The Power Of Zero Show
David McKnight
Tax rates 10 years from now are likely to be much higher than they are today. Is your retirement plan ready? Learn how to avoid the coming tax freight train and maximize your retirement dollars.
Your Authoritative Guide to Tax-Free Retirement Planning in 2025
In this episode of The Power of Zero Show, David McKnight addresses different strategies for tax-free retirement planning in 2025. Most Americans are a little nervous when it comes to the fiscal trajectory of the U.S.. According to expert forecasts, the likely extension of the 2017 Trump tax cuts would take the current $36 trillion of national debt beyond the estimated $54 trillion by 2034 – taking it all the way to $59 trillion. A recent Penn Wharton study predicts that if the U.S. doesn’t righ
Expecting a Pension? Strongly Consider a Roth Conversion
David McKnight discusses a couple of really good reasons for doing a Roth conversion when you’re expecting a pension in retirement. David sees the American tax system functioning in a similar way as a graduated cylinder. Your income goes in and flows all the way down to the bottom. Some of your money gets taxed at 10%, at 12%, 22%, some at 24%, 32%, at 35%, and some at 37%. Jeff Bezos, too, has some of his earned income taxed at 10% (only for about 3 seconds, though!). If you’re planning on re
Dave Ramsey: Fire Your Tax Advisor for Recommending a 401(k)!
This episode of the Power of Zero Show sees host David McKnight address Dave Ramsey’s advice – inviting a member of his audience to fire his tax advisor for recommending a 401(k). The problem with “financial gurus” like Dave Ramsey and the call-in shows they host is that they provide one-size-fits-all prescriptions that are delivered in very stark black and white terms. While David is an advocate for accumulating money in tax-free retirement vehicles, he also recognizes the importance of nuance
The Guru Gap: How America’s Financial Gurus Are Leading You Astray and How to Get Back on Track
Today’s episode is a podcast guest interview David McKnight did for Josh Jalinski’s The Financial Quarterback Podcast. David gives Josh’s audience a quick bio that spans from his early days in the financial services space in 1997 all the way to his latest book The Guru Gap. The premise of The Guru Gap is the difference between the 1990s when people had very few options to vet out financial planning advice and today, where they have plenty of ways to vet out. Nowadays, whenever David makes a fina
Suze Orman: Here’s Why Annuities Are So Bad! (Avoid Them at All Costs!)
David McKnight takes a closer look at Suze Orman’s take on annuities – and at why she recommends her audience avoid them at all costs. Suze Orman labels the 5.4% compounded annual rate of growth one of her audience members (Janet) has had over the last six years as “horrific in today’s market.” David believes that the main issue with Suze Orman’s approach is that it engages in a classic case of apples to oranges comparison. According to David, index annuities are a bond alternative and were neve
Congress Approves $200 Billion in Additional Social Security Benefits: Do You Qualify?
This episode looks at whether you qualify or not for the $200 billion Social Security benefits approved by the U.S. Congress. Host David McKnight shares that, with the current status quo, the Social Security Trust Fund is on pace to go bust by 2033. If that were to happen, only about 83% of benefits would be paid out… If signed into law by President Joe Biden, the Social Security Fairness Act would provide an additional $200 billion in Social Security benefits to nearly 2.8 million Americans ov
At What Tax Bracket Should I STOP Contributing to Roth: Responding to The Money Guy Show
In this episode, host David McKnight tackles a question about the tax bracket at which you should stop contributing to the Roth IRA and start contributing to the traditional IRA. The inspiration for this episode was a recent episode of The Money Guy Show. David believes that advice such as that shared on The Money Guy Show doesn’t consider most of the people asking questions like the one addressed in the episode. Those are people whose combined marginal tax rates fall between 25% and 30%. Genera
New Study: Retirees with Annuities Spend MORE than Those Who Rely on Investments Alone
David McKnight looks at a recent study on retirees that seems to tell a different story compared to what many people in the U.S. tend to believe. Americans often view guaranteed lifetime income annuities skeptically – they’re perceived as a drag on the growth of their stock market portfolio. According to the study by retirement researchers David Blanchett and Michael Finke, retirees with guaranteed lifetime income spend about twice as much as their counterparts who rely on stocks and bonds alon
The US Debt Crisis: Will DOGE Really Move the Needle?
