet mean
less need for heartburn meds? Would losing 10 pounds or
quitting coffee reduce or eliminate the need for a costly drug?
Would moderate, daily exercise offset your need for a pricy
blood-pressure med, with all of its side effects?

Join These “Secret Health Savings Clubs”

Wouldn’t it be nice if shopping for health care was like
shopping for so many other products and services — the kind
that come with price discounts? I mean, when was the last time
your doctor, dentist, pharmacist or hospital said: “We’re having
a 20% off sale this month”?
Believe it or not, it’s possible to get just such discounts with
little-known health savings clubs. Usually you’ll find them mar-
 Around the House 177

keted as “health discount programs.” But first, let’s get a couple

things straight…
• Health discount programs are NOT health insurance.
• There’s no reimbursement of your health care providers,
either. You get the discount when you pay for the service
or product in question.
• You pay a monthly premium, and in return, the adminis-
trator of the health discount program negotiates with your
doctor and other health care providers to accept a reduced
fee.
Why would a doctor or hospital perform agree to that?
Because the health discount program brings them an increase
in business, in the same way that coupons help cereal and other
items fly off your local grocery’s shelves.
You can usually save up to 20% to 30% on a provider’s
services. (But beware any health discount program claiming to
offer discounts of 50% or more — chances are it’s either a scam,
or just plain lying about the real savings you might get from the
plan.)
So where can you find a good health discount program?
Chances are, if you have a health insurance plan already, then
your provider may offer a discount program too. Call up their
customer service agents and ask, or look through the plan’s
guidebook sent to you when you signed up for the policy.
What if you don’t have health insurance (or your provider
doesn’t offer a discount program)?
First, DO NOT buy a health discount program over the
internet without doing a lot of research. The Federal Trade
Commission warns that while some medical discount plans pro-
vide legitimate discounts, others take your money and offer very
little in return.
Experts say the right way to find a health discount program
is to first visit your personal physician’s office and talk to a re-
sponsible person in the office’s billing unit. Or if you’ve done
some internet research already, and are interested in a particular
178 Endless Income

company’s health discount program, bring the sales pamphlet or

printouts with you to the doctor’s office.
The billing person there will be able to advise you on the
discount plan, whether its provider is legitimate or not, and
whether you can get the advertised discounts from the doctor’s
office.
Yes, it takes a little extra work, but it’s well worth it when
you consider the savings involved on just a few visits to a doctor
(dentists, hospitals, pharmacists and other health care provid-
ers, too).

Save 85% With Generics

If you must take a drug, absolutely ask for generic options
first. Generic drugs are identical to their name-brand versions
and can be up to 85% cheaper. If you have a very high insurance
deductible, you will pay out-of-pocket 100%, so make sure to
get generics whenever possible.
Your cost of coinsurance will be lower, too, on generic drugs.
You are likely to pay coinsurance equal to 50% of the cost of a
branded drug, but as low as 10% of the cost of a cheaper generic
alternative.
The insurance company will also steer you toward these
lower cost options — choices which might not be obvious until
you ask.
Doctors prescribe non-generics out of habit, or because
they have been sweet-talked by a “pill pusher” from the drug’s
maker. The visiting salesperson showers the office with coffee
and donuts and plies doctors with free travel to “conferences” in
tropical locations.
It’s your money, so push back. Tell the doctor you want ge-
nerics in every case possible and get their honest reaction.
You are likely to find, too, that your insurer simply won’t pay
for some name-brand prescriptions at all because of the high
cost. In this case, be sure to ask your doctor if using the name
brand is absolutely crucial.
 Around the House 179

He might cite reasons why the name brand is preferred —

reasons you might agree with. In all other cases, generics will be
fine, and you will save big just by switching.

Grab Deep Rx Discounts

Don’t stop there. Big-box retail chains such as Walmart,
Target and the warehouse stores typically offer volume pricing
on generic drugs.
If you know you will take a specific medication for a long
time, you can find them in these pharmacies much cheaper than
at your normal corner drugstore. Discount stores are up to 60%
cheaper for commonly prescribed drugs for cholesterol, high
blood pressure and other chronic ailments.
Your insurance company also may have a deal to drive your
business to Costco or a similar warehouse store where you al-
ready shop. Low-cost drugs are a “loss leader” for them — a way
to get people into the store.

Don’t Pay the “Convenience Markup”

Another way to look at it: Using a “non-preferred” drugstore
is probably going to cost more for the same drug — sometimes
much more. Most people just go to the drugstore on the way
home from their doctor’s office.
They unwittingly pay a premium for that convenience.
It’s the difference between buying milk at a gas station ver-
sus at a grocery store. Which do you think will be more expen-
sive? The faster and more convenient option, for sure.
Don’t go from the doctor’s office straight to buy your pre-
scription, unless your physician instructs you to do so. Go home,
fire up the internet and research prices first.
180 Endless Income

Paying a Premium
$1,000

 Generic Actos $928

$900
 Generic Celebrex $866
$800  Generic Lipitor
 Generic Plavix $752
$700
– Total
$600
$535 $540
$518
$500

$400

$300

$200

$106 $114 $154

$100
$67

$0
re tco nts lub art art res ns id et
wa os de ’s C lm Km Sto ree eA arg
lth .com C en Wa ery lg Rit S/T
a
Heouse d e p
S
am oc Wa CV
h In Gr

The prices for a 30-day supply of five commonly prescribed generic drugs varied
widely in this survey of online and drugstore sources. The black line shows the
total monthly cost if you bought all five at the corresponding stores below.
SOURCE: Consumer Reports

If you know you’re going to take a drug for the long term
and you have to start it right away, go ahead and buy that first
month’s supply. But then look into pharmacies by mail, where
prices for a 90-day supply are often the same as the cost for just
30 days’ supply at the corner chain drugstore. Many insurers
have special relationships with pharmacies by mail or through a
“preferred” pharmacy.

Be an Online Sleuth
Remember, many of your friends and neighbors likely al-
ready take advantage of these price breaks. Ask around! The
drugstores have no incentive to advertise lower prices, nor do
the drug companies.
 Around the House 181

Your doctor won’t even bring it up. So you have to do some

sleuthing to find the best price, particularly if you expect to take
a drug for a long period of time.
If you do end up taking a name-brand drug, set up a Google
alert online for the drug’s brand name, plus the words “generic”
or “patent expiration.”

Top Branded Drugs Going Generic This Year

Revenue in Billions of U.S. Dollars

0.0 1.0 2.0 3.0 4.0 5.0 6.0

Nexium 5.6
Abilify 4.9
Cymbalta 3.5
Celebrex 1.6
Nasonex 1.2
Nasmenda 1.1
AndroGel 1
Nisapan 1
Lunesta 1

SOURCE: Consumer Reports

Many drugs have a specific window of time before they are

forced to release the drug’s formulation to generic providers. Go
to www.google.com/alerts and follow the simple instructions
there. You will get emails daily or weekly as news stories feature
your chosen keywords.
Your costly prescription drug might be on the verge of drop-
ping in price!
Some insurers, too, will send you email alerts on your meds,
precisely to tell you when prices fall, but you have to set that up
online, too. Check with your provider.
182 Endless Income

INCOME SECRET NO. 32:

Switch to a Cash-Back Rewards Gas Credit Card

Gas prices are once again on the rise. As each trip to the
pump threatens to take a bigger bite out of your wallet, it’s time
to take back a little more of your money.
If you haven’t done so already, consider applying for a
gas-company credit card that offers cash-back rebates with your
purchases. You can save up to $600 per year on this kind of
program.
For example, BP has a loyalty rewards program called BP
Driver Rewards. It allows customers to earn at a rate of $0.10
off per gallon for every $100 spent on BP fuel. Not only that,
you have the option to earn those rewards in the form of cents
off per gallon at BP or United MileagePlus® award miles.
For your added convenience, you can link your BP Driver
Rewards account to your qualified debit or credit card and auto-
matically earn and use fuel rewards or MileagePlus miles every
time you swipe your card at a BP gas pump.
But that’s not all! If you do choose award miles, you’ll earn
up to 3 MileagePlus miles with every gallon of BP gas you pur-
chase. In addition, you’ll earn 200 bonus miles for making your
first transaction after linking your card.
For more details about the BP Driver Rewards program or
to join, visit https://www.mybpstation.com/bp-driver-rewards.
Other gas companies such as Shell and Speedway offer sim-
ilar rebate programs. For example, Shell Fuel Rewards members
earn $0.05 per gallon for every $25 spent inside participating
Shell stations. Whether it’s a cup of coffee or a car wash, they
earn Fuel Rewards® savings on specially marked items, plus they
save up to $0.10 per gallon for every fill-up with Shell V-Power®
NiTRO+ Premium Gasoline. For more details or to participate,
visit https://www.fuelrewards.com/fuelrewards.
 Around the House 183

Meanwhile, Speedway Speedy Rewards members earn 20

points per dollar on in-store purchases and 10 points per gallon
on their fuel purchases. These points can be redeemed for free
featured items such as food, beverages, fuel discounts and gift
cards using Speedway’s mobile app. For more information, visit
https://www.speedway.com/SpeedyRewards.
If you depend on personal transportation, cash-back pro-
grams are a great way to fill up your tank and get rewarded for
your customer loyalty.
184 Endless Income

INCOME SECRET NO. 33:

