The Mark Perlberg CPA Podcast
The Mark Perlberg CPA Podcast
EP 72 - Holistic Wealth Planning w/ Dave Walcott
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Discover wealth-building secrets the ultra-wealthy rarely share. Join us as Dave Walcott leads a transformative discussion on holistic tax planning, moving beyond standard strategies like cost segregation. Learn how compounding wealth through strategic tax planning can yield greater returns than traditional investments. With insights from his personal journey, Dave introduces a five-phase framework to navigate investments with clarity, focused on financial independence.
We'll explore the shift from corporate life to a successful tax planning practice, highlighting the impact of continuous skill-building. Challenge the Wall Street mindset by understanding how the ultra-wealthy favor tax-efficient investments, such as real estate and private equity, over stocks and 401ks.
We’ll also delve into innovative strategies for tax-free 401k withdrawals, utilizing dependent care credits to avoid penalties, and compare the tax benefits of oil and gas versus real estate within a diversified portfolio. As the year ends, our expert tips will help you maximize savings and reinforce your path to financial freedom. to learn more about Dave go to: https://pantheoninvest.com/
Welcome to the show everybody. This is Mark Perrover here and I'm excited to talk with Dave Walcott. Dave does a lot of exciting stuff with raising capital here. We talk a lot about the concept of holistic wealth tax planning. Holistic tax planning where we're looking at everything here right.
Speaker 1:Tax planning is more than just cost segregation and bonus depreciation, especially as that bonus phases out. So there are so many other things we want to look at here as where we're putting our money, what are the tax benefits and also the economic and wealth building benefits associated with this. Also, for some of you guys, and especially our clients, getting six-figure refunds, it's not just about the initial tax savings, but where are you going to deploy that cash so it grows and you're building and compounding your wealth and, at the same time, minimizing your taxes. So we're going to have a wonderful conversation with Dave here, who talks about that topic and how you could be thinking about this and all these different opportunities to invest in the tax incentives associated with it. So, dave, why don't you introduce yourself in 60 seconds or less?
Speaker 2:Yeah, absolutely, mark. So yeah, I can kind of help the audience kind of frame a little bit with my origin story. And for me, I was raised in a middle-class family in Connecticut. For me, I was raised in a middle-class family in Connecticut and I was taught that the recipe for success was to go to school, get good grades, then you're going to get a job and life would just work out right. So I followed down that path, had the opportunity to serve my country in the Marine Corps, did the ROTC program for about four years, and after that I transitioned into corporate America and I quickly lost that sense of purpose and that sense of mission, mark, that you know just wasn't there on the corporate side of things.
Speaker 2:And then at the same time my wife and I started raising a family. We had an 18-month month old running around kind of ruling the roost, and on October 24th 2000, we literally had triplets and quadrupled the size of our family. And so the first thing that was going through my head, mark, was just how am I going to provide for financial security for my family, right, I mean, I literally just quadrupled the size of it. So this was the main thing that really propelled me to then try to figure out how are the ultra wealthy, the top 1%, really building wealth? Because I knew it wasn't as a retail investor in the stock market.
Speaker 2:After talking to my financial planner, he kind of said the same thing that everyone before him said, which was max out your 401k. You know you can do 529 plans for the kids, get some state tax deductions right, and I just knew that wasn't for me. So then I started basically investing in all kinds of alternative assets, everything from oil and gas. Investing in all kinds of alternative assets, everything from oil and gas, single family real estate, commercial, you know, multifamily syndications, office, raw land, you name it. And then so fast forward 20 years. And then I really started Pantheon as really a place for people to understand, you know how to basically to uh, how they could understand what is this blueprint of the ultra wealthy right? How can we teach people how to do this? What is the system for building uh wealth? And so that's when I wrote my book, the holistic wealth strategy.
Speaker 1:Awesome. So so, for someone who's just now being exposed to this idea what's? Where do they start? What's the what's the first step here?
Speaker 2:So great question, right it. And in my book, right it's it's all about really creating a crystal clear vision for yourself, because if you don't have a target, you're going to miss every time, right? So understanding very clearly where it is that you want to go and creating that as your foundation, and then we have a simple five phase framework with which you can build your wealth.