The episode explores whether the proposed Department of Government Efficiency (DOGE) will move the needle when it comes to the U.S. debt crisis. Some people see DOGE as the bold move America needs to solve its looming debt crisis. Elon Musk believes that DOGE can rip out at least $2 trillion out of the $6.5 trillion Biden-Harris budget – however, David McKnight disagrees. David gives a breakdown of the federal budget, including the so-called non-discretionary spending. Former U.S. Comptroller Ge
Why I Wrote a Book Exposing Dave Ramsey
The episode kicks off with David McKnight sharing his view of the guru’s approach: “to go about half an inch deep and ten miles wide.” David discusses a sort of clash that financial planning gurus are creating by trying to attract — or even 'steal' — clients from financial planners who already have them. The goal of financial planners should be to provide a bridge between the advice clients get from financial gurus and their ultimate objective of ensuring that their money lasts as long as they d
First Major Book Critical of Dave Ramsey Retirement Advice Set to Publish
This episode is based on David McKnight’s interview with Lane Martinsen on Financial Fast Lane. David shares how he started in the financial planning industry, as well as the backstory of his new book, The Guru Gap. The Guru Gap focuses on several financial gurus such as Dave Ramsey, Suze Orman, Clark Howard, and Ramit Sethi. David finds it interesting to see financial gurus demonizing the types of recommendations him and his peers share – recommendations based on math and actuarial science. For
First Book Critiquing Dave Ramsey's Retirement Advice Set to Publish
This episode is based on David McKnight’s recent interview for Stephen Gallo’s podcast. David explains how the advice shared by gurus tends to work – and the role financial advisors play. David touches upon his concept of “Dave Ramsey’s circle of poverty.” According to Wade Pfau, adopting the approach shared by Dave Ramsey will lead to you running out of money in advance of actuarial life expectancy 63% of the time. To avoid falling in league with financial gurus, financial advisors should stay
How to Tell If a Financial Guru Is Telling You the Truth
This episode is part of David McKnight’s guest interview with Kyle Solon. David talks about the importance of math when it comes to decisions related to using cash value, life insurance, and annuities. A recent Ernst & Young study showed a surprising stat about who had the highest income in retirement and passed the most money on to the next generation. David illustrates the concept of the volatility shield, also known as volatility buffer. The #1 concern of Americans all across the country is r
What Trump’s Election Means for Your Roth Conversion Strategy
David McKnight describes the Trump tax cuts situation before Trump’s victory at the 2024 presidential elections. There’s likely going to be changes under a new Trump administration – something that David sees as great news. When it comes to Roth conversion strategy, David is a believer in two things. The first is to convert your money slowly to avoid rising into a tax bracket that gives you heartburn. The second is to convert your money quickly enough to get all the heavy lifting done before tax
The Huge ERROR in the Dave Ramsey-George Kamel Plan to Pay Off Your Home in 10 Years
This episode is a critique of a recent video by George Kamel on the supposed benefits of paying off your house in 10 years. David McKnight examines Kamel’s viewpoint on early mortgage payoff and whether it’s truly beneficial – do you really come out ahead by eliminating your mortgage as fast as possible? A major point David sees as a disadvantage is the fact that by paying off your mortgage early, you may lose access to the equity in your home. David highlights the opportunity cost of using fund
The Top 6 Reasons to Do a Roth Conversion
Today’s episode looks at the top 6 reasons why doing a Roth conversion may be the right move for you. The disastrous fiscal condition of the U.S. is the first reason why you should consider doing a Roth conversion. David explains why debt in and of itself isn’t the issue – and what the real problem with it is. Doing a Roth conversion with today’s low tax rates can be a way for you to shield your retirement savings from the impact of higher taxes down the road. Not sure what tax rates could doub
Understanding the Tricky Roth 401(k) Distribution Rules
David McKnight explains how a lack of knowledge about Roth 401(k) distribution rules can lead to unexpected taxes and penalties. This episode dives into practical insights to help you steer clear of unwelcome surprises from the IRS. David illustrates what happens if you withdraw from your Roth 401(k) before age 59½, and how these rules differ from those of a traditional Roth IRA. He subsequently tackles the question of when post-59½ withdrawals of Roth 401(k) growth can be completely tax-free.