Save 15% on Auto Insurance by Taking This Course

Sick of paying high auto insurance premiums — especially

when you’ve never had an accident?
Then enroll in a defensive driving safety course to save up to
15% on your auto insurance.
If 15% doesn’t sound like a significant savings, do the math:
For every $1,000 per year you spend on auto insurance, you
could be saving $150. Depending on where you live and your
previous driving record, that could mean savings of anywhere
from $150 to $450 or more … every year you drive.
Defensive driving classes are often sponsored by groups
such as AARP, AAA and the Safety Council to promote better
motoring skills — and therefore less risk of accidents — among
both older and younger drivers. These courses, which can be
conducted in a classroom or online, usually range in cost from
$15 to $100, but are worth the investment.
According to AARP: “By taking a driver refresher course
you’ll learn the current rules of the road, defensive driving tech-
niques and how to operate your vehicle more safely in today’s
increasingly challenging driving environment. And you’ll learn
how you can manage and accommodate common age-related
changes in vision, hearing and reaction time.”
Currently, 34 states and Washington, D.C., mandate a dis-
count for safe-driving classes. These states include Alabama,
Alaska, Arkansas, California, Colorado, Connecticut, Delaware,
Florida, Georgia, Idaho, Illinois, Kansas, Kentucky, Louisiana,
Maine, Minnesota, Mississippi, Montana, Nevada, New Jersey,
New Mexico, New York, North Dakota, Oklahoma, Oregon,
Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah,
Virginia, Washington, West Virginia and Wyoming.
The mandated discounts cover all drivers who take the
courses, regardless of their age, with the exception of New
Mexico, which prohibits the discount for drivers under 50.
 Around the House 185

However, some but not all insurers in non-mandated

states offer discounts for course participation, according to the
Insurance Information Institute.
Also, some state-mandated insurers do not accept online
classes, so you should speak with your insurance company or
agent before signing up for a defensive driving course to verify
whether you can get credit for taking an online class and find
out how much of a discount you can expect.
Age requirements can vary from state to state and among
insurers. For example, Esurance requires older drivers to be at
least 55, while Allstate offers a safe driver discount for those
older than 50. Meanwhile, some insurers offer discounts for
those 25 and younger, while others reserve the discount for
those 21 and below.
Here’s a rundown of what some of the major insurers offer
(depending on the state) for both older and younger drivers
who take a defensive driving class, according to company repre-
sentatives and the insurer’s website:
• Farmers Insurance — About a 10% discount for older driv-
ers and up to 10% for younger drivers.
• State Farm — Up to 10% for both older and younger drivers.
• Nationwide — About 5% for both older and younger driv-
ers.
• Esurance — About 5% for older drivers and up to 15% for
younger drivers.
• Geico — About 5% for both older and younger drivers.
• Allstate and The Hartford — Up to 10% for all drivers, any
age.
• Liberty Mutual, Progressive and USAA — About 5% for
both older and younger drivers.
Besides saving you money on your insurance premiums,
a defensive driving course could also result in a reduction of
points on your driver’s license and waiver of a fine following a
driving violation ticket.
But best of all, it’ll help make you a better driver and safer
on the road.
186 Endless Income

INCOME SECRET NO. 34:

Earn up to $10,000 Per Year
Renting Out Your Own Car

Owning a car can be as expensive as having another depen-

dent. You need to buy or finance it. Then, of course, there are
insurance premiums, the expense of maintaining and repairing
the car, and then paying out hundreds of dollars or more per
year just to keep the tank full.
But what if your car could earn its keep … in other words,
pay you?
Renting out your car using apps such as Turo, Hyre or
Getaround can earn you up to $10,000 or more per year in extra
income. With that additional income, you could pay off the cost
of your car in as little as two years, invest the money, help pay a
child’s college tuition, boost your retirement nest egg or spend
it as you wish.
Here’s how car-sharing typically works:
When you list your car on Turo, you decide how many days
per month you want to rent it out. The higher the market value
of your vehicle and the number of days you choose to rent it
out, the more money you can make. For example, if your car’s
market value is $20,000 and you choose to rent it out for just 10
days per month, you could earn $4,664.
Turo will set your car’s rental price based on market value,
location, time of the year and other data set to maximize your
income and boost your listing’s competitiveness. Or, if you pre-
fer, you can manually set your own daily price, as well as the
mileage limit.
Turo will pay you by direct deposit within five business days.
You’ll earn 65% to 85% of the rental price, depending on the
vehicle protection package you have chosen. If you already have
commercial rental insurance that covers you, your car and your
customers, you have the option of waiving the vehicle protec-
tion provided by Turo, thus earning 90% of the rental price.
 Around the House 187

The vehicle protection provided by Turo includes $1 million

in liability insurance, and your car is also covered against theft
and physical damage. In addition, your car is returned to you
refueled.
Hyre and Getaround have similar terms and conditions,
although rental prices and earnings may vary. However, listing
your vehicle on any of these car-sharing services is totally free
with no monthly fees and no buy-ins.
For more details, visit https://turo.com, https://www.
hyrecar.com or https://www.getaround.com and start putting
your car to work for you.
188 Endless Income

INCOME SECRET NO. 35:

Review Your Auto Insurance Bill to Save $531

We’ve all seen the commercials telling us to shop around for

a better rate because we may be paying more than necessary
with our current carrier. And in some cases, it can be true.
According to the Federal Consumer Price Index, car insur-
ance rates usually rise an average of 3% to 4% per year, but
rates have been jumping faster in recent years. In December
2016, care insurance rates shot up 7% from the same time a
year earlier.
In 2017, car insurance rate soared 7.9%.
Advances in safety and technology within cars have resulted
in a steeper price increase over the past several years. Even if
you haven’t gotten a new, more advanced car, you might have
seen your insurance increase with everyone else’s.
So, it’s best to at least shop around to see if you’re getting
the best rate possible. A couple of phone calls or web searches
can really pay off.
For example, if you or your spouse are 50 years of age or
over, requesting a rate quote request from AARP® Auto Insurance
Program from The Hartford may prove very fruitful. This insur-
er offers competitive rates that are worth investigating that may
reward you with significant savings.
Also, an auto insurance policy through AAA can save mem-
bers an average of $531 per year. Please visit your local AAA
website or office for further details.
Some other tips for lowering your auto insurance include:
1. Bundle your policies. If you get your car insurance from
the same company that offers homeowners or renters in-
surance, you can possibly save up to 25% on each policy
from some companies.
 Around the House 189

2. Purchase a cheaper car. Consider a pre-owned car with-

out the advanced gadgets such as backup cameras. Older
cars are also less risky for insurers because they are less
expensive to replace. If you car’s value is less than 10
times the premium, you may want to reduce or drop
your collision and/or comprehensive coverage, as well.
3. Pay your bills on time. A low credit score often results
in higher car insurance. Paying your bills on time will
improve your credit score and lower your car insurance
payment. You may also be able to get a discount if you
choose auto-billing and if you pay for a full year upfront
versus paying month-by-month.
190 Endless Income

INCOME SECRET NO. 36:

Chop Your Cable Cord ... and Save Big

“Not wasting money is just as important as making money

in any prudent investment strategy,” I’d said in my presentation
at the Offshore Investment Summit.
Out of the corner of my eye I saw a little man’s head snap up,
his eyes fixed on me. He’d been taking notes up to then, head
bowed to the table. But from that moment onward he stared at
me in rapt attention.
After I was done — my session was just before the afternoon
coffee break — he cornered me on my way out of the hall.
Uh-oh, I thought. No coffee for me. I had to be back onstage
to introduce the panel discussion in 15 minutes.
“Until you spoke, I was worried that nobody really under-
stood the secret of wealth,” he said, in a thick Swiss-German
accent. “But you clearly do.” I nodded politely, the smell of fresh
coffee and leche tugging at my nostrils. “What you just said is
the wisdom of the ages, as far as I am concerned.”
“You mean the part about not trusting any politician who
isn’t Uruguayan?” I ventured. Instantly I recognized my father’s
brand of irreverent humor, albeit unsure of its appropriateness
in conversation.
The apple doesn’t fall far from tree, for better and worse.
The little man looked right past my quip in the way that only
the Swiss can do.
“No, I mean about not wasting money as the key to wealth.”

Free Your Mind, Then Your Wallet

Okay, then … I know a bit about that! After all, I spent the
bulk of my career working in the nonprofit sector, where salaries
are nothing to write home about.
But my interest in good value and savings goes beyond dol-
lars and cents. I see it as a critical aspect of my more general
 Around the House 191

passion … to live as freely as possible and to escape traps laid

for me by the powers that be, and to help others to do the same.
The problem is that in today’s America, mainstream media
and pundits — all working for big private corporations —
strongly encourage us to focus our discontent on government
and politicians. And they certainly deserve a lot of that! But a
mono-focus on Washington distracts us from problems that are
at least as important as an out-of-control government.
Thanks, perhaps, to my many years spent outside the U.S.,
I see the country from a slightly different perspective; one that
is also sensitive to the ways in which accumulations of power
outside government also shape our fortunes in negative ways.
For example, I know for a fact that on a like-for-like basis, I
pay a great deal more for my broadband internet service in the
U.S. than I would if I lived in any other developed country, as
well as a number of less-developed countries. The same is true
for health care, education and other crucial services. The reason
for this? As The Economist puts it:
One problem with American capitalism has been overlooked: a
corrosive lack of competition. The naughty secret of American
firms is that life at home is much easier: their returns on equi-
ty are 40% higher in the United States than they are abroad.
Aggregate domestic profits are at near record levels relative to
GDP. America is meant to be a temple of free enterprise. It isn’t.
An average 40% return on equity is unheard of in econom-
ic history. An individual firm may be capable of sustained re-
turns like that for a while, but would expect to see their profits
“competed away” eventually. Today, however, a very profitable
American firm has an 80% chance of being that way 10 years
later. In the 1990s, the odds were only about 50%.
The problem is that steep corporate earnings aren’t luring in
new entrants because established firms are abusing monopoly
positions, or using lobbying to stifle competition. Indeed, two-
thirds of the U.S. economy’s 900-odd industries have become
more concentrated since 1997. A tenth of the economy is at
the mercy of a handful of firms. At the same time, the rate of
192 Endless Income

small-company creation in America is close to its lowest mark

ever.
What are we to do about this if our politicians won’t do
anything? Well, you can’t “vote the b******s out” when they
are private corporations, industry associations or lobbyists. The
best way I can think of to fight back is to explore the ways they
rip us off, and how to stop that from happening by adopting
smart, little-known techniques to avoid doing business with
them altogether.

