Unlocking Your Retirement Goldmine: How to Legally Tap into Your 401K and Pension Now

Welcome to another edition of the what's Next Retirement Podcast with Craig Weir. Life is full of transitions that have a financial impact now and in your future. When finances are affected, there are always questions to ask and choices to make. As an independent certified financial planner for well over 30 years, Craig has helped Americans make decisions that give them their best financial futures. The experiences with so many clients has given him a unique perspective to help with with what's next for you as you navigate the unknowns of your own life. What's next? Answers to the retirement issues on your mind.

Hey there.

Well, welcome back to Clear Direction for Retirement. This episode of Clear Direction for Retirement is loaded with some pretty awesome stuff. This is going to blow your mind. I know it. It blew my mind when I learned some of the stuff that we're going to teach you guys today. So let's just kind of dive right in. All right, so what do you do if you want to get access to your 401k or your pension, but you're still working? You know, traditional knowledge says, ah, too bad, too sad, you got to wait till you retire. And that may be the case for you. But what if, what if you want access because you want different investment options? What if you want access to those, to that pot of gold you have because you want to put together a real estate portfolio? Or maybe you want to invest in private syndications, or maybe you just want to manage it differently than the options that are available in your plan? What do you do? Or what if, what if the writing's on the wall and you realize you really need to begin doing Roth conversion, but your plan is just not going to allow it? You can't get access to your 403 plan, maybe your pension plan, your 401k, any of those kind of company retirement plans. So in today's episode, I'm going to introduce you guys to an attorney who may have a solution for you. He's really discovered a way that can open up maybe that trunk of your pot of gold a little bit earlier than what you maybe think it is. And if you'll stick around, after we kind of break down the mechanics of what we're going to talk about, I've got a tip that will supercharge this concept for some amazing tax savings for you. So Marcus Foote is joining us. He has a family law practice in Baton Rouge, Louisiana, or as they say in Louisiana, Baton Rouge, right?

That's correct.

And I've asked him to share some of his insights and experience. So welcome, Marcus. Thanks for joining Us. I hope I didn't slaughter the French at all on that deal down in Houston. Yeah, it'll do it, right? So thanks for joining us, man. I know you got a busy day going on and like you just shared with me before we went live, you got a whole lot of disruption going on to your life with your office and all those kinds of things. So my prayers go with you in rebuilding your office and all that.

Yeah, well, yeah, it happens. We move forward and we just keep going forward.

Yeah, no doubt. So let's just kind of skip to the bottom line for folks and not kind of drag it out and then we'll come back and we'll work our way through the details. So tell the podcast listeners exactly what you've discovered and how you're using that to help clients and all across the United States.

So I guess in general, what we figured out is a way to access in access to qualified funds, which would be 401ks, 403 plans, pension plans, mostly corporate plans, company plans governed by Arista in the background. I've been doing my specialty as board certified female attorney to do quadros, which is qualified domestic relations order, which is the way to transfer it usually out with a divorce. If you Google Quadrant, that's all you're going to get is a dollar divorce. And because I've been doing that as a specialty 20 years, about eight years ago, I figured out that the word divorce was not there. So it allowed me a way of accessing or triggering the federal statute by having these types of, certain types of interspousal agreements. And then we just started doing in Louisiana, we did them in Texas, we did them for two or three years and bottom line is we were to now do them all across the nation. But again, it's basically to get access where you couldn't otherwise get it.

Yeah. So in essence you're doing the same thing that somebody would do in a divorce, but you're doing it. It's accessible for all kinds of reasons other than divorce. Right. So.

Correct.

What are the most common reasons? Go ahead.

I'm sorry. Well, I'll just say this. For happily married people, it is, it is basically allowing when people misconstrue is they think that a divorce is what triggers the ability to do a qualified domestic relations order, but it's not. It's the property settlement that usually is overrelated to the divorce. So we just simply kind of came up with knowing how spousals can contract between each other. We started doing, you know, coming up with certain Types of agreements that can between spouses as legal binding that can trigger being able to do a quadrant which means it allows it to get access to the funds to transfer it to your spouse.

Well, you know, when One of our CFPs introduced me to your website and the concepts that you talk about, it just, I mean my, my financial planner brain just started going on hyperspeed. Of all the different ways that you could use this in really helping people in a really a great way to unlock funds that are kind of in this locked trunk. But what are the, what are some of the most common reasons that your clients are coming to you and they want to do this? What, what are the top three or four reasons that you see that people are doing this?