Speaker 1:So when we think about where we want to end up. So what you're saying here is we begin with the end in mind and you want to maybe reverse engineer. What kind of investments do we need to make? What kind of savings do we have? What's that first step? Kind of look like.
Speaker 2:Yeah. So it's interesting, mark, right? I think actually more of this wealth building game is, you know, more than 50% of it is really the psychology of it, right? So, again, we're trying to build wealth, but what for? We want to achieve financial independence. What for? Because you want freedom of time to travel with your family, maybe. Maybe you want to see your aging parents more, maybe you want to spend time kind of creating more relationships or traveling more, right? But it's all about when you can create that vision for yourself and truly understand where you're going and create passion behind that. That that's what's going to propel you to get on the path to actually succeeding.
Speaker 1:Very cool, Very cool to propel you to get on the path to actually succeeding. Very cool, Very cool. So one of the things I noticed about you is you have your hands in so many different things here. So you've discussed multifamily, alternative assets, infinite banking, oil and gas self-storage. You've raised capital and evaluated all these different investment concepts here. How does someone not get overwhelmed with all these ideas and determine what's the best way to diversify or place my money in? How does someone make sense of all these opportunities and create a game plan?
Speaker 2:Yeah, another good question, mark, and maybe I'll kind of just hold that and maybe I think what would be great context, mark, and maybe I'll kind of just hold that and maybe I think what would be great context for the listeners. I can kind of walk through these five simple phases which really can get you to that right. So phase number one is really all about yourself and understanding that you are your greatest asset, so investing in your education, that you are your greatest asset, so investing in your education, investing in your health, creating goals for yourself, creating habits to be able to support those goals and also getting rid of limiting beliefs right, that we all have, right, we all grew up with certain money mindsets that we have, you know, from our childhood. And so what is really driving you today? Right, but when you can create those goals that are going to get you to where you want to go, and then starting to create those right habits, you can really, you know, start to create the right mindset, right? So mindset is really phase number one. And after we get into, after phase number one, we move to phase number two, which is all about increasing your financial IQ. And in your financial IQ, this is, you know increasing.
Speaker 2:You know what you understand around wealth, right, there's so many different things. So, for instance, on the tax side, right, most people are taught that taxes are just a penalty, something that you have to pay right. But when you actually understand that the tax code is a series of incentives for business owners and entrepreneurs, and when you can understand that, then you can actually start to invest on the right side of the equation, right, and take advantage of some of that tax code. So that's, that's a good example. Another example about you know, increasing your financial IQ is you know, most of us are taught in traditional financial education that we're supposed to defer taxes and things like government sponsored qualified plants. But wouldn't you rather pay taxes on the seed rather than the harvest? Right, I would, right. And when I figured that out and I did the math on that, I actually exited my 401k. So, getting smarter on some of these concepts that you know, we just you know we're really taught by conventional thinking and wall street, um, and really starting to get smarter on, you know, building out your own financial IQ is key.
Speaker 2:And then we move into phase three. And phase three, mark, is all about creating an infrastructure around your wealth right. So many of us want to just, you know, go after that next investment and increase our returns, and that's all exciting, but you know, for instance, you need to create an asset protection plan right, because we have to. We're not only building wealth, but we want to preserve our wealth right. So understanding estate planning, asset protection is really crucial.
Speaker 2:This is where we actually also talk about tax strategy, and I mean it took me so many years I actually fired five different CPA firms over the years of having many, many large, you know six-figure checks that I had to write to the IRS and always being blindsided by them, until I finally found out that you know there's something called proactive tax planning, that you can actually put a strategy in place to mitigate that. So this is where tax strategy comes in. We're also big advocates on infinite banking and using whole life insurance policies to actually control your wealth right and manage things and also use this as a multiplier where you can house your capital and grow it tax free. You can give it to your heirs completely tax free. You certainly have a death benefit that's associated with it and you can actually borrow against it to go invest in other opportunities or if your business needed cash right for a quarter. So we're kind of creating that infrastructure.