Is Dave Ramsey STILL Wrong on Roth Conversions?
In the past, David McKnight has been critical of gurus like Dave Ramsey. However, this episode looks at a video in which Ramsey seems to have slightly changed his views. Ramsey emphasizes that one key benefit of a Roth IRA is the potential to drastically reduce or even eliminate Required Minimum Distributions (RMDs). David explains that the decision to pursue a Roth conversion typically depends on whether you expect your future tax rate to be higher than it is today. David discusses a missed opp
Grant Cardone: Never Own a Home, Go to College or Invest in a 401(k)! (YIKES)
In a recent video, real estate influencer Grant Cardone made some bold claims, advising against attending college, owning a home, and he even suggested that people should cash out their 401(k)s to invest in real estate. David McKnight calls this advice irresponsible, dangerous, and lawsuit-worthy. Far more Americans achieve millionaire status through consistent stock market investing than through real estate. David shares a more sustainable approach to building wealth through homeownership that
The Easiest, Low-Hassle Way to Become a Millionaire (2nd Place isn’t even close)
This episode explores the easiest and most hassle-free way to achieve millionaire status. According to Fidelity, the number of 401(k) millionaire accounts they manage has skyrocketed from 100,000 in 2017 to nearly 500,000 in 2024. “The slow and steady approach to building wealth is the best way to become a millionaire today,” says David McKnight. David explains why this method often outperforms owning real estate or running your own business when it comes to low-stress wealth accumulation. He a
Ben Shapiro: Here’s What Will Happen to the National Debt Under Kamala Harris
In this episode, Ben Shapiro shares his insights on the growing national debt and its potential trajectory under a Kamala Harris administration. Shapiro provides a historical overview of U.S. interest payments, starting from the 1960s. He highlights the alarming rise in the national debt, which has doubled in the last decade, and examines Harris’ proposed solutions to address it. According to Shapiro, there are only two viable paths to resolve the debt crisis: significant economic growth or subs
How Do I Do a Roth Conversion and Which Forms Will I Need?
This episode answers the question, “How do I do a Roth conversion, and what forms do I need to fill out with the IRS?” David explains that there are three basic steps to convert your IRA to a Roth IRA. Carrying out these three steps will likely take a few weeks – the process could be slightly shorter if everything is handled by the same financial institution. Starting this process in December isn’t ideal because financial institutions are often overwhelmed with conversion requests. If the conve
Eight IUL Deal-breakers You Should Watch Out For
This episode is part of David McKnight’s interview with Mark Byelich, founder and owner of Attleboro Wealth Management. David and Mark discuss why the money inside a Life Insurance Retirement Plan (LIRP) "bucket" is treated differently for tax purposes and benefits from low fees. When it comes to life insurance, David recommends "having as little of it as the IRS requires, and stuffing as much money into it as the IRS allows." Remember: not all Indexed Universal Life (IUL) policies are created e
Updated Rules on Missed RMDs
This episode looks at the recent IRS updates on the required minimum distributions due for 2024 and 2025. David touches upon which accounts are and which aren’t subject to RMDs. Historically, when someone missed their RMD, they had to pay a 50% penalty on whatever they were supposed to withdraw but did not… David goes over what the new regulation for missing an RMD says. David explains how SECURE Act 2.0 changed what was a popular policy in regards to RMDs and paying penalties. To avoid confus
4 Ways to Build Tax-Free Wealth for High-Income Earners
Today’s episode addresses how to create multiple tax-free income streams that don’t show up on the IRS’s radar and that contribute to you being in the 0% tax bracket in retirement. Having some money in a tax-deferred account, like an IRA or 401k, is the first way high-income earners can create tax-free wealth for retirement. Contributing to your Roth 401k or Roth 403b, as well as leveraging a backdoor Roth, are a couple of additional ways to build tax-free wealth in retirement. David touches upo
Can I Avoid IRMAA When Doing a Roth Conversion?