Cable: How (and Why) They’re Ripping You Off

For most of us, television in the first half of our lives meant
tuning into the broadcast networks, CBS, ABC and NBC, and
enduring commercials (and poor reception) as the price of free
entertainment.
All that changed with the rapid spread of cable TV in the
1980s. By the end of the decade, there were about 30 channels
available on most cable networks. By the mid-90s the numbers
had exploded into the hundreds — cable’s vastly greater band-
width made that technically feasible.
This plethora of content led to the development of “tiered”
cable offerings, in which a higher monthly subscription fee gave
you more channels to watch. The trick was that the most desir-
able content — especially professional sports, which migrated
early to cable-only formats — was limited to the most expensive
subscription tiers. The cost of these top tiers has risen at two to
three times the rate of inflation ever since, joining cable with
education and health care as the key drivers of escalating house-
hold budgets.

Sports Über Alles

Of course, just because cable can carry a lot of channels
doesn’t mean it has to. The driving force behind this tiered-bun-
dle model is the cable companies’ need to cover the costs of
broadcast rights for sports and other premium content. A cost
breakdown of the typical top cable tier shows that the bulk of
 Around the House 193

your monthly subscription fee goes to broadcast rights for a

small number of channels — usually four to five.
The main culprit is sports. Every U.S. league makes millions
or billions of dollars from the content networks that want to
broadcast their sports. Those networks in turn reap money from
cable networks, who recoup it from you via the bundle model,
whether you want sports or not. Anyone who wants just a few
special channels has to pay for the whole bundle regardless,
keeping the money flowing up to the leagues.
One reason for this is that the content cable companies buy
is also sold in bundle form. ESPN, for example, is owned by
Disney, which will only sell ESPN to a cable network if it buys a
range of other Disney channels as well. Each of those channels
attracts a per-subscriber fee paid by the cable network, which
then passes it on to subscribers whether we watch them or not.
Merging Content and Distribution
Starting with Comcast’s acquisition of NBC in 2009, cable
companies have rapidly merged with content producers — the
people who make movies and TV shows. Cable companies re-
alized that they might as well be the ones receiving the money
they were paying for content broadcast rights, so they started
acquiring the companies that produced it. In that way, they
could increase their own profits — notably, by refusing to allow
their now-proprietary content to be shown on competing cable
networks — creating a de facto monopoly pricing situation.
Cable networks now commonly require small content pro-
grammers to give up much of their companies’ equity stock just
to get carried at all. As one CEO explained: “Cable and satellite
TV companies want to own you before they put you on televi-
sion.” Cable networks are known to blackball any programmer
who resists this — something illegal under federal communica-
tions and anti-trust laws, but largely unenforced.

Oligopoly
The third factor behind high and rising cable prices is re-
gional monopolies and national industry consolidation. Many
Americans rely on a single provider in their neighborhood, who
194 Endless Income

can dictate prices at will. That’s because most cable operators

received exclusive franchises from local authorities when the ca-
ble network infrastructure was first being built out in the 1980s
— using public utility rights-of-way — otherwise they wouldn’t
have laid the cables.
For example, in my neighborhood, Comcast was the only
option for years, until AT&T figured out how to deliver cable via
the existing telephone infrastructure it already owned. They’re
my only two choices now.
Nationally, the U.S. cable television industry is an unmistak-
able oligopoly, with the top four companies serving over 60% of
the market. Coupled with limited regional options, this allows
cable companies to jack up prices and neglect service quality at
will.

Getting You Coming and Going

Finally, cable TV distributors derive extra “rent” from leasing
set-top boxes to consumers. These boxes are often needed for
on-demand and high-definition offerings and frequently include
DVR capabilities. The cable networks dominate the market for
these boxes and deliberately make it difficult for consumers to
use independent boxes. As a result, the set-top box is not subject
to competition or innovation (many rely on old technology);
nevertheless, cable companies can and do charge high monthly
prices for them.

The Specter of the Internet

The bottom line is that the average American household
pays several hundred dollars a month for hundreds of cable
channels … but only watches 16 of them regularly. The price of
these cable packages continues to rise at more than the inflation
rate, contributing to monopoly profits at our expense.
Most people instinctively react to this situation with the rea-
sonable proposal that we should be able to buy cable channels
á-la-carte, picking only those we actually watch. Surely, if we
can put a man on the moon, we can pick and choose what to
watch and when, paying as we go?
 Around the House 195

Indeed, there is absolutely no technological obstacle to á-la-

carte television. The problem is that the cable companies rely on
the current distorted market structure to extract economic rent
from the U.S. consumer.
Internet streaming is the key to fighting back against this
rip-off. It is considered such a threat that contracts between
content producers (like ESPN) and cable networks — which
are often as long as seven years — limit what the producer can
make available online on its own internet streaming service.
And, particularly, on third-party services such as Netflix or Apple
TV. For example, ESPN still doesn’t allow most live sports to be
broadcast on its own streaming service, WatchESPN.
That’s done specifically to ensure that streaming distributors
can’t compete with cable networks, so we have to keep paying
excess costs for inferior products. It’s market manipulation plain
and simple, really.
But the cable companies aren’t stupid, and they know they
need to cover their flanks. So they’ve used those massive excess
profits (rents) to buy up the broadband internet networks so
that we need to watch streaming TV and ditch cable.
Consequently, nowadays most folks get their internet and
cable from the same company — AT&T, Verizon, Comcast,
Charter or Time Warner. That gives the cable companies even
more market-distorting leverage over content producers … and
viewers like you and me. Here’s how they use it:
• TV everywhere — In the late 2000s, the cable networks
and the big content providers secretly colluded to cre-
ate an internet-based streaming ecosystem called “TV
Everywhere.” The idea was to allow people to receive
some streaming content — like hit cable series — but only
if they already had a valid cable subscription.
For example, there is a nice Cartoon Network “app”
available for the iPhone, but you can use it only if you
enter your subscription details to one of the major cable
companies that carries Cartoon Network. In this way, the
cable industry hoped to satisfy the demand for á-la-carte
streaming without giving up any profits. They assumed
196 Endless Income

what we want is the convenience to watch TV anywhere

— but what we really want is the freedom to buy only
what we want to watch.
• Network neutrality violations — In mafia-like fashion, ca-
ble/broadband companies like Comcast have tried to force
internet-based distributors like Netflix to pay “protection
money” to prevent their streams from being “throttled” or
slowed down on their internet networks, making it hard
to watch them online. By contrast, Comcast goes out of its
way to ensure that content that it owns, like NBC shows,
streams beautifully. Although the Federal Communications
Commission outlawed this in 2015, it still persists in hard-
to-detect forms.
• Content lockout — Cable networks that own content (such
as Comcast’s NBC titles) refuse to license that content to
streaming TV services like Netflix, Hulu or Apple TV, forc-
ing consumers to subscribe to Comcast cable to get it.
• Targeted cap-and-metered pricing — Recently I got a no-
tice from AT&T, my current internet provider, saying that
in May my internet data would be capped at 600 MB a
month, after which I’d have to pay $25 for blocks of 50
MB. I ditched Comcast last year because they were doing
the same thing (at a 300 MB cap). This lead to internet
bills of $200 or more a month because I use streaming
services instead of cable. There is no technological reason
for them to do this, as they typically claim. Instead, they
do it purely to compensate for the loss of cable subscribers
to streaming services and to make returning to cable look
more attractive.

An Epidemic of “Cord Cutting”

In these ways — despite the absence of technological bar-
riers and the rapid spread of high-speed broadband internet —
the cable cabal has basically blocked the natural progression to
á-la-carte content in the U.S. That’s why we have slower and
costlier internet service and higher TV prices than any other
developed country.
 Around the House 197

But 2013 turned out to be a historic inflection point: The

first full year the cable industry lost subscribers. The losses wid-
ened in 2014 and rapidly grew even faster in 2015. Cable TV
viewing has been dropping at around 10% a quarter, a plunge
that has advertisers terrified. In the second quarter of 2015, for
example, cable networks suffered their worst-ever quarterly
subscriber declines, collectively shedding more than 600,000
accounts. Then in 2016, there were a reported 1.4 million fewer
cable subscribers from the year prior.
Not only is the number of cable subscribers falling, but the
customers who remain are buying much slimmer bundles. One
result was that ESPN, the top dog of cable, reached fewer homes
by the end of 2014 than it did in 2010. Nielsen announced in
2016 that ESPN had its worst reported month in its history, los-
ing over 620,000 cable subscribers, which also meant a drop
in revenue of over $52 million. Overall, the number of pay TV
households is projected to decline, slowly but consistently. For
example, the Statistic Brain Research Institute reported the total
number of cable subscribers in 2010 to be 44,500,000, and in
2016, 34,340,000.
The driving force
behind this change is “Cord Cutting”
“cord cutting” — the
rapid uptake of the
sort of streaming de- Cut the
Cord
vice and online con-
15%
tent-delivery services.
Pew Research Center’s Never Had
Home Broadband Cable 9%
2015 study found that
24% of all American
Cable/Satellite
adults do not subscribe
76%
to a cable TV service.
Of those, 15% have
become cord cutters
in recent years, while
9% never had cable at all. The high cost of cable TV packages
was cited by 74% of the cord cutters as the reason for dropping
service. Two-thirds of those who don’t subscribe to cable cited
198 Endless Income

alternate sources of streaming content as the reason for not hav-

ing a traditional cable service. And 45% said they had reduced
their cable or satellite TV service because they could get some
desired content via streaming.
This was enough motivation for the content providers finally
to take the plunge and start experimenting with streaming-only
options, over the strenuous objections of the cable giants.