I would say probably the most common is to be able to diversify their 401k. They always have a plan that house only a certain number of options. We don't necessarily. The biggest referral network we have is other financial planners. So you get a financial planner that can say hey, I can do better than what you're, you know, you're. And manage it. If you had a bunch of money, you would want to put an IRA so that it could be managed by a qualified person, not a 1-800-number growth. So I would say just getting access for that. Probably the number one, I would say the number two reason is to put it in alternative investments. With the stock market going up and down, some people like doing alternative investments. I remember one person using their 401 candidate move into a self directed IRA and bought a restaurant. Now maybe that's a good idea, maybe that's a bad idea. I'm not in the restaurant business but you, you couldn't get that type of dynamic inside of your 401k. And so if, if they believe that could be a better money maker than you know, buying another share of stock. That's useful. The other one I would say probably one of the most used is it allows you to roll to, to roll the funds down to a spouse that might be significantly younger. Say for example the person is 69 years old and they're married to a 60 year old, well, they're going to be paying RMDs in what, two and a half years. So if you can actually move $1 million 401k down to your 60 year old spouse, you're delaying the RMDs for like nine years. And you can do the math on that. And depending on the amount, you're not going to do that for 100,000. But for $1 million. That's a significant savings.

Yeah. And you know, one of the things that I, that I thought of it was one of my first ideas that I had because a lot of our clients come to us and that's. They got that ticking clock when they're trying to get us to help them with the Roth conversion piece of it. I will kind of also do a shameless plug here that you know, if you, if you have an interest in alternative investments, you can go back to our podcast page on our website where you've probably found this at. And we, we've done two or three different separate podcasts with different real estate syndicators and that deal in different parts of the market. We don't, we don't promote those, we don't sell investments, we don't manage portfolios. But we like to provide education on things that we find that are valuable. And so if, if you're trying to get to, into the alternative investment space, a couple of the podcasts that can really help you out are on the site there too. So Marcus, are there. I don't mean to rep, but I.

Will say, I will say this. We've actually, that reminded me of one when you mentioned that we actually got hired by a couple of clients and what they did was one little known thing is you don't actually pay the 10% early withdrawal account. You know, you have a 401k. If you take your money out before you 59 and a half you'd be paying the 10%. Colony divorce attorneys have been using this federal exemption for years and years and years when you do a quadra if you don't pay the 10% penalty. So we have, I've had at least three or four clients go and just liquid a large part of their 401k in order to not just roll it to a self directed IRA but cash it out without the 10% penalty in order to invest it into other types of real estate. Other types of investment. We had one that would do it in these oil leases and then take a tax, you know, deduction. I mean there are a lot of complicated type stuff, but it allows it to get access at a lower tax rate and without the 10% penalty.

So then Marcus, are you saying that once they do the quadro that they can gain access to those funds and not pay the 10% penalty? Is that what you just told us?

That's exactly right, yes. You really don't into an ira, Cash it out.

That's pretty big. That opens up a lot of Operations, right? Yeah, yeah, yeah. So that. That'd be an interesting planning concept, is to see how that compares to putting it into a Roth and being able to have all the benefits tax free if you're going to pay the tax anyway. But it also depends, kind of at the point that you made, what are your other. What are the other taxes going on in your life where maybe you need some of the passive losses that some of the active owned real estate or even passive real estate can offer to you? So far, what we've got, you could.

Do a combination of the two. If you have a $500,000, you want to get access to it, you would do a $500,000 quadra, but you might only then convert a couple hundred thousand. You can actually liquidate. So if you have a $500,000 quadra, you can say, hey, we roll 400 to my IRA or my spouse's IRA and liquidate 100. And I've seen people use that to pay for the cost of the Roth conversions, where you can do a hybrid, a partial rollover, and a partial liquidation.

That's cool. That's good to know that partials can be done, too. So so far where we are is we've got a man or wife who have a large or have any amount of money. We'll talk about some of the limitations you talked to me about before. Maybe we can get into that. But as long as you have just a reasonable amount in a 401k or 403 or pension plan, it oftentimes does make sense. Marcus can talk to you about some of the limitations here in just a minute, but we've got, so far, one spouse that has got a lot of money sitting in those company retirement plans, and you want to get access. And so with this in marriage quadra, which is a term that Marcus trademarked. Right. Or copyright, whichever it is that you do with those things.

Federal law, but we trademarked the phrase and kind of came up with our own system.