David starts the conversation by explaining what IRMAA is, if you should be worried about it when doing a Roth conversion, and whether there are ways around it. David defines the acronym IRMAA, Income-Related Monthly Adjusted Amount. This is an additional charge you could be required to pay on your Medicare Part B premiums. As your income goes up in retirement, your Medicare Part B premium increases with it. David explains why standard deductions do not apply when calculating IRMAA. What is the
Suze Orman goes on EPIC IUL Rant--“I’m BEGGING you not to do them!”
This episode addresses Suze Orman’s epic IUL rant on her Women and Money podcast. Suze Orman begged her audience not to do Index Universal Life insurance policies. This very broad brush and no nuance approach of every financial guru is what David’s upcoming book The Guru Gap touches upon. David explains why the generic approach financial gurus tend to have is leading people astray. David brings up Orman’s advice to one of her listeners who has been investing $200/month into an IUL policy. David
The #1 Reason Why People Don't Do a Roth Conversion
David and Mark Byelich talk about why people don’t want to pay a tax before the IRS absolutely requires it of them. David touches on the 2018 documentary The Power of Zero: The Tax Train is Coming. Mark Byelich explains that the longer someone hasa tail of the overage in their IRA hanging out there, the more risk they have. Mark discusses what happens in financial planning when people ease. When it comes to people around the country, the initial tax payment is typically the thing that’s really
Why You Must Do a Roth Conversion Before Your Spouse Dies (Bonus: Your Kids Will Love You)
Today’s episode is part of David’s interview with Mark Byelich. David and Mark address Mark’s concept of “suddenly single”. David once met an Uber driver who had saved $1.5M. All financial advisors gave him the same advice “don’t change anything” but David had something different to share. A Roth conversion is something married couples should consider to avoid being automatically catapulted into the 22% or 24% tax bracket if one spouse dies. David breaks down the thought process behind consideri
Critiquing George Kamel’s 8-Step Plan for a Successful Retirement (#5 Will Sink You)
This episode addresses the 8-step plan for a successful retirement plan that was recently shared by Dave Ramsey’s “sidekick,” George Kamel. Just like in any field of life, a good financial plan benefits from assessing where you are, where you want to be by a given date, and what needs to be done to get there. David dislikes the approach of painting everything with a broad brush and characterizing niche financial planning principles in broad, one-size-fits-all financial planning terms. That’s wha
How Life Insurance and Annuities Can Help Maximize Your Retirement
Today’s video comes from David’s interview with Dave Christy. They discuss how life insurance and annuities can help maximize your retirement. They start by describing the three different ways cash value life insurance can positively impact your financial plan. David reveals how IULs can be an excellent replacement for the bond portion of your portfolio. David explains why most people get heartburn when they think about paying for traditional long-term care. David goes over the unique aspect
Will Trump Extend The Tax Cuts If Elected?
Today’s video is part three of David’s interview with Dave Hall. They discuss whether Trump will extend the tax cuts if re-elected. David cites a recent report from the Committee for a Responsible Federal Budget that says that if they extend the tax cuts, the government will have to borrow $5 trillion to pay for those tax cuts. David explains why he doesn’t see another tax cut happening without a commensurate reduction in spending. David tackles people’s assumptions that tax cuts can stimulat
Can Social Security, Medicare and Medicaid Be Saved?
Today’s episode is part 2 of David’s interview with Dave Hall. David shares his thoughts about moving the retirement age to what it currently is. Dr. Larry Kotlikoff has suggested raising taxes to 4% – 2% on the employee and 2% on the employer – as a way to solve the issues around Social Security. David sees the combination of pushing back the retirement date and increasing revenue as a valuable avenue to tackle the Social Security issue. Dave and David talk about the current and future state of
How the Current U.S. Debt-to-GDP Trajectory Could Kill Your Retirement Plan
Today’s episode is part 1 of David’s interview with Dave Hall. David shares what he considers the fundamentals of his financial movement: “numbers don’t lie.” David cites a recent Penn Wharton study that illustrates two things that should be done by 2043 – and what will happen if these conditions aren’t met. Dave and David discuss the debt-to-GDP ratio, and why debt isn’t the problem. According to experts, when the debt-to-GDP gets past 75% it’s when there’s an eroding influence on your economic
How Soon Will AI Replace Financial Advisors?