How I Fight Back

My household canceled its last cable subscription three
years ago. At the time I was paying almost $200 a month for
cable. Now I pay around $45 … and could be paying even less.
And if anything, our viewing options have expanded rather than
contracted … and we have vastly more control over what and
when we watch.
My weapon of choice in the fight against the great cable
rip-off is a little box that sits next to the TV called a Roku. (We
actually have three — one in the living room, one for my daugh-
ter’s room and one for the basement.) The Roku 3 box we use
costs about $100, but they can be had for less on special or used
on EBay, while the Roku Streaming Stick, which does the same
thing, is only $45. There is no subscription charge — you just
buy the Roku of your choice.
The Roku connects to our broadband internet by wireless or
Ethernet cable. Once it’s fired up, there’s a menu of streaming
“channels” to choose from. Most are free, and those that aren’t
are dramatically lower in price than a cable package, as you’ll
see shortly. We load and unload specific channels as needed —
for example, during cricket season, we watch our South African
national team via a special channel that we unload during the
rest of the year. The same is true of many other specialized
channels.
Here’s the core of our Roku channel lineup:
• Movies and TV shows — The popular Netflix channel
gives us unlimited access to tens of thousands of titles,
with monthly plans that go from $7.99 for Basic to $13.99
for Premium. It also has a number of its own series, such
 Around the House 199

as the popular hits “House of Cards,” “Orange Is the New

Black,” and “Stranger Things.”
Then there’s Amazon Instant Video, part of Amazon Prime,
which costs as low as $8.99 a month for Prime Video only,
or just $12.99 a month ($119 a year) for the additional
Prime perks, including two-day shipping and unlimited
music streaming, photo storage, and reading. This gives
us access to a large variety of video material that’s “free,”
i.e., covered by the Prime membership. Other titles are
available to buy or rent on an on-demand basis, costing
anywhere from 99 cents to several dollars per title. We
typically pay $4.99 for the standard definition version
of a movie that has just been in theatres. After a few
months, the price of such films drops to $2.99 or $1.99.
High definition is also available, usually for $1 more per
title. Amazon Prime added the ability to stream versions
of popular cable channels, such as Starz, Showtime, and
HBO, with free trials or monthly fees ranging from $8.99,
$10.99 and $14.99, respectively.
Finally, my wife subscribes to the CBS All Access channel
($5.99 a month), which carries her favorite soap opera.
• News — All the major American news networks, including
CNN and PBS, have Roku channels that provide both a live
feed and a menu of specific stories viewable on demand.
The live feed isn’t always the same as what you’d see on
cable, but it’s pretty close. Some of the networks display
adverts between news segments, just like a broadcast sig-
nal, but they are much shorter and less obtrusive. Local
news channels are available on Roku for every major and
medium-sized city in the U.S. I also subscribe to a range of
alternative news networks — the list of available channels
grows every day.
• Sports — Here’s where my household is atypical. Since
we’re South African-Americans, we follow cricket, rugby
and soccer, mainly. We can get those sports either via a
special channel (Willow TV) or as part of a free ESPN or
Fox Sports Roku channel. We pay for the cricket channel,
which has live broadcasts, but for rugby and soccer we
often watch free replays the next day.
200 Endless Income

On the other hand, if we were into American sports, we

could simply subscribe to Sling TV for $25 a month, which
would give us ESPN, ESPN 2, NBA basketball and a num-
ber of entertainment channels. In addition, we might add
MLB.TV for our favorite baseball team ($50/year) and NFL
Game Pass ($100/year). Both are also available month-by
month. The NHL GameCenter platform and Major League
Soccer’s MLS Live provide similar access for those sports.
College sports channels are also available at similar prices
for games that aren’t already on ESPN.
Note, however, that this may not be enough if you’re a
diehard. The old-fashioned, network-oriented licensing
and marketing rules usually entail a blackout of local team
games, forcing you either to watch them on local network
TV affiliates, or to watch them later on replay.

History Repeating:
Broadband Consolidation
The top high-speed internet access providers include
cable companies AT&T, Comcast, Verizon, Time
Warner, Cox and others. These companies charge you
twice — once for internet access and once for a cable
TV subscription.
Most analysts predict that as customers desert cable
TV packages for internet-based streaming services,
the telecom giants will try to charge more for internet,
wiping out some or all of the cable savings. Indeed,
the raw economics of internet delivery favor the cable
companies. Internet service is much cheaper to offer
than TV, so having customers shift the balance of their
bills to data instead of TV is pure profit for the industry.
It costs broadband providers virtually nothing if you
use more data, so the overage charges they are starting
to apply for the higher data usage arising from stream-
ing cord cutters is essentially easy money for them.
 Around the House 201

That’s why it’s important to pay attention to the de-

bates about competition in the broadband market and
issues like net neutrality. The cable/internet giants are
lobbying furiously for special favors from national and
local politicians to protect their extraction of excess
profits from the rest of us.
For example, some states have passed laws that make
it difficult or impossible for municipalities to invest in
low-cost broadband networks for their residents. They
have also erected barriers that make it hard for newer
businesses to string fiber-optic cable on utility poles
or below ground in order to compete with established
cable and phone companies.

The Digital Antenna Hack

But there’s a way around that, which also gives you access to
local broadcast stations in real-time — the digital antenna or HD
antenna. Local affiliates of commercial broadcast networks like
CBS, NBC, ABC and Fox still broadcast free-to-air the way they
always have, except that now the signal is digital. With a digital
antenna, you can ditch cable but still get real-time broadcast
networks for free. Modern HD antennas don’t have to go on the
roof — they’re simple affairs you set up next to the TV. (Outdoor
antennas remain a viable option.) You’ll have to play with the
antenna position to maximize reception, just like fiddling with
rabbit ear antennas in the 1970s.
Before you do this, make sure you have over-the-air HD as
an option where you live. Visit AntennaWeb (www.antennaweb.
org) or TV Fool (http://www.tvfool.com) for a listing of the sta-
tions broadcasting near you and the sort of antenna you might
need to pick them up. Top-rated HD indoor antennas include the
Winegard FL5500A FlatWave Amplified Razor Thin HD Indoor
Antenna and Mohu Leaf 50 Amplified Indoor HD Antenna, both
in the $50 to $60 range.
202 Endless Income

Your Options for Low-Cost Streaming

There are a lot of ways to watch streaming TV across the
internet like I do. For these services, a five megabyte per sec-
ond (Mbps) broadband internet connection is generally fine,
although high-definition streams may require a bit more.
Your viewing options include your smartphone, tablet, com-
puter and, of course, your TV. On your computer, just visit a
streaming service’s website to view them — or connect your
laptop to your TV using a monitor output, as I sometimes do for
special events that are only on the internet.
An increasingly popular option is to use “smart” TVs, which
have built-in streaming software like Roku and connect to the
internet. I was in Best Buy recently and saw excellent 52” mod-
els on sale for under $450.
If you don’t have a smart TV, there are many streaming hub
options like the Roku I use with an eight-year-old flat screen.
They include game consoles such as the Xbox 360, Xbox One,
PlayStation 3, PlayStation 4 and Nintendo Wii. Several Blu-ray
players also have streaming hub apps.
Dedicated streaming devices like my Roku have two main
forms: a thumb-drive sized unit that plugs into the HDMI port
on the TV or a separate box the size of a portable CD player.
Excellent small “stick” streaming devices include the Google
Chromecast ($35), Roku Streaming Stick ($50) or the Amazon
Fire TV Stick ($40). Larger units like my Roku 3 that give slight-
ly better performance and on-board memory storage include the
Amazon Fire TV and the Apple TV, and the newer Roku 4K.
Every single one of these products supports the holy “trinity”
of cord cutter video-streaming apps: Netflix, Hulu and Amazon
Prime Instant Video. If you’ve got a specific service you want
to watch, however, you need to do some research. Not every
streaming devices or game console gives access to every stream-
ing service. For example, PlayStation 4 users who have Comcast
cable have found that the company blocks them from using the
HBO GO app that was recently released for that console.
 Around the House 203

What’s You’ll Save

Here’s the list of apps that would give you almost complete
programming coverage — at least of primetime TV across net-
works and cable channels. Many of them offer a free month
trial, too.
From this you can do a quick calculation against your current
cable bill. Remember that you’ll need to keep internet service,
so be sure to deduct that from your current billing if you get
bundled service to arrive at your cable-only cost.
In any case, our household has saved a substantial amount
of money each month. Now, we don’t subscribe to all the stream-
ing services — I don’t have Hulu, HBO Now or Sling TV. But
everyone in my household is perfectly happy with what we get.
We do purchase on-demand movies and TV shows two to three
times a week, which probably adds another $40 to our monthly
outlay — but remember, these are things we choose to watch,
and when to watch them. We don’t need to set up a recording
— just click and view on demand.