Speaker 2:And then, in phase four, we move into that which we call asset repositioning, and most Americans have their capital tied up in two places. It's either in track equity in their primary residences right, which the rate of return on your equity in a house is zero, or it's trapped in government sponsored qualified plants right, where the government is telling you when you can access your money, how much money you can take out and, by the way, they control the tax rate now and in the future, right. So I think this is a big opportunity for people to really look at how can they optimize their existing portfolio into assets that we like, which are really non-correlated to the stock market, and provide a trifecta which is really providing passive income, tax efficiency and then forced appreciation on the asset. And then, lastly I'll hit the last one here, mark, and then pause, but this is, you know, your original question how does an investor choose?
Speaker 2:Phase five is all about building massive passive income. So I know your listeners are probably familiar with Kiyosaki, right? This is all about buying tangible assets that reduce your taxes, create passive income and really grow your asset base and value, and you know we have been focused on three core sectors, which is energy, real estate and then private credit and debt, and we like those because of that trifecta approach. And then it's all about really understanding what that investor's unique DNA is and creating a buy box or strike zone for what types of opportunities you're looking for and then trying to build out your portfolio from there.
Speaker 1:Awesome. So I took some notes on some thoughts here as you were talking, and one of the things I've talked about as well. While I'm very enthusiastic about real estate investing and other assets and oil and gas and all these other vehicles, the number one investment I've found is that I've ever made it was into my own development. One investment I've found is that I've ever made it was into my own development. So you know, I wouldn't be here if I didn't. You know what I first, what was the seed and the domino to where I am right now, was I was really bored at my corporate job and I had just bought a house. I had no money put all my money into my house. I was going to the Coinstar machine, even though I had a CPA license and working for a big corporation. I had no money and I so I. But I purchased a membership to the American Institute of Certified Tax Planners and the way I purchased it was by taking PayPal debt and they said if you pay it off in three months, it will, you'll pay no interest on the purchase. It was like a $3,500 initial payment and that $3,500 payment changed my life and led to what I have now, which is a tax planning focused practice, which wouldn't even exist if I didn't understand the concepts of tax planning that I learned there.
Speaker 1:And another great investment can be in an assistant. A really good hire and assistant can give you a three, four, x return on investment. But at a certain point we got to diversify and then and then we have, once we build, an effective, profitable system here. Now we look into these exciting vehicles and investing into your development, investing into the right people around you and mentors, only allows you to put more into these other things. And when we have when we were just talking to a client here client did pretty good profit, like four and a half to five. Actually, we're projecting around five to six million in profit for the client and we're going to completely eliminate his taxes through a combination of maybe four or five strategies.
Speaker 1:And with one of the strategies he says well, hey, I was talking to my financial advisor and he talked about putting this money into these stocks here or this fund there. I said that's great. But he's like well, I also want to put into these things that you're telling me about and I'm like listen, you want to prioritize the money into your tax planning vehicles because a really good tax plan and a really good implementation of a tax plan will create an immediate ROI, oftentimes of a 5x. So we were exploring a vehicle where it was a $100,000 investment.
Speaker 1:In this example he would have had to invest I think it was about $300,000 of the tax savings would have been like $800,000 for the implementation of the strategy. That savings is then invested into the stocks, the passive vehicles, and you have more of it now to put into the oil and gas and to put into PPLI and to put into all these other syndicated investments. So, just like you said in the order of operations here you maximize your profitability, you protect it from the IRS and some of these things kind of cross over, because some of your investments, like oil and gas, will help reduce your IRS obligations. But the tax savings and the tax plan creates such an amazing ROI as well that allows you to really really compound your wealth now with all these tax advantage investment vehicles.
Speaker 2:Yeah. So, mark, that's a great point, right? And you know, it really frustrates me some of the thinking that comes from Wall Street, right, that comes from Wall Street, right. So if this business owner had a great year and he's got 4 million in profit and they're telling him to put it in Wall Street, in stocks, bonds, mutual funds, you know the reason. You have to understand that. The reason that they're doing that is for their agenda, because they make money on assets under management. So as much money as they have of yours, whether the market goes up or down, they're charging fees on that.