Today’s video is part four of David’s interview with the co-founder of Power of Zero, Larry DeLegge. They discuss whether AI will replace financial advisors and if Congress will take away the tax advantages of cash value life insurance. According to David, financial planning is more of an art than a science. This is why he is not all that convinced that AI has the capabilities to successfully handle people’s unique and complex financial situations. 2043 will be a big year for our country. Once
Beware of This Tax Bracket When Doing a Roth Conversion
Today’s video is part two of David’s interview with Larry DeLegge, the co-founder of Power of Zero. They discuss the tax bracket you should avoid when doing a Roth conversion. They start the conversation by describing why it’s a no-brainer to pay your taxes today at 22 or 24% marginal rates. Instead of rushing to complete Roth conversions by 2026 and potentially bumping into higher tax brackets, David suggests stretching the conversions over several years. After 2026, the tax brackets are expect
The Ticking Time Bomb in Your Cash Value Life Insurance
Today’s episode is part 1 of David’s interview with Power of Zero co-founder Larry DeLegge. The two talk about value life insurance policies, children, and whether life insurance can serve as a viable volatility shield in retirement. David shares his thoughts regarding the “IUL vs. whole life insurance policy” debate. For David, starting a life insurance policy is like getting married – he explains why. When it comes to life insurance policies, there are two key things David looks at. The first
The Most Dangerous Retirement Advice from Suze Orman, Dave Ramsey and Ken Fisher
This episode is part 3 of David’s interview with Power of Zero co-founder Larry DeLegge. The two discuss the most dangerous retirement advice from Suzie Orman, Dave Ramsey, and Ken Fisher. Financial gurus in the business of dispensing one-size-fits-all financial planning advice is David’s biggest pet peeve. Why do they do it? To appeal to a broader range of Americans. David explains what his so-called Dave Ramsey’s circle of poverty is all about. Two out of three people who reach financial in
The Fatal Flaw in Suze Orman and Dave Ramsey's Retirement Planning Advice
Today’s video is part six of David’s interview with financial advisor Chris Martens where they discuss the fatal flaw in Dave Ramsey and Suze Orman's retirement planning advice. They discuss David’s new book, “The Guru Gap,” and how America’s financial gurus are leading people astray. David believes that Dave Ramsey and Suze Orman have done an incredible service helping many Americans get out of debt and even become rich--but they’re not all that good at helping you stay rich or secure your ret
Here’s What Happens When You Put 30% of Your Retirement Savings into Cash Value Life Insurance
Today’s episode is from David’s conversation with CFP Adam Olson. They discuss why mega-CPA firm Ernst & Young is saying that if you want to maximize your income in retirement, you should put 30% of your retirement savings into a cash value life insurance. David reveals what percentage of your savings you should put into a life insurance retirement plan. David shares the benefits of accumulating three years worth of living expenses in your cash value life insurance–this is to pay for your livin
What Dave Ramsey DOESN’T Want You to Know About Indexed Universal Life
Show host Arturo Johnson shares his experience with coming across David’s content – and how it has changed his perspective. David mentions a study that illustrates the benefits of putting 70% – and not 100% – of your retirement savings into a Roth 401k and the balance into cash value life insurance. Dave Ramsey is famous for stirring up a hornet’s nest among CFPs all across the U.S. David unpacks a shortcoming with one of Ramsey’s principles. David goes over what can happen when you utilize life
First Glimpse at Your Tax Bracket in 2026 (And What It Will Cost You)
David talks about what tax brackets will look like starting from January 1st 2026. One of the things that will change in 2026 are the actual tax rates – with an increased percentage of tax attached to a given range of income. In 2026, tax rates will return to what they were in 2017. David points out that some people online mistakenly believe that, in 2026, things will simply revert back to the same tax rates of 2017, with the same income ranges attached to those rates. An important thing to not