Service Monthly Yearly

Netflix “Standard” $10.99 $131.88
Hulu $7.99 $95.88
Amazon Prime $12.99 $119.00
Sling TV (“Orange” or “Blue”) $25.00 $300.00
HBO Now $14.99 $179.88
CBS All Access $5.99 $71.88
TOTAL $77.95 $898.52

Is Cord Cutting for You?

The decision to “cut the cord” as I’ve done depends on how
you balance the various factors. To help you do that, here’s a
summary of the pros and cons:
204 Endless Income

Pros —
• Savings: If you’re like me, you’ll definitely save money.
Theoretically, you could pay almost as much as you do for
cable if you subscribe to a lot of streaming services. I did
initially try a number of the other streaming services that
I don’t use, but just found that I didn’t watch enough on
them to justify the cost. When the dust settled down, I was
saving almost $150 a month.
• Flexibility and convenience: A big overlooked factor with
cord cutting is that nearly everything becomes on demand.
You don’t have to watch when the show is on — you watch
when you want to do so.
You don’t have to watch the movie HBO is showing to-
night — you pick one yourself. In some cases — such as
AMC’s “The Walking Dead”, a big hit in my household —
we watch it the day after it shows on cable, which doesn’t
bother us one bit. We just ignore the reviews until we’ve
seen it.
• No contracts: All of the streaming services we use except
Amazon Instant Video are on a month-to-month basis, and
I can cancel or suspend them at any time with no con-
sequence. Some U.S. sports packages require an annual
payment, but most allow you to go month-to-month as
well. Compare that to the silly contracts and conciliation
rules cable companies impose on you!
• Fewer things to go wrong: Streaming video requires only
internet, a streaming device and a TV or monitor. At its
simplest, all you need is your computer. That’s a great
deal less complicated than the cables and set-top boxes
required by cable setups. When we had Comcast cable, we
had service outages nearly every month. We’ve never once
had a problem with our streaming setup.

Cons —
• Lost content: The biggest con is the loss of some chan-
nels, especially live news and major sports. Some popular
 Around the House 205

shows are only available after a delay, as I noted above,

and this may matter to you. But honestly, considering the
abysmal quality of most U.S. cable news, is that such a big
deal? In any case, streaming offers are expanding rapidly,
and I anticipate that content restrictions will fade just as
fast.
• Vulnerability to abuse of internet monopoly: As I noted
in the box earlier, the cable giants are trying to combat
cord cutting by chiseling us on the broadband internet
side. Right now, for example, if I had a Comcast internet
package, my typical streaming usage would incur signif-
icant additional broadband overage fees every month,
which would cancel out the advantage of dropping cable.
Fortunately, I have alternatives — Google Fiber is on its
way to my town — so this isn’t an issue. But it may be for
you. I do predict, however, that the cable companies will
ultimately lose the fight to extract excess profits via abuse
of broadband markets, particularly with Google and Apple
moving rapidly to enter the broadband market directly.

Conclusion
There’s nothing stopping you from trying out cord cutting
right now. Just get a streaming box or stick and check it out, and
keep your cable until you’re ready to decide. Even if you decide
to stick with cable, it’ll still come in handy — after all, you can
take it with you when you travel in the U.S. and view Netflix
and so on anywhere you can get a suitable internet connection.
Give it a try — I promise you won’t regret it. And remember
… it’s not just about the money … it’s about what’s right for all
of us.
206 Endless Income

INCOME SECRET NO. 37:

Separate Your Landline
Long-Distance Phone Carrier

The majority of households today subscribe to “bundle” ser-

vices from multi telecommunication providers, which include
phone, cable and internet. When considering a “bundle,” you
should ask yourself, “does bundling really save me money?”
Providers have built up — through their ads and sales strat-
egies — the idea that you are better off to subscribe to their
bundle deals. But having all the components ordered together
may not be saving you money, especially if you don’t need all
of them. Many of us also don’t pay close attention to what we
are paying for and just pay the bill each month. If you go over
your bill in detail, you may find that you are being deceived into
believing you are getting a “deal.”
When considering bundle options, if you find yourself need-
ing to keep a landline in your home, instead of bundling phone
services, consider separating them. There are several long-dis-
tance phone carriers that charge relatively cheaper rates for
long distance phone calls. 
Here’s how it works: These carriers charge about three cents
or four cents per minute with six-second billing increments.
There are no minimums nor monthly fees.
If you were to call someone out of state and talk for over an
hour, your bill could be as low as $5 or $6, including taxes and
fees, for the month.
And if you do not talk to anyone in a month, your bill is $0.
A company that can offer such savings is Pioneer Telephone.
Since 1994, Pioneer states that it has helped “business and resi-
dential customers save on their phone bill. Over $1,003,206,851
in savings to date, and [they] are just getting started.” For more
details, visit http://www.pioneertelephone.com.
 Around the House 207

Other strategies that you can consider to lower your phone

expense is to go mobile and get rid of your landline altogether.
The majority of mobile plans include unlimited phone and text
within the continental United States.
You can also use apps and computer-based software, such
as WhatsApp and Skype. These applications allow you to phone
local and international numbers at no cost.
In addition, there is the option to use a Voice over Internet
Protocol (VoIP) provider, such as Vonage (https://www.vonage.
com/personal). A VoIP transmits phone calls using a digital con-
nection.
The bottom line is you can save yourself money each month
by examining how you utilize your phone and what you use it
for. Cut out what you don’t need and take advantage of all the
great options that cost close to nothing, if nothing at all.   
208 Endless Income

INCOME SECRET NO. 38:

Save up to $45 Per Month by Replacing
Furnace and Air Filters Regularly

Sooner or later, homeowners and small-business owners

need to clean or replace their furnace and air filters. However,
if you want to save money on your energy costs, sooner is much
better than later.
Regularly replacing filters — every 30 to 90 days depending
on the make and model of the filter — allows air to flow easily
without overtaxing the HVAC blower motor. Not only does less
stress on the equipment extend the life of your heating and cool-
ing system, it can also save you up to $45 per month.
According to FilterSnap.com website:
The Department of Energy states that replacing a dirty filter
with a clean one can reduce energy consumption by as much
as 15%. Combine that with the knowledge that your HVAC is
responsible for approximately half your energy bill, and you’re
looking at savings of 7.5% every month.
So, if your average electric bill is $100 per month, you could
save approximately $7.50 by changing your filter regularly
(or, you are already saving that much if you change them reg-
ularly). Over three months, that’s $22.50. That said, if your
energy bill is only $100 per month, good on you.
If your bill is closer to the $200 range — and it can likely creep
up there when the furnace or A/C is working daily to heat or
cool your house — you’re looking at savings of up to $45 per
month.
When shopping for an air filter make sure to look at the
MERV rating (minimum efficiency report value). The higher the
MERV rating, the less unwanted particles, dust and debris pass
through the filter. These ratings range from 1 (lowest efficiency)
to 20 (highest efficiency).
 Around the House 209

• MERV ratings 1 through 4 trap pollen, dust mites, sanding

dust, spray paint dust, textile and carpet fibers. This range
is for minimum filtration and used mostly in residential
buildings.
• MERV ratings 5 through 8 also trap mold spores, hair spray,
fabric protector, cement dust and pet dander. This range is
typically used in better residential or general commercial
and industrial workspaces.
• MERV ratings 9 through 12 go a step further and trap hu-
midifier dust, lead dust, auto emissions and milled flour.
This rating range is typically used in superior residential
buildings or better commercial buildings.
• MERV ratings 13 through 16 trap all particles ranked 1 to
12 and go the extra mile by trapping bacteria, most tobac-
co smoke, droplet nuclei (sneeze), most face powder and
cooking oil. This rating range is typically used in superior
commercial buildings and hospitals.
• MERV rating 17 through 20, the top rating tier, is typically
used in pharmaceutical and electronics cleanrooms.
True, air filters cost about $10 to $20 each, but what you
save in replacing them every three months more than makes up
for the expense — and puts even more money in your pocket
over the long run.
210 Endless Income

INCOME SECRET NO. 39:

Save Hundreds in Energy Costs Just by
Switching to the Right Light Bulb

According to the U.S. Department of Energy, the average

American household dedicates about 5% of its energy budget to
lighting. However, according to the Environmental Protection
Agency (EPA), approximately 70% of all U.S. light bulb sockets
still contain inefficient light bulbs. Whereas, if Americans made
the switch to Energy Star-certified LED light bulbs, they could
realize savings of up to $118 million in energy costs!
That’s because just one Energy Star-certified LED light bulb
saves about $6 a year in electricity costs and can save anywhere
from $40 to $135 over its lifetime. Which means that you can
light your home for less money and cut your overall energy bills
by switching to energy-efficient lighting.
Ninety percent of the energy used by traditional incandes-
cent bulbs is given off as heat, which is an inefficient waste of
energy. It’s one of the reasons incandescent bulbs are no longer
being manufactured and are being replaced with money-sav-
ing options such as halogen incandescent, compact fluorescent
lamps (CFL), and light-emitting diodes (LED) light bulbs. It is
estimated that by replacing your home’s five most frequently
used light fixtures with bulbs that have earned the Energy Star
rating, you can save as much as $75 each year.
These newer choices in energy-efficient lighting come in the
same colors and light levels as before. Although they cost more
than traditional incandescent bulbs, they last far longer because
they use less energy and, therefore, save you money over the
long term.
In addition, you can install controls such timers and photo-
cells that save electricity by turning lights off when not in use.
Also, dimmers save electricity when used to lower light levels. In
terms of outdoor lighting, CFLs or LEDs can be used in a variety
of fixtures to save energy. Most bare spiral CFLs can be enclosed
in fixtures that protect them from the elements. CFLs and LEDs
 Around the House 211