Yeah. Kind of like I have with Rothology, kind of the same deal, right? Yes, sir. So. So now what we've got is we've got a way for you to get access to those funds by. By basically entering into a relationship with your spouse that is legally binding, that the money is now in their name, and you can use that for whatever benefit reasons, and we're throwing out a few of them. You may have your own reasons why you want to get access, but we're giving you kind of the big ones. So, Marcus, are there. Are there limitations on the dollar amounts that can be done, on the age at which this can be done. Are there any kind of limitations people need to be aware of?

No specific limitations would be. No, would be the type of plan would be the only limitation. You could do it at any, you know, when we talk about amounts, you can do it in any amount. Now, obviously, whether it's justified, if you're talking about, you know, 75,000 or $50,000, it's not worth it. You can do it alone. You can do some other mechanism. By and large, you can do any amount. We've seen that. I would say the minimum would probably be close to 150 to 200,000. It's at that point. It's not. If you go below that, it would likely not be worth it. As far as the timing, there isn't any limitation to that effect. We basically kind of say is that there's maybe five of these different ways you can get access, like a retirement, hardship, divorce, things of that. Basically, what we did was you created a sixth trigger to get access to your funds before you retire.

And one thing we need to also just kind of tell people is that this isn't available in every state. Right. So you have to explain to them the limitations in the states that they live in.

So theoretically, federal law, erisa, federal law applies to all the states. The reason why I say it's not applicable in every state is because certain states have their own state civil procedure, and their state procedural rules will prevent certain types of spousal agreements that are necessary to trigger the Quadro statute. So we've done them in 30 states. We have only been turned down in about two. There's the other states. We just haven't had a test case yet, so to speak. But. But again, it's not because that. It's because that state has a procedure, a specific law, and the two just aren't meshing together. Well.

Okay. And so, I mean, this is, you know, for. For me, after being. Being in the business for a long time and for probably everybody that's listening in on this, it sounds like a really different game plan. And, um, if, I guess just understanding a little bit about the type of people that listen into our podcast, they're. They're at a place in their life that they're also kind of going to be thinking, all right, so am I just kind of waving all kinds of red flags and the IRS is going to come audit me? Do I have. Do I have issues with the IRS to deal with? And then one thing that Maybe, you know, I'd like you to talk about, too, is what happens once you get that money from you to your spouse? What happens if somebody dies or there's a divorce that you're not planning on? What happens now?

All right, so I'll handle the second one first. This is an actual transaction. This is not a simulation. It's not some kind of shame transaction. This is a transaction. So if your spouse were to divorce you, you know, it's an enforceable transaction. Now, there are some things that we do to, I guess, minimize the risk, so to speak. So, for example, if you had a. I'm just going to give an example. If you had a $800,000 401k, you don't necessarily have to get all 800,000. You can say, hey, you get 400,000, I get 400,000. And we do the. In marriage closure on the 400,000 that's going to your spouse. So you're. You're still not necessarily losing anything. You're kind of replacing it somewhere else. If you wanted to give her the entire 800,000 a. You either have to or him. I'm not in sexes here. Could be him or her. You know, Whoever has the 401k, you would have to either say that's at risk if we get a divorce or say she gets the 401k, I get part of the pension. You bring in some other asset to kind of somewhat equalize the risk. So again, it is an actual transaction. If people were to die, it was not going to be in your estate. So you can talk to an estate planner. Obviously, you want to make sure the beneficiaries go back to your spouse. I mean, you're not trying to actually cause more marital turmoil than might already exist. In that regard, regarding the irs, all my answer could be is this.

We've been.

The first one like this we did was in 2013. I've given three or four national seminars, and we have not had a single person report back. They've had any trouble because of two reasons. One, the Department of Labor is what governs the ERISA statute, so it wouldn't be the irs. The IRS won't get involved unless you actually liquidate it. Well, the 1099 on a quadrille liquidation is the exact look as the 1099 for the regular divorce quadra, which I've been doing for 25 years now. So there's almost no scenario that I can come through where the IRS is going to have an issue. The only snafu is the Plan needs to know that all the I's have been dotted and all the T's are going to be crossed. And so that's the only issue is you may get some pushback from the plan. If they just are seeing this for the first time, that's really the risk.

Okay, all right, so that's a great segue into kind of where my. Where my next question is for you is just give us, we don't need the nitty gritty details. They can, they can get that from you when they talk to you, but give us kind of a general overview. What are the steps involved, how much glass do they have to crawl through, how long a process is this just kind of big picture for us?