How Gen Z Should Save for Retirement
David talks about the Power of Zero “philosophy,” as well as a recent Penn Wharton study saying that, if all we do is continue on this same course, by 2043 there will be no arrest in the financial collapse of our country. 95% of Americans have the lion’s share of their retirement savings sitting in what we call tax-deferred vehicles like 401(k)s and IRAs. A big problem most Americans face: every year the IRS gets a vote on what percentage of your profits they get to keep. David shares the Power
Why Ken Fisher Does NOT Want You to Do a Roth Conversion
Today’s video is from David’s conversation with financial advisor Bruce Hosler. They discuss why financial advisors like Ken Fisher don't want you to do Roth conversions. David reveals why there is a lot of incoming resistance from financial "Gurus" about moving to tax-free and using the tools necessary to get to the 0% tax bracket. David talks about his new book, Guru, and all of the interference he’s facing in trying to get the Power of Zero message out to the American people. Most of these gu
How Much of Your Social Security is REALLY Getting Taxed? (and At What Rate?)
How much of your social security is getting taxed, at what rate, and is there anything you can do about it? Unfortunately, the IRS doesn't make it easy for people to understand how much of their social security is taxable and at what rate. David explains that the best way to understand social security taxation is to first know about provisional income--this is the income the IRS tracks to determine how much of your social security will be taxable. As you continue to increase your IRA distributio
Why Don't More Financial Advisors Recommend Indexed Universal Life?
This episode addresses whether the mainstream financial planning community is justified in avoiding Indexed Universal Life. Lately, social media has been filled with videos praising the virtues of a financial tool known as Indexed Universal Life (IUL). David explains why the IUL has been taking such a beating from traditional financial planners. David discusses three different viewpoints against the IUL – including that of scammy salesmen on TikTok who often describe the IUL as “a stock market r
Your Roth Conversion Roadmap for the Next 10 Years and Beyond
David discusses how much of your IRA you should convert, in what amounts and over what time frame. If you’re not convinced by the possible dramatic increase in tax rates in 2031 to bump you into the 32% bracket, you’re not alone… A whole battery of experts predict that tax rates will have to rise dramatically to help service the national debt and with the $200 trillion in shortfalls in Social Security, Medicare, and Medicaid. In Comeback America, former Comptroller General David Walker predicted
Clark Howard Says Fixed Indexed Annuities Stink! (My Response)
David addresses Clark Howard’s viewpoint that seems to want to invite people to never consider a fixed index annuity. Despite interacting with thousands of financial advisors who offer fixed index annuities every year, David has never heard one of them describe them the same way as Clark Howard. Since financial gurus have to get their points across in short three-minute segments, they don’t have the luxury of nuance, says David. David explains how fixed index annuities actually work, and why yo
Is IUL the Dream Investment that Doug Andrew Claims?
Doug Andrew called the IUL a dream investment, but is it the silver bullet retirement account he claims it to be? David goes through Doug Andrew’s controversial remarks about IULs, and explains why he politely disagrees with his one-size-fits-all approach to index universal life. David explains why the 4% rule is a very expensive way to pay for retirement. He reveals why it's much more economical to guarantee your living expenses with a lifetime income annuity. If you only utilize the IUL, yo
The Two 5-Year Roth Rules Explained
This episode explores the two different five-year rules for Roth IRAs instituted by the IRS to prevent people from abusing them. The first five-year rule applies to earnings on Roth contributions and determines whether those distributions can be taken tax-free. The second rule concerns Roth conversions and lets you know whether conversion principles can be accessed penalty-free. David explains that, for the purposes of the five-year rule, the clock starts the first time any money is contributed
Warren Buffet Says AVOID Financial Advisors Like the Plague (Is He Right?)