are also available as flood lights. Many outdoor Energy Star-

qualified fixtures come with features such as automatic daylight
shut-off and motion sensors.
Here’s a quick review of your energy-efficient alternatives:
• Halogen incandescent — This type of bulb has a capsule
inside that contains gas around a filament to increase the
bulb’s efficiency. It’s available in various shapes and colors,
and can be used with dimmers. Although it meets federal
minimum energy efficiency standards, there are more effi-
cient options available.
• CFLs — These are curly versions of the long tube fluo-
rescent lights you may already be using in your kitchen
or garage. Since they use less electricity than traditional
incandescent bulbs, CFLs pay for themselves in less than
nine months, then save you money each month. In fact,
an Energy Star-qualified CFL uses just one-fourth the
energy of a traditional incandescent bulb and one-third
the energy of a halogen incandescent, while providing the
same amount of light and lasting 10 times longer than the
traditional incandescent bulb.
• LEDs — These are a type of solid-state lighting in which
semiconductors convert electricity into light. LEDs that are
Energy Star-qualified use only 20% to 25% of the energy
of traditional incandescent bulbs and last up to 25 times
longer. Similarly, they use 25% to 30% of the energy of
halogen incandescent bulbs and last eight to 25 times lon-
ger.
LED bulbs are available as replacements for 40-, 60- and
75-watt traditional incandescent bulbs, reflector bulbs
used in recessed fixtures, desk lamps, track lights, under
cabinet lighting and outdoor area lights. Some are dimma-
ble and can also be used as daylight and motion sensors.
Another advantage of LEDs is that they perform well both
indoors and outdoors because of their durability in cold
environments, making them an excellent choice for path-
way lighting, step lighting and porch lights.
212 Endless Income

INCOME SECRET NO. 40:

Save up to $20 Per Month by Tinting
Your Home Windows

When looking to save on your household energy bills, don’t

overlook this “bright” idea: tinting your home windows.
For homes in warmer climates that have a direct eastern
or western exposure to sunlight, tinting your windows with at
least 28% visible light transfer (VLT) shade film can help save
between $10 to $20 per month on your monthly energy bills,
depending on the size of your home.
Window tinting has been an option for more than 50 years.
It has become the norm for automotive application, but residen-
tial window tinting is still gradually gaining in popularity. That’s
because window-tinting technologies have greatly improved
over the years to become a useful tool in reducing energy costs
associated with heating and cooling your home.
Contrary to what some believe, you don’t have to darken
your windows to achieve effective heat reduction.
One option is ceramic window tint, which can block up to
90% of infrared heat without eliminating daylight.
Likewise, various solar-control films can block up to 80% of
the sun’s radiant heat coming through your windows. According
to the International Window Film Association, that can result in
a year-round savings of about 5% to 10% of your home’s total
energy bill — and possibly more during hot months.
Not only can residential window tinting save you money
by reducing your energy bill, but it can also save you money
on interior renovation. The visible light that enters your home
through your windows lies on the spectrum between ultraviolet
and infrared. Ultraviolet radiation can damage your furniture,
while infrared radiation emits heat.
Tinted windows, however, can block 99% of UVA and UVB
rays, thus slowing the deterioration and fading of drapes, car-
 Around the House 213

pet and furniture. It can also protect you and your family from
harmful UV rays.
Residential window tinting can transform your home into a
safer, more comfortable environment while saving you a bundle
in energy costs over the long term. For more information about
home window tinting, visit www.iwfa.com.
214 Endless Income

INCOME SECRET NO. 41:

Save up to 30% on Your Heating and
Cooling Bills With This 1 Simple Trick

According to the U.S. Department of Energy, heating and

cooling account for about 48% of the energy use in a typical U.S.
home, making it the largest energy expense for most homes.
That being the case, you stand to save a substantial amount
of your income by conserving energy in your home wherever
you can.
One of the best ways to do that is by installing a programma-
ble thermostat to regulate your home’s temperature — whether
you live in a warm or cold climate.
According to the U.S. Department of Energy, a program-
mable thermostat can help you save as much as 10% a year
on heating and cooling by turning thermostats down 7 to 10
degrees for eight hours per day from its usual setting. In all,
when used correctly, these thermostats can save 10% to 30% on
cooling and heating bills.
If you’re unsure how high or low to set your thermostat in
the summer and winter, follow these industry recommendations:
• During the summer — Generally speaking, our bodies
are most comfortable indoors when the air is within a de-
gree or two of 75 degrees Fahrenheit during hot summer
months. However, this temperature setting isn’t necessary
when your home is unoccupied. So, if you’re out of the
house for long periods during the day — at work or doing
errands — set the temperature several degrees higher.
Setting the temperature a few degrees higher during the
cooler night before bedtime is also an energy-saving prac-
tice worth considering. Following this routine for eight-
hour intervals will greatly reduce your cooling cost. Just
don’t overdo it because it will make it that much harder
for your A/C unit to reach your comfort level if the air
temperature gets too warm.
 Around the House 215

• During the winter — Your furnace or heating unit will

keep you comfortably warm during colder months if your
thermostat is set at 68 degrees Fahrenheit. And, just like
in the summer, lowering your thermostat a few degrees at
eight-hour intervals when you aren’t home or snug in your
bed will save money on your heating bills. Plus, during
milder winter days — or if you have a fireplace — you may
not have to use your furnace or heating unit at all.
• When you’re away from home — Do not shut your cool-
ing or heating system off completely if you go on vacation
or take a weekend getaway. That will only lead to high hu-
midity levels that spawn mold growth during hot summers
since your home’s interior temperature will soar uncon-
trollably and fresh air won’t circulate. Likewise, allowing
your house to drastically cool down while you’re away
during frigid winter months will make your system work
much harder to warm up your home when you return.
Instead, set your thermostat at a constant temperature
that’s several degrees higher than normal during summer
trips, and several degrees lower during winter getaways.
Plus, having your outdoor condensing unit running occa-
sionally will make it appear that someone is home, provid-
ing a measure of security.
For a detailed energy assessment of your home that includes
money-saving recommendations for thermostat use, contact
your local utility.
216 Endless Income

INCOME SECRET NO. 42:

Save Energy and Money by Setting Your
Ceiling Fans to a Low Speed

We all know that air conditioning can be a costly necessity

in hot weather, but it also can be an expensive luxury all year
round when there’s an effective and thriftier climate control
alternative — ceiling fans.
While a typical central air conditioning unit uses 3,500
watts of energy when in use, the average ceiling fan uses
a mere 60 watts — even at a high speed. That, according to
thesimpledollar.com, means that if running your ceiling fan all
day long allows you to reduce your AC usage — even for just
30 minutes per day — you could save a significant amount of
money over time.
And if you follow these energy-efficient tips, who knows
how much you might be able to save in energy costs while stay-
ing comfortable in your home:
• Adjust the direction of your ceiling fan so the air blows
down in summer. Your fan should have a “clockwise”
and “counterclockwise” setting. Each of these settings is
appropriate for a different season. During the summer,
you should have your ceiling running on high in a coun-
terclockwise direction to force the air down and cool the
room.
• Run the fan on low in the other direction in the winter.
In colder winter months, flip the little switch or push the
button near the base of your fan so that it turns clockwise.
This will pull air up in the center of the room and push
it down again along the outer edges. What this does is
force warm air and cool to mingle, keeping the room at
a steadier temperature. It prevents heat from rising and
building at the top and cool air from settling near the floor,
so your furnace or heating system doesn’t have to work so
hard to keep your home warm. If you stand near a wall in
the room, you should feel a gentle, warm breeze.
 Around the House 217

• Set your thermostat higher in the summer. Raise the

temperature by a few degrees if you are planning on
running your ceiling fans constantly on a hot day. While
your ceiling fan doesn’t directly cool the air, it does help
circulate the cool air better, creating a breeze effect that
can make the room feel cooler than it really is.
• Be sure to turn off your ceiling fans when you leave
home. This can save your money as well. There’s no sense
in keeping your home quite as cool or warm as normal
when you aren’t there. If you have a programmable ther-
mostat, you can set your air conditioning unit to turn off
and on based on the time when you’ll be home.
It makes basic economic sense; who needs the high cost of
overused air conditioning when low-cost ceiling fans can keep
you cool or warm all year long?
218 Endless Income

INCOME SECRET NO. 43:

Get Paid to Clear Out Your Clutter

Over the course of just one year, it can be surprising to see

how many items we can accumulate. We pick up things to make
our life easier or mementos from a trip or new experience. These
wonderful items exist in almost every nook and cranny in our
own homes.
Now is an excellent time to go through all of your belong-
ings, and decide what should be kept and what should be donat-
ed or discarded and then get PAID.
And nowadays, you don’t have to rely on simply dropping
off to a donation center, or dump, or even having those all-day
garage sales.
In fact, if you have a smart phone or access to the internet,
getting rid of unwanted things is easy. As the old adage says,
someone’s junk is someone else’s treasure.
Here are some of the best free apps, to help you clean the
clutter and even make some money:
• OfferUp — This app and site allows you to browse local
items, by image with thousands of new postings every day,
and communicate with sellers entirely through their in-
app messaging. Simply take a photo, post the description
and price and get ready to take the best offer. People are
selling everything from cars to grills to shoes to ocean kay-
aks.
• LetGo — This is another free app and website where you
can sell (and buy) pre-owned stuff. It is very similar to
OfferUp, but better organized by categories.
Now, for some of us, having a garage sale is an overwhelm-
ing amount of work, and in some communities, it is prohibited.
So, another route you can take is donating the items to charity.
 Around the House 219