Speaker 2:I run a podcast myself which you were on just came out today Mark Wealth Strategy Secrets of the Ultra Wealthy, and I interviewed Michael Sonnenfeld who runs Tiger 21. They have there's over 1300. Verse average net worth is over a hundred million and you know we talked through asset allocation model and their exposure to public equities is literally only 22%. Okay, and so what does? And the other assets classes that they're in, mostly real estate, private equity right? And then they have some fixed income and cash are the key buckets. So what does that tell you? Right, it tells you that the investors, who are the best of the best, understand the you know limited potential of investing in stocks. Right, and they're investing in these other assets, you know, just like Mark was pointing out, because of the nature of the return. They're tax efficient, they've got this passive income component and they also grow.
Speaker 1:And also here's another thing when I was working at a big corporation and a lot of group think we're going to run a bunch of auditors everybody was just trying to put as much as they could into their 401ks and they had some stock incentives that were decent.
Speaker 1:But what people don't realize here is you are converting the preferable dividend and capital gains rates into ordinary income rates and you can't take the money out until you're 59 and a half. So this idea of deferring while sometimes it makes sense, we don't know what bracket you're going to be in when you actually want to take the money out and instead of it being taxed at 0, 15 or 20 percent, this could be taxed at whatever your marginal rate is at that time. Now there are strategies to mitigate it. But you know this idea, especially in corporate America, that oh, I'm just putting money into my 401k, my boss has me handled. He puts a 3% match. I'll just get your free money, get the match, but you have the opportunity to put anything beyond that match. You want to start talking to some professionals about what else is out there. Where else can I invest my money? Where they're not matching it, where I'm not getting free money and where I can grow this and amplify my wealth at maybe a more advantageous manner.
Speaker 2:Yeah, good point, mark. So let me give the audience, um, a really clear example here of why I think the whole wall street um, you know Street model is broken. Okay, so basically their model is that you're going to build this nest egg for retirement and let's say that you've built up a $4 million nest egg at age 65. And then what they're gonna do is they're gonna run that through a Monte Carlo simulation and say that you can, you know, withdraw 4% a year. It's actually less than that right now, but let's be conservative. We'll say, okay, you can do 4%, so you've worked your entire life, you've put all of that in there, and then, at 4%, that's 160K in income.
Speaker 2:But they've really neglected to point out the taxes, fees and inflation. So you're the CPA, so you tell me I'm guessing that's more like a net income of 100, 110k, right? Especially if you roll it out into the future. So you know, let's say you're living off of 110K, right there, and you just hope you don't outlive your money, right? And now let's compare that scenario to the passive investing approach, right, where you have $4 million in real estate, private equity, oil and gas, these different types of investments, right, and they're all tax efficient. The income is coming through tax-free, so that same 160K is actually 320K if you can get to tax zero, which I'm sure Mark could help you get there. So now you've literally doubled your income. And oh, by the way, instead of reducing your nest egg by 4% and killing your golden goose every year, it actually keeps growing, so that 320K continues to grow each decade that you have, and that's how you actually build legacy wealth.
Speaker 1:Yeah, I think we had. I think you know the guests that I had the Wealth Without Wall Street guys. Oh, yeah, yeah.
Speaker 2:They're awesome.
Speaker 1:Yeah, funny guys too, but same thing. And you know, one thing I've learned over time is following the masses and just doing what's closest to you and what your peers are doing around you Oftentimes is not the most advantageous thing to do here. And you really got to educate yourself and you know there's so much minutia and you don't realize you're getting hit in the head with all these expenses.
Speaker 2:No-transcript 100% Mark.
Speaker 1:Yeah, Now here's something cool for the tax geeks out there. Now, if you are in a $0 bracket and you want to pull money out of your 401k and you're not 59 and a half, what we found is we can activate the dependent care credit so we're actually timing distributions so that 10% early withdrawal penalty it gets completely offset by the dependent care credits. Now it can't get offset by your losses, because it's a penalty, and you can't offset a penalty by losses, but you can offset it with your tax credits. So what we're doing now with our clients that have moved into full-time real estate investing or they're in $0 tax brackets because of the depreciation or other events we're now looking at, if they want to pull the money out of their 401ks early and to invest it into other vehicles, such as what you do we time it. So we time it with the dependent care credits so they're activated to completely eliminate that 10% early withdrawal penalty when they pull the money out.