All right. So I would say on process itself, I would say depending on the state will take anywhere from two and a half months being the fastest that I've seen to maybe four months if you're in some of the states that don't go so fast, I guess as far as what you would do if you were interested, for example, if you had a client and you know, we would send you our 2 page client information that just gives, you know, names, addresses, ages, dates of marriage, things of that sort. Nothing too, too specific. And a copy of the 401k or whatever the plan's in this. So then we can see that it's a qualified plan. Right? It can be a non qualified plan. There are certain types of 403 that may get hiccups here and there. So. So you get that information. We would do free consultations. I have a calendar link that my assistant sent out to do free consultations just to help out the advisor or the client to the advisor. Once they would hire us. So I guess that's where your question starts. Once they would hire us, we do a zoom, usually within the first week or two. We have a network of attorneys because I'm not licensed in 50 states or 30 states. So we have a network of attorneys that we've built over the years. We set up a three way conference, talk about what the potential risks are, we'll talk about how much they want to transfer, we talk about any other questions that they may have. We try to give them the documents. And what we're doing is we're creating an interspousal agreement that's specific to that state. Once the interspousal agreement is signed, we file it into court to enforce that agreement. Because remember, they don't have a pending divorce petition at this point.

So you.

There isn't those Names are presumably not in the. In. In the suit. And this actually gets filed and voided, signed and signed off on by a judge. Once the judge signs it, assume the judge signs it. We would then send it to the plan, literally, just like it was a regular divorce quadra. We, you know, we changed some of the language and retrofit what a regular quadra would look like. And then the plan qualifies it in the same process as a regular divorce quadra. And then once we get the qualification letter back, theoretically my job and the local attorney's job is over. Right. Because what they would do with it with their money, whether it's a financial advisor or they're doing it on their own, you know, I'm not gonna. I'm not giving them financial advice. I'm kind of moving it from one bucket of money to the other bucket of money legally. And then, you know, they handle the financial planning themselves.

Yeah. Okay. So, I mean, it has been, like, blown my mind. I didn't. You know, it's kind of like when I discovered some of the principles I discovered with Roth conversion stuff and that we. You need to do it faster than normal, higher tax rate than what you believe, and that's where the goodies are. That blew my mind. And this has been a similar concept to me. It's like, holy smokes. Wow. This could really. It gives the folks that are still working that have got a big pension amount out there, they can get access to that if they got the 403BS, the 401ks, any of those company retirement plans. Now all of a sudden, you have ways to get access to those, and it kind of goes into the bonus idea that I promised at the up front. So let me give you kind of an. I kind of Craig's spin on. On things, and then I'll wrap up of how you can get a hold of Marcus and all those kinds of things. So you may want to get access to this, your pot of gold, if you will, for investment purposes. And I think that's great. And that's probably a really good reason to do that. Maybe you're a do it yourselfer and you got all your other money sitting over at Vanguard, and you do all your own thing wherever your custodian is, and you. You kind of look at your 401k statement with a little disdain every time it comes in because you wish you had better options or they aren't performing as well, or you just wish you had more control over it, or maybe you have a financial investment advisor that you really like and they've done well for you and you'd like to not have to worry about the 401k anymore. So those are all great. I think they're great reasons to get out into alternatives. I think they're great reason to get into all the things we've talked about across the podcast. All those things are fantastic. But if for no other reason, if I was in this circumstance of you as a client that maybe has that, I would do it. If for no other reason, I would do it for the potential of what the Roth conversion can do for you. And that's only because we've seen the numbers. Imagine if you had all the benefits of those other investments, but all the gains and all the income was totally tax free. And what if you got started on it five years, 10 years earlier because you are going to maybe still work for that long, but now you can get started earlier. And it is totally a myth that you should not convert while you're still working at a higher tax bracket. We deal with it every single week. And every time we run the numbers, Every is strong, 99% of the time that we run the numbers. If you, you're better off to convert now the smaller balance than to leave it deferred for another five or 10 years and pay tax on a higher balance. I don't care what your tax rate's going to be in the future. The math still works for you because of all the required minimum distributions that you're going to avoid over the rest of your lifetime. So what this allows you to do is it gives you a lot more time. Like the illustration that Marcus gave on the 69 and 60 year old. It gives you a lot more time before RMD's beginning. You know, our average client avoids almost $3 million of taxes through using our accelerated Roth conversion strategies. And they don't have to buy any financial products to do it. They don't have to change investment advisors. They just simply get with the program. And by you getting the money out of your pension and out of your 401k instead of waiting until you retire, then you're going to be able to convert now. And you can do it within the concept of, I mean, within the scope of a really comprehensive financial plan. So I want to give you two ways that you can proceed with the information from today. First of all, the show notes here in this podcast, we're going to put Marcus's contact information so you can connect directly with him. If you want to do it that way, you can go direct to him. He can talk to you. Marcus and I do not have any financial agreement. There's no kickback he gets from me. I don't get kickbacks on your fees. Right, Marcus?