At a recent Berkshire Hathaway annual shareholder meeting, Warren Buffett shared his thoughts on why he sees financial advisors as the worst people to trust with your money. Buffett believes that financial professionals in aggregate can’t do better than the aggregate of the people who just sit tight. David agrees with Buffett’s view on active versus passive investing. According to David, Buffett’s point of view and approach don’t account for the high cost of investor behavior. The fact that 90%
George Kamel Swings and Misses on Indexed Universal Life
George Kamel recently released a video on index universal life. On the surface, it looks like a ruthless exposé of a financial scam that millions of Americans are falling for. But when you scratch just below the surface, his critique of IUL is a steaming cesspool of half-truths and outright lies that are designed to sell you a term insurance policy through a Dave Ramsey-sponsored term insurance broker. According to Kamel, the IUL is a financial scam marketed as a secret wealth hack, yet in real
Is Ken Fisher's Anti-Annuity Stance Illegal?
According to David, Ken Fisher’s hate toward annuities is visible in what can be considered “one of the most successful attacks on any financial product in history”. David discusses why, in his opinion, Ken Fisher sees annuities as the perfect marketing tool to build his own asset management firm. There are two things annuities can do that no other financial product can – David explains what they are. Academic studies that go back to the early 1960s seem to suggest that annuities are the best wa
Suze Orman vs. Dave Ramsey on Sustainable Withdrawal Rates in Retirement
Financial expert and author Ric Edelman has stated that, in his opinion, anyone following Dave Ramsey’s 8% retirement withdrawal strategy is…doomed! The 4% rule has been the distribution rates’ gold standard for over 30 years. However, Suze Orman said that she wouldn’t use the 4% rule on any level. David touches upon what he considers a “massive unintended consequence” of adopting Suze Orman’s 3% withdrawal rate in retirement. According to David, there isn’t a winner between a 3%, a 4%, and an
Is a 100% Tax-Free Retirement Really Possible?
A recent Penn Wharton study found that the federal government will have to dramatically raise taxes within the next 20 years to avoid sliding into a debt spiral of high interest rates and debt payments. Former comptroller General David Walker has stated several times that taxes would have to double by 2030 or the U.S. will go broke as a nation. When it comes to retirement savings accounts, the federal government typically gives people a choice between paying taxes at the time of contribution or
A Recent Penn Wharton Study Says that the U.S. has 20 Years to Fix Debt or Face Cataclysm
Former comptroller general of the federal government, David Walker, believes that tax rates will have to double, in order to avoid a financial collapse. The U.S. Government should be helped in preventing their growth. David McKnight points out a potential course of action that should be followed to avoid a possible financial collapse. Permanent solutions to stabilize the debt outlook are needed now…not 20 years from now when the crisis is already upon us. David touches upon the role that higher
How to Figure Out How Much Money to Save for Retirement
Today’s episode is part 4 of David’s interview for Jesse Wright’s podcast, and it addresses the best way to figure out how much money you’ll need to be able to retire. David explains how to be able to identify what your retirement shortfall is going to be. There are different approaches and each one comes with its unique traits – David discusses his favorite. Citing Suze Orman, David shares his thoughts on what the new retirement age should be. Jesse and David touch upon living abroad while in
The Best Way to Make Sure Your Money Lasts as Long as You Do
Today’s episode is part three of David’s interview on Jesse Wright’s podcast. They discuss the best way to ensure your savings last as long as you do. Jesse shares a shocking stat: 65-year-old married couples have an 18% chance that at least one person in the relationship will live to be 95 years old. This means that there is a very real chance that at least one of them will outlive their savings. For David, most Americans outlive their savings because they don’t save or invest enough to fund
Exposing the IUL TikTok Trap
Today’s episode is the second part of David’s interview for Jesse Wright’s podcast. Beware of what you see on social media, says David. A lot of that content is by wayward life insurance agents employing pretty despicable tactics. David shares an example of bad advice and highlights why this is advice you should stay away from. For David, 99% of TikTok videos misrepresent what the IUL can do and the role it should play in your retirement. David explains why an IUL is sort of like getting married
Expert Warns Your Effective Tax Rate Could Double by 2030
Today’s episode is part 1 of David’s appearance on Jesse Wright’s podcast. Jesse asks David where one should start from when thinking about retirement. David points out that the types of accounts which one saves money for retirement really matter. According to David, there’s essentially two ways to save money for retirement. The first is to get a tax deduction today. The second is to pay the tax today and invest your money so that, in the future, you’ll be able to take that money out tax-free.