Speaker 2:Yeah, absolutely love that, and I would encourage people to really do the math right, because that's what I did and I got to a point where I was investing in all of these alternative assets and it was going really well until, you know, I ran out of capital, right. So I looked at that 401k money that I had and I actually built an entire calculator for it and, you know, looked at even, okay, well, even if I pay the 10%, right, if I pay the 10% on a million today, I'd rather do that than have it grow at 7%, which is really like 2% over the next 20 years, right, um. So I think when you draw the math out, it's really interesting and we have a calculator, um, that you know we could share with people. But it's interesting because the model is if you literally let's say you, you have a hundred K and the 401k, you pay the 10% penalty, you pay 35% in taxes, you then have a net investable 55K and if you run this out over 20 years, mark, and you compound it tax-free, at a 20% rate, right, which you should be able to get in a syndication rate, right, which you should be able to get in a syndication right with tax advantages keep rolling it over.
Speaker 2:Every five years it comes out to over $2 million had I kept that same 100K and in the 401K it comes out to about 265 after taxes. Yeah, so do the math into the future and really understand. You know okay. Where am I really taking risk?
Speaker 1:Yeah. So and now talking about alternative investments here and I know you're raising capital for oil and gas here and a lot of folks are getting really excited about this stuff, especially our clients who are burnt out from landlording here I had a couple of questions on what you see as like how long do you think these funds run here? Because one of the things I see when we look at oil and gas versus real estate real estate is really good for the exits. The velocity of cash aside from the refis may not be as good here and the tax savings may not be as good for tax reduction, but there's other really good benefits with real estate. But what I see here with oil and gas here is that you may not be able to exit as strongly as with real estate, or I don't even kind of, honestly, I don't know what the exit looks like, how long these things go until they run their course. What are you seeing in the world of oil and gas here on? What's the long-term game plan for these investments?
Speaker 2:Yeah, I think there's some different models out there, but the current deal that we have right now I can speak to that because that's what I'm familiar with right now. But I mean, mark, this is a there's a 60 percent IRR. That's crazy, you know. With this is exactly because when you include the tax benefits and then the return of capital inside of you have almost all all your capital and the tax benefits inside of 18 months. You're basically whole, you know. So that IRR basis is really huge.
Speaker 2:So, and to your point, you know, if you're looking at you know velocity of capital and trying to grow your wealth as quickly as possible, you know that's really significant. So most of these funds are, you know, built to. You know they're either exploratory and nature right, where you know you can increase the amount of cash flow you know, based on the exploration of oil and gas. Or, in our case, we have existing producing wells with a lot of you know brand names Conoco, phillips, oxy and a lot of the big guys that are out there and it's diversified across 100 different wells. The operator has deployed over 3 billion and they have a fantastic track record. So you know, one of the challenges I think in the market has been trying to identify really solid operating partners who have a great track record and who also have a unique model. You know you don't want to get into something that's too exploratory because the risk rate is too high.
Speaker 1:Yeah, so yeah, and you know our clients are seeing really nice returns on these types of investments.
Speaker 1:And I think we started off and we still are very strongly focused on real estate often, but we got to know everything because people need money to afford the real estate.
Speaker 1:But we often find that people are bottlenecked by lack of liquidity with their real estate. We often find that people are bottlenecked by lack of liquidity with their real estate. They're deploying so much of their capital into the real estate and what I really like with oil and gas especially if you don't have real estate, professional tax status or short-term rental so you're creating all these losses or have access to all these losses, but they're not going to reduce your taxes. You can put your money into oil and gas Because when they eventually start profiting and generating positive cash flow, if we're not redeploying it right back into the oil and gas, we run the risk of eventually paying taxes on our profits from the oil and gas. But the profits are somewhat offset by the depletion deduction and if you have suspended losses, unused losses from the real estate, those are passive losses and those can offset the profit on the oil and gas. Now that's really cool, so you can have the benefits of tax reduction and potentially also not pay taxes on the profitability of this thing.