Although there are several national and local agencies that

will gladly take your donations, it’s always best to call first to
make sure they are accepting donations and in what form.
And, don’t forget, donations are tax deductible! Be sure to
keep your receipts for tax purposes.
Recently, I came across a great app that will let you track
and value your non-cash charitable donations. The app iDonate-
dIt is dedicated to helping you get the most value possible from
your charitable donation. This app is available on the Apple App
Store.
When you’re done, you’ll have more room in your home and
money in your pocket.
220 Endless Income

INCOME SECRET NO. 44:

Win up to $10,000 Playing Digital Scratch-Off
Lotteries Each Day … for Free

Scratch-off lottery tickets are fun and — if you’re really,

really lucky — you can win anywhere from a few bucks to thou-
sands of dollars.
The only problem is that these tickets cost you money. And
with astronomical odds of winning a big prize against you, it’s
one of the worst “investments” you could make.
If only you could play for free and win some cash every now
and then.
Actually, you can with the Lucktastic app that lets you play
digital scratch-off lotteries every day for free. It’s a fun way to
win cash and prizes worth up to $10,000.
To start playing and winning, all you have to do is download
the Lucktastic app at the iTunes App Store or Google Play Store.
Follow the instructions on opening an account and you’re good
to go.
To win any scratch card, you need to match three of the
winning symbols displayed on that digit card. If you win a cash
prize, you’ll receive a notification within the app congratulating
you, and your winnings will appear in your account balance.
Yeah, but what about the odds?
For instance, scratch cards depend on the number of people
playing the cards. For contests, the odds of winning depend on
the number of entries received. But all entries have the same
chance of winning, and the winner won’t be announced until he
or she has confirmed their information.
As for that $10,000 scratch card, you have to play a total
of 150 scratch cards to unlock it, but all scratch cards count
toward that goal. Once you’ve unlocked the $10,000 card, it
stays unlocked and you can check your progress at any time on
your personal Lucktastic dashboard.
 Around the House 221

Redeeming Lucktastic Instant Rewards is easy.

Once you have accumulated enough tokens, you simply go to
the Instant Rewards section, tap the four-leaf clover icon in the
top left corner of your app, select Instant Rewards, and choose
the Instant Reward you want to claim. You’ll be prompted to
verify your account and enter your phone number, and then
you’ll receive a text message with a six-digit code to confirm
your identity. From there, you’ll receive an email and/or SMS
message with a link to your electronic gift card.
To date, Lucktastic has awarded over $3 million in prizes
and rewards to more than a million players. You could be next.
It costs nothing to download the app and play, yet you could
come away a winner.
For more detailed information about Lucktastic, including
how to get started earning rewards, visit https://lucktastic.
com/faq.
222 Endless Income

INCOME SECRET NO. 45:

Get Automatic Refunds With This
Little-Known Email App

How often have you purchased an item on sale or for the full
retail price only to discover shortly thereafter that the price has
been reduced even more? It’s a frustrating feeling and an incon-
venience if it means having to return the item for a better deal.
Or maybe you aren’t even aware that the price has gone
down and that you could have acquired the item for less than
you paid.
As a consumer, you rarely have the time, resources or pres-
ence of mind to backtrack and check for price drop, much less
call or email the retailer to get your refund.
That’s where Paribus can save you hundreds, if not thou-
sands of dollars, per year.
The company has an app that does the legwork for you. It
tracks customer and price adjustment policies at popular online
merchants. When it sees a potential savings or refund opportu-
nity based on your purchase history, it contacts the merchant on
your behalf to help get you the refund.
The Paribus app is 100% free and available at the iTunes
App Store.
Here’s how it works:
You download the app and register with Paribus, authorizing
it to act as your agent. Using the same advanced data structures
and algorithms that retailers use to fix prices, Paribus collects
your refunds in part by scanning your emails for receipts from
your recent purchases. It identifies your receipt, evaluates the
data and imports it into its database, focusing on the price at
which you purchased the item. Your refund period generally
lasts for about two weeks. During that time, Paribus monitors
the cost of the product and submits a refund request on your
behalf if the price drops.
 Around the House 223

Among the online merchants on Paribus’ radar are:

Amazon Banana Republic Costco

Bloomingdale’s Gap Home Depot
Macy’s Old Navy Sears
Staples Walmart Crate & Barrel
Target Kohl’s Bed Bath & Beyond
J. Crew Office Depot Anthropologie
Zappos Neiman Marcus L.L. Bean
Nordstrom Saks Fifth Avenue Wayfair

The Paribus homepage shows examples of refunds that fetch

you anywhere from at least $3 to over $300, depending on the
item you purchased and the price drop Paribus finds.
Not only does the Paribus app offer price protection by
watching for price drops at online retailers with price adjust-
ment policies, but it streamlines the claim process to make it
easier for you to promptly get your money back.
Also, Paribus offers delivery monitoring, tracking your ship-
ments from select online retailers to see if you are owed money
for late deliveries.
For more information about the Paribus app and how it can
help save you a bundle in refunds, visit the company’s website
at https://paribus.co.
224 Endless Income
 PASSION TO
PROFITS

A
dding to your income doesn’t mean that you need to take
on a typical nine-to-five job. Resourceful people have
come up with exciting and creative sources of income in
the new “gig economy.” This is an opportunity to dedicate a lit-
tle of your free time and possibly some skills that you’ve learned
over years to raking in some extra cash. Learn how you can
earn some extra money with the photos you took on your last
vacation. Turn your favorite hobby into an easy source of cash.
You can even get paid doing routine activities such as watching
TV. Turn your passion into profit.

225
226 Endless Income

INCOME SECRET NO. 46:

Get Paid to Do Routine Activities

In a perfect world, they’d pay you to watch TV. You’d get a

bonus for paying your bills each month, and you’d collect $100
or more for stopping by your hair salon or barber shop.
Well, welcome to that perfect world.
You can do all of those things. And here’s how…
First of all, there are numerous companies that will pay you
to watch videos and TV shows. For example, Netflix, the most
popular subscription video streaming service on the planet, pe-
riodically hires “taggers” — or editorial analysts, if you want
to get technical about it. These are folks who watch Netflix’s
programming and enter relevant metadata (words or phrases
that describe the content) into the company’s database to make
it easier to search and categorize and also to provide accurate
recommendations to fellow subscribers.
According to MoneyPantry.com, Netflix taggers watch
approximately ten to twenty hours of programming per week,
earning on average $300 per week. These positions are posted
on the Netflix job board (https://jobs.netflix.com) and are
perfect if you like to binge-watch movies, TV series and special
programming.
Of course, there are only a limited number of positions
available at Netflix, and the competition for them is fierce. But
they’re not the only game in town. There are many other pay-
to-watch TV services.
One of them is Marketforce Information, which has a “Certified
Field Associate” program (https://www.certifiedfieldassociate.
com) that pays you $10 to $20 per hour to watch Netflix or to be
a Theater Checker, visiting movie theaters on the weekends and
— among other things — collecting box office information or
recording all trailers on all screens prior to the assigned feature.
 Passion to Profits 227

And then there’s Swagbucks (https://www.swagbucks.com),

where you can earn money for watching a variety of themed
videos ranging from world news to sports and entertainment.
When you’re ready to be paid, you can redeem your bucks for
gift cards or PayPal cash.
Inbox Dollars (https://www.inboxdollars.com) also allows
you to make money watching short videos on a daily basis. You
get paid with cash and earn your first $5 just for signing up.
Not interested in spending a lot of time at the movies or
in front of the tube? Here’s another option: Download the
MoneyLion app. It offers rewards — including gift cards to
restaurants such as Chili’s, Romano’s Macaroni Grill, Maggiano’s
and On The Border, and to AMC Theaters — for staying on top
of your finances.
That’s right — you earn rewards by:
• Signing up for a free MoneyLion account (1,400 points).
• Downloading the mobile app (100 points).
• Connecting a bank account to track spending (500 points).
• Sign up for free credit monitoring (250 points).
• Make bill payments on time (50 points).
• Get a loan (200 points).
• More rewards with MoneyLion Plus Cashback bonuses
— $1 every day just for logging into the MoneyLion app
(exclusive to MoneyLion Plus members).
For more information or to join, visit www.MoneyLion.
comrewards.
Now, while discussing ways to earn rewards for doing what
otherwise are daily routines, here is a way to get cash back.
Ebates is a cash back and discount website that helps its
members earn when spending. What does that mean for you?
All you have to do it become a member — free of charge —
and begin your online shopping at www.ebates.com. From
there, you’ll find over 2,500 of the biggest stores and boutiques,
228 Endless Income

including Amazon, Macy’s, Kohl’s, Zulily, Home Depot, even

Travelocity. From that, you can earn as much as 10% cash back.
Simple search for the store you want, sign in, and shop.
From that, you get a check in the mail or can be paid through a
PayPal payment. It’s that simple! Seemingly almost too good to
be true. Plus, you can get a $10 bonus just for signing up. This is
the ultimate easy way to make money for doing what you would
be doing anyway.
And finally, this hair-raising opportunity…
Every time you go for a haircut, your locks end up on the
salon or barbershop floor, where they usually get swept up and
disposed of. Instead, you can sell your hair for anywhere from
$100 to $4,000!
As long as you have hair that is at least six inches long, there
are buyers from around the world — often wig manufacturers
— who’ll pay good money for those precious strands. All you
need to do is go to Hairsellon.com, register for a free account,
post an ad and wait for the offers to come pouring in.
And the great thing about hair is that it’ll grow back, so you
can make this an ongoing, profitable side hustle.
For more information, visit www.hairsellon.com.
 Passion to Profits 229

