Most households can use parts of the same tax-planning playbook—hold investments thoughtfully, use accounts with tax benefits, avoid unnecessary sales, and choose debt carefully. Most cannot copy a wealthy family’s full “buy, borrow, die” strategy because they lack the liquid collateral, affordable credit, diversified cash flow, or estate-planning capacity to carry the risk.
What is within reach?
Use tax-advantaged retirement accounts, understand when selling creates a taxable gain, keep records of cost basis, and avoid panic selling. Consider secured borrowing only after comparing the full interest cost, repayment source, and what happens after a market or income shock.
Can a regular investor use the strategy?
Sometimes, in a limited way. A person with a sizable diversified brokerage portfolio and reliable income may qualify for a securities-backed line. A homeowner may qualify for a home-equity line. These products provide cash without immediately selling an asset, but create debt secured by investments or a home. Lenders set approval, limits, rates, collateral rules, and remedies after default or collateral decline.
The tax mechanics are not reserved for the wealthy: a bona fide loan is generally not taxable income because repayment is due, and unrealized gains on shares generally are not taxed as capital gains until a taxable event. The difference is that wealthy investors can often support larger loans, qualify for better terms, and withstand a bad year without selling collateral. Access to a rule does not mean equal access to capital needed to use it safely.
Kiyosaki’s message—and the access gap
Robert Kiyosaki has argued that the tax code rewards business and investment income differently from wages, and that wealthy investors can use tax incentives to pay less. In a Rich Dad Channel interview, he frames this as a lesson in earned, portfolio, and passive income. That overlaps with “buy, borrow, die” at the level of tax planning, but it does not erase the practical barriers. The rules may be broadly available; substantial eligible collateral, affordable credit, cash flow for repayment, and the ability to withstand a market decline are not equally available to every household.
Strategies ordinary investors can use
1. Use tax-advantaged accounts available to you
Employer plans and IRAs can change when contributions, growth, and withdrawals are taxed. Eligibility, limits, matches, withdrawal rules, and tax treatment vary by account and year. An employer match can be valuable, but retirement-account money is not freely spendable cash. Review IRS guidance for the specific plan and tax year.
2. Keep a diversified taxable portfolio tax-aware
Investors can reduce avoidable realization with a long-term plan, checking tax lots before a sale, and considering whether a loss can be harvested without violating wash-sale rules. Holding does not prevent taxes on dividends or interest, and prices can fall. A low-turnover fund may generate fewer taxable sales than a high-turnover strategy, but no investment guarantees gains.
3. Treat borrowing as a tool with a payoff plan
A securities-backed line may suit a short liquidity gap when the borrower has substantial eligible collateral, understands the rate and call provisions, and has a repayment source independent of market performance. It is a poor fit if a household needs the loan for routine expenses or depends on returns to make each payment. The SEC notes that a margin lender may liquidate collateral when account equity falls below maintenance requirements; a securities-backed bank line can have different terms, so read its agreement.
A home-equity loan can cost less than unsecured credit in some cases, but the home is at risk if payments are not made. A variable rate can rise. Borrowing against a primary residence to fund lifestyle spending is leverage, not a tax strategy by itself.
4. Compare selling with borrowing and stress-test both
Compare the tax cost of selling only the gain portion that would be realized with the loan’s interest, fees, tax treatment, and risk. Then test a lower portfolio value, higher interest rate, and reduced income. If the plan only works when investments beat the borrowing cost every year, it is not resilient.
Interactive scenario model
Sell investments or borrow against them?
Compare two ways to raise the same cash. Start with the sample numbers already filled in, then change one assumption at a time.
How to use this model
- Enter the portfolio value and the cash you need to spend.
- Estimate how much of a sale would be taxable gain and the tax rate on that gain.
- Enter the loan rate, fees, time period, and any annual payment you can make from other income.
- Compare the estimated portfolio left after selling with the portfolio value less debt after borrowing.
Try a lower investment return or higher loan rate to see how sensitive the comparison is.
Compare the modeled results
The model sells enough to cover your cash need and the estimated tax.
Investment sale before tax—Estimated tax on gain—Portfolio value after the selected years—The portfolio stays invested; the loan balance grows or falls with interest and payments.
Starting loan balance, including fees—Portfolio value after the selected years—Remaining loan balance—Portfolio value minus loan balance—What this leaves out: Returns are steady; debt compounds annually; payments happen at year-end; cash is spent. The model does not include volatility, dividends, changing rates, future taxes, lender terms, or time value. It is educational arithmetic, not tax advice or a borrowing recommendation.
Risk check: Rates may rise, lenders may demand more collateral, and market declines can trigger forced sales. Interest continues when returns disappoint. Plan repayment without assuming the portfolio will rise.
Why many people cannot copy the wealthy version
Collateral is the first barrier. A lender may accept only certain marketable securities and lend only a fraction of their value. A small account may not qualify or may produce too little credit. A concentrated portfolio is vulnerable because a decline can reduce both net worth and borrowing capacity.
Cash flow is the second barrier. “Interest-only” does not mean “cost-free.” Interest must be paid or added to the balance. A household that cannot make payments without selling investments can be forced to sell at the wrong time. Historical average returns cannot meet a lender’s contractual due date.
Terms and tax results vary. Rates can move; a lender may demand collateral or repayment; personal-use interest is generally not deductible. Forgiven debt can create cancellation-of-debt income unless an exclusion applies. See IRS Topic 431 and Publication 550.
Estate planning is not one-size-fits-all. Inherited property generally gets a new basis tied to value at death under current federal rules, but exceptions apply and estate or state taxes may matter. Do not assume assets can be held until death or an heir can keep them without paying the debt. The loan remains an obligation for the borrower or estate.
A practical decision checklist
- Do I have diversified collateral after the lender’s haircut?
- Can I pay interest and principal from income that does not depend on selling pledged assets?
- What happens if the portfolio drops 30%, rates rise, or the lender changes terms?
- Would selling selected tax lots cost less than carrying the loan?
- Is this a short-term specific need, or borrowing to cover a recurring budget gap?
- Have I confirmed the tax treatment and loan agreement with qualified professionals?
The realistic answer
Regular investors can use tax-smart investing, retirement accounts, careful lot selection, and sometimes secured borrowing. What they generally cannot reproduce is the wealthy household’s margin of safety: a large diversified portfolio, multiple credit options, outside cash flow, and multigenerational estate planning. Without that foundation, borrowing can add forced-sale risk and compounding debt instead of creating a tax advantage.
Use the calculator as a scenario tool
Change one assumption at a time, test an adverse case, and compare options against a real repayment source. The output is educational arithmetic only. It does not estimate capital-gains tax, portfolio risk, loan approval, or estate outcomes. See our Tax Strategy Calculator for separate rental-property scenarios.
Sources and further reading
- Robert Kiyosaki, “This Is Keeping You Poor,” The Rich Dad Channel (2018) — his explanation of income types and tax incentives.
- IRS Publication 550 — investment sales, gains, and interest allocation.
- IRS Topic 409 — taxable sales of capital assets.
- IRS Topic 431 — canceled debt.
- IRS Publication 559 — inherited basis and estate-tax rules.
- SEC Investor Tips: Margin — margin calls and collateral liquidation risk.
- IRS: Individual Retirement Arrangements — official IRA rules.
Reviewed October 29, 2026. General education, not individual tax, investment, or legal advice.