Speaker 2:Yeah. So let me talk about investment thesis just for a moment here, mark, and why this is also beneficial, right? So when I mentioned earlier that we focus on energy, private credit and also real estate, one of the reasons is because of the macro, the strong fundamentals, right, where the macroeconomics are in our favor, from supply and demand, so I don't care. You know what industry are you in, where you live. In the world, the demand for energy consumption is continuing to rise, especially with the increase in AI these days, right? So we always want to be investing for the long term and investing. You know where the puck is going. So that's one of the reasons also why we really like energy and as much as we love real estate.
Speaker 2:Just think about it If you're too exposed in one sector, you've got interest rate risk right In real estate, well, you don't have that in oil and gas, right? So that's really good. And then also, you know hedging and being in a commodity like this, you know, especially with the fluctuating waning value of the dollar, right. I mean, which do you think is more valuable? Right? A barrel of oil, right? Or so many dollars, right? Well, that oil is going to be able to get you really far. So I think there's some different things that you want to kind of think about in terms of how you do your portfolio construction right and you know again, having some diversification into a different sector can be very beneficial.
Speaker 1:Yeah, really cool stuff here we also have for those of you who have a lot of money sitting in that 401k and IRA and you're like, man, what am I going to do to mitigate the taxes here? I mean there's a lot of ways, there's many ways to mitigate it. We do know of a way where you can invest in oil and gas through your self-directed, through your IRA or 401k, which is tax deferred, and if you time the investment in your oil and gas, when you time it, when you move it into the Roth at the right time, you can mitigate the taxation on that conversion. At the right time you can mitigate the taxation on that conversion and we've seen it mitigate as much as I would say 50%, without pushing the envelope too far, but 50% mitigation of the taxation on the conversion because of the valuation of the investment at the time of conversion, which is really cool stuff here for the tax geeks such as myself out there. So a lot of really exciting things that I love with oil and gas and even qualified opportunity zone funds with oil and gas, yes, yeah. So I mean it's such a versatile thing.
Speaker 1:And then we see these folks saying, oh yeah, well, what about electronic vehicles. I was in California and saw all these Teslas. What makes me think that no one wants oil and gas? In a year, I'm like dude. Everything around you is a product of oil and gas. Your computer has products of petroleum and everything is using it. It's not going away anytime soon.
Speaker 2:No for sure. I mean, it has a long way to go. No for sure it has a long way to go. People forget to think all of the mining that went into extracting for that lithium battery that you have, you know, we do and that you know, not only do we need these EVs and you know ESG, all of these green products to come online, but we also need fossil fuels. We need everything to support the demand.
Speaker 1:Yeah, absolutely Well, dave, I know you got a flight and I really enjoy our conversation here and it's always fun talking about these investment vehicles and you know there's so much more I'd love to learn from you and, I imagine, our audience as well, because this is, I mean, we only touched the surface of what could be a very, very loaded topic here, of where you're going to invest, to build the wealth and also some of the concepts you laid out. So where can people go to learn more about you and get dialed into what you do?
Speaker 2:Yeah, thanks, Mark. No, happy to share a copy of the book for anyone who's interested. You can just go to holisticwealthcom and you can get a free copy of the book. So that's holisticwealthstrategycom and get a free copy of the book there.
Speaker 1:Awesome. Well, I'm going to post that in the show notes for those of you driving and listening. Hope you all enjoyed it. And, of course, if you ever are interested in our services, you go to prosperalcpacom slash apply. Also, you're going to see on our site we have a free five-minute tax plan. Just go to the resources tab there or prosperalcpacom slash five-minute tax plan. If you want to get just a high-level overview of what tax planning opportunities are available for you, go to that link. We're approaching our Q4 planning deadline, so now is really the most important time for you listeners to make sure you're maximized tax savings. So if you aren't doing something, make sure you have a plan in place, because once it hits December 31st, the books are closed and there's not a lot we can do. And so I hope you guys enjoyed the show and subscribe for more great content coming your way.