INCOME SECRET NO. 47:

Earn Thousands Per Year Writing About
Your Favorite Hobby Online

Do you have a favorite hobby? Perhaps it’s collecting mem-

orabilia, restoring vintage cars, photography, crafting … the list
goes on and on.
Chances are, many other people share your interest and
would like to learn more about it and/or profit from this knowl-
edge. So why not start a blog and write about it on a regular
basis?
How exactly do you make money from blogging? By being
more than just a writer, but also an entrepreneur running a small
business and using your blog as a lead generator for products
and services.
Blogging can earn you money in several ways … from sim-
ple Google AdSense revenue to affiliate sales.
With AdSense (https://www.google.com/adsense), you
place Google ads on your website. When a visitor clicks on it,
Google pays you 68% of what the advertiser pays them.
Affiliate sales are a business model in which you endorse
someone else’s products or services in exchange for a commis-
sion — typically 50% or more.
How much you make by blogging depends on the quality
of your blog, how long it’s been online and how much traffic is
directed to your site.
A survey of 1,500 ProBlogger readers found the majority
made only about $1,278, but 9% made between $1,000 and
$10,000 per month and 4% made over $10,000 per month.
So, how do you become a part of the 13%? The process,
according to ProBlogger, involves:
• Setting up your blog. First, you choose a topic for your
blog (for example, health, marketing or gardening) and
focus on that one topic. Next, you pick a relevant domain
230 Endless Income

name and purchase it. Then find an affordable web host,

install WordPress and upload a good-looking template so
your blog looks professional.
• Creating useful content. To make your blog worth read-
ing, you’ll need to research keywords your audience is
typing into search engines. You’ll find these using keyword
tools such as SEMrush, Ahrefs and the Google Keyword
Planner. Also, research the kind of content shared on so-
cial media. This can be done by running blogs on the same
topic as yours through BuzzSumo, which analyzes what
content performs best.
• Converting visitors to email subscribers. How much
money you make as a blogger will depend on how many
recurring visitors you have. Ways to lure subscribers in-
clude an email marketing platform (to send mass emails),
sign-up forms on the blog and a bribe to subscribe in the
form of a free giveaway.
• Building engagement with readers. Before sending
readers links to your sales pages, build their trust by deliv-
ering content that provides them with great value for free.
When they realize your advice actually works, they’ll not
only trust you but also be more likely to purchasing the
products or services you have to offer.
• Making money from a variety of income streams by
selling products or services your audience wants. These
can include:
o Education such as coaching, courses, books, e-books and
seminars.
o Services such as financial, programming, design, copy-
writing and marketing.
o Digital goods such as templates, music, software, pho-
tography and games.
o Physical goods such as art, electronics, clothing, supple-
ments and food.
 Passion to Profits 231

There are many sites devoted to showing you how to build a

successful blog. These include: Backlinko, DigitalMarketer and
Smart Passive Income. And for more tips on starting and main-
taining a moneymaking blog, visit: https://smartblogger.com/
make-money-blogging.
232 Endless Income

INCOME SECRET NO. 48:

Turn a Lifetime of Knowledge Into Cash

When your children were growing up, there were probably

a lot of nights that you sat at the kitchen table, helping them
with their math or science homework. Or maybe you were an
ace at flashcards. Or maybe you helped them achieve that next
reading level through nightly lessons.
While your kids might be grown and raising their own kids,
that doesn’t mean your nights of tutoring are over.
Only this time, you could get paid for your time in actual
cash.
At Tutors.com, it costs anywhere from $25 to $100 per hour
for tutoring help in the subject areas of math, economics, lan-
guages, sciences and programming. Most tutors start at around
$11 per hour, but your pay rate varies based on the difficulty of
the subject and can increase as you gain experience.
Some high demand areas of knowledge include:
• Calculus.
• Discrete Math.
• Physics.
• Chemistry/Organic Chemistry.
• Statistics/College Statistics.
• Finance.
• Economics.
• Accounting.
• German.
• French.
• Italian
• Nursing.
 Passion to Profits 233

Another option is Chegg Tutors (https://www.chegg.com).

The company has higher requirements for its tutors, but those
tutors will be paid $20 per hour at the start.
Use your free time to help someone expand their knowledge
and earn money.
234 Endless Income

INCOME SECRET NO. 49:

Spending Time With Man’s Best Friend
Can Increase Your Income

We love our four-legged friends. They are companions and a

frequent source of amusement and love in our lives.
But vacations and emergencies that draw us away from
home means we need someone reliable to care for our dog or
cat.
That’s where the reliable pet sitter comes in.
Pet Sitters International reported that the pet sitting indus-
try reached $332 million in revenue at 720,000 households
nationally in 2014. And it’s still growing.
Pet sitting offers the pet a calm, private home rather than
the noise and anxiety of a kennel environment.
And if you’re an animal lover, this is an easy way to make
some extra money out of your own home without a lot of effort.
For pet sitting, there’s no extensive training or certifications
required.
On sites such as Rover (https://www.rover.com) or Care.
com (https://www.care.com/pet-care), you can post a profile,
which will include your rates (e.g., $25 per night or $15 to $20
per hour), your availability and photos of yourself, your family,
any pets you may have and the space your animal guest will be
staying in.
The director of operations for Rover.com estimates that a
person who treats pet sitting as a part-time job, taking two or
three dogs for two weeks out of a month will earn $1,000 per
month on average.
Someone treating pet sitting as a full-time job can earn
roughly $3,300 a month on average.
If you’re an animal lover, that’s an easy way to rake in a little
extra income doing something you already enjoy.
 Passion to Profits 235

INCOME SECRET NO. 50:

Earn $5 Every Time You Snap a Photo
With Your Mobile Phone

What are you paying per month for that rad mobile phone of
yours? It does everything, right? Places calls and texts messages.
Takes sharp, awesome photos.
What if I told you that you could make that phone pay for
itself and then some?
Instead of snapping selfies and posting them on social media
for nothing more than instant gratification, why not snap pho-
tos of other things — sunsets, landmarks, vistas, public events,
gourmet foods, adorable pets, you name it — and sell those
photos for $5 a shot?
That’s exactly what you can do with the Foap smartphone
app available on Google Play and the iTunes App Store.
With the Foap app, you can do more than just create your
own portfolio and stock it with unlimited uploads. You can
upload your photos straight from your phone and sell them
through Foap Missions to brands like Nivea, Bank of America,
Volvo Group, Absolut Vodka, Air Asia and Pepsi.
Foap is free and will not only pay you a $5 license fee for the
pictures you take, but will also give you 50% of the commission
every time you sell a photo. Foap also offers easy payouts thanks
to PayPal integration.
But that’s not all. You can also sell photos taken with your
cellphone — or digital camera — on other stock photo sites such
as Getty Images, Shutterstock, iStock, Adobe Stock, and poten-
tially earn even more.
For example, Getty Images will price a high-resolution pho-
to in its online catalogue for as high as $575 — and pay you a
20% commission if it’s sold. In this case, that’s about $143 for a
single photo each time it’s downloaded!
236 Endless Income

More often, however, Getty Images will charge its premium

access (frequent) customers much less, so your earnings on a
download might be as low as a few bucks. However, even if your
photo is priced much lower, you can earn hundreds of dollars
from its continuous use.
The only drawback to Getty Images is that it retains ex-
clusive rights to your photos, whereas other sites such iStock
(which is owned by Getty Images) allow you to sell your work
to other agencies as well. Of course, most of these services have
a lower base rate of around 15%, meaning you’ll be paid signifi-
cantly less for your photos if you choose to shop them around.
However, iStock does offer an exclusivity option that pays you
25% by default and up to 45% depending on the amount of
downloads.
And for more information on how you can become a paid
photographer and earn additional income simply by using your
smartphone, visit Foap.com, Shutterstock.com, iStockphoto.
com, GettyImages.com and Stock.Adobe.com.
Imagine what it would be like to save an extra $5,000 a month or earn an
extra $5,000 a month. Or, even better … both!

We all dream of the day we can stop worrying about money. Some people
spend decades working hard, saving their pennies, and yet never quite
seem to get there. Others take advantage of a few simple secrets … and
achieve financial freedom sooner than they ever imagined. This is your
chance to do the latter.

The tips, tools and “secrets” included in this book are responsible for
unlocking unbelievable streams of extra income … as much as $5,000 …
or more … every month … with little or no effort. The wealthy have been
using them to boost their income for years. These are methods that can
be used by almost anyone — no matter your age, your education or how
much money you have saved up.

Some of the “Income Secrets” you will find inside include:

• Become a “lazy landlord” with little-known investments that let you

collect rent without owning a single piece of real estates.

• “Supercharged” savings accounts that pay you 25 TIMES more interest.

• The three simple yet surprising words to add $172,500 to your

retirement account.

• How to turn a modest nest egg into a $1 million fortune.

• How to earn EXTRA Social Security benefits for retiring eight

years early.

• TRIPLE your dividend income with a few nearly forgotten

“high-class” stocks.

• Get paid $565 a month, for LIFE, simply for “insuring” your nest egg.

• Save up to 85% on airfare with a quick, “old school” travel tip.

• How to earn thousands doing the things you love — such as taking
photos, household crafting, knitting, fishing and more.

• Save up to 5% on every purchase while keeping your money

TWICE as safe.

• Shave 5% to 10% off your home’s total energy bill.

ISBN: 978-0-692-16879-0 190B003388