That's right.

We don't. We don't share any of that.

I legally couldn't do that.

Yeah, Nor could I. Yeah, but just because there are people out there that they wonder, you know, what's in it for me? And what's in it for me is you have a better life and maybe somehow we add enough value that you say, well, gee, maybe they can help me with some other things. So you're going to have a way to get a hold of Marcus if you go down in the show notes. And I'm also going to provide you a link to schedule an appointment with one of our CFPs, maybe to put together a comprehensive plan. Maybe you need, maybe you want to ask questions that maybe Marcus isn't the right. Maybe he is not the right person to go to for financial advice. He's a great guy to go to, obviously, for legal advice. But maybe what you need to know is, hey, is this really a viable alternative for me? Is this something I should consider and that needs to be considered within the scope of what are your, what's your, what are your retirement objectives? What kind of income are you going to need? What are your other assets, what's your tax situation, all those kinds of things. And wrap that into now if I do, this is a Roth conversion, part of my future. And you may have limiting factors where we say, you know, really, you probably just need to go do the in marriage quadro. And we may or may not be able to help with comprehensive financial planning. Or the CFP may say, and you, you're knocking down the dominoes all through. There's. This is going to be a huge win for you all through the process. So there'll be a link down below in the show notes that you can click through on that as well. So, Marcus, thank you so much for taking the time to join me today. I hope people reach out. You know, I know that we've educated you. You came in and you educated our, our staff as CFPs. And it's top of mind for them. And they're looking for opportunities as the months go by to where we can help clients more by sending them to you. So thank you for kind of sharing the info. I don't know whether you've thought about it or not, but, dude, you need to write a book about this stuff. You need to write a book. And.

Yeah, I know I, I've had one or two national articles published, but that, that's pretty much about it. You know, at some point, you know, I, I rely a lot of the referrals on. On advisors, you know, so I'm not trying to steal anybody's thunder. I'm trying to help out advisors and help them work it to their own.

Sure, yeah. And, and I'm sure everybody appreciates that, and you probably have got all the business you probably want, but there's an audience out there that really needs to hear this, that maybe don't even have a financial advisor. Right. So, you know, as always, guys, we don't sell financial products. We don't want to manage your investments. We only, we only want to provide advice that helps you make the best possible decision. So if you aren't already, subscribe to this podcast and you'll be among the first that's going to get notified when new episodes drop. Mentioned to you that we've got the podcast on the alternative investments. And pretty soon, in fact, within the next week or two, I've got a time booked. We're gonna have a fascinating discussion with a Medicare consultant on how to save a bundle on Medicare premiums. And guess what? We're gonna use Craig as the guinea pig. We're gonna just. They're gonna go in and they're gonna run our scenario. They're gonna learn about us and they're gonna. And you're gonna get to hear it live on the podcast of how. How it could work for you as well. You know, my wife and I are both 64, pushing that magic 65. And so we're in the perfect age A few months from now. We got to make some of those decisions. So if you subscribe to the podcast, you'll know when that comes out and you'll get to learn all about Craig and you'll get to see kind of how that maybe could work for you as well. Marcus, before we go, do you have any final comments that you want to tell anybody, anything?

I appreciate that. The last thing I will tell you is this. On our process, I said there was always a risk, and I always want to make sure the advisors treat their clients and their clients are treated correctly. So not trying to sound like a news car salesman, but we actually give a substantial partial refund if the process doesn't work. So we try to make it as risk free as possible. I don't want the clients to be in any worse situation than before they met me. So the goal is to help people and they're the advisors, clients, and not to put anybody at a disadvantage.

Yeah, that's awesome. Great. Well, again, thanks a lot for your time and looking forward to getting to know you better and working between our two organizations.

Absolutely.

I appreciate it. For those of you listening in. You bet. For those of you listening in, have a great rest of your week and God bless.

Investment advisory services offered through Q3 Advisors. This presentation is for educational and informational purposes only and is not intended to be individualized financial, tax or investment advice.