HonestMath.com Weighs In on Dave Ramsey's Epic Meltdown Over the 4% Rule
David and Khalen Dwyer discuss HonestMath.com's research proposing a conservative 4% annual withdrawal for a 30-year retirement--contradicting Ramsey's long-standing advice of an 8% withdrawal rate. Khalen explains how Ramsey's assumptions defy both mathematical principles and historical data. He also reveals the financial instability retirees may face when following Ramsey's controversial 8% withdrawal rate. Khalen and David agree that the primary job of an advisor is to help investors set rea
The Worst IUL TikTok Video You’ve Ever Seen (Financial Malpractice on FULL Display)
David makes a clear preface: “If anyone ever tells you to cash out your 401k and put it all into an IUL, you’re to turn around and run the other way!” This episode addresses what David refers to as “the worst IUL TikTok video I’ve ever seen; a video that’s so replete with manipulative sales tactics and lawsuit-worthy financial advice.” David points out one of the manipulative sales strategies included in the video: making the prospect feel as if she needs help by making her feel confused and ove
How to Take SUSTAINABLE 8% Withdrawal Rates in Retirement (Not the Dave Ramsey Way)
One of the things Dave Ramsey is famous for is telling his audience that they can take sustainable 8% distributions from their stock market portfolios in retirement. David has two issues with this recommendation: it ignores reams of academic data on sustainable withdrawal rates, as well as the concept of sequence of return. David points out the potential repercussions of following Ramsey’s approach. According to the mainstream financial community, 4% is the actual “golden rule” for sustainable d
How to Become a Tax-Free Millionaire (with Tom Hegna)
David talks to Tom Hegna, an economist, author, and popular industry speaker considered by many to be the retirement income expert. David reveals how he learned about the unstable fiscal trajectory of the U.S. and why he wrote the book, "The Power of Zero." The book emphasizes the importance of preparing for higher tax rates. It offers strategies to help you protect your retirement savings against the impact of potentially higher tax rates in the future. David talks about teaching financial prin
The Caller on Dave Ramsey's Viral 4% Rule Meltdown Speaks Out! (My Interview with Jay Disberger)
David talks to Jay Disberger, the caller on Dave Ramsey's viral 4% rule meltdown. They start the discussion by describing why the clip went viral and how people can get their questions answered live on the Dave Ramsey Show. Jay's motivation for the call: To get clarity on how best to withdraw your money in retirement and get Dave to take a stand on sustainable withdrawal in retirement. Jay shares his journey to finance coaching and saving for retirement. David and Jay discuss why George Kamel
Dave Ramsey Eviscerates Co-Host George Kamel for Preaching the 4% Rule
Dave Ramsey recently eviscerated his co-host George Kamel for preaching the 4% rule. According to George, withdrawing only 4% of your savings is the easiest way to guarantee your money lasts throughout retirement. George further adds that the 4% rule is a math-based approach to sustainable withdrawals in retirement. For Dave Ramsey, the 4% is senseless and only geared toward stealing people’s hope for a brighter retirement. He believes an 8% withdrawal rate is more sustainable since your savings
The Three Types of Tax-free Retirement Advisors (And Which One’s the BEST for You)
David talks about the three main types of tax-free retirement advisors and the one that will guarantee a hassle-free retirement. The first type of advisor is the TikTok advisor. This is the advisor who will preach the prospect of dramatically higher tax rates in the future. The only downside to their message is that they believe the only way to shield yourself from the rising tax rates is to put all your retirement savings into an IUL. If you believe in a balanced and comprehensive approach to r
How to Get Rich the Dave Ramsey Way! (Hint: 10% Withdrawals in Retirement)
David breaks down a recent Dave Ramsey interview where he advised a 50-year-old widow on the best way to save, invest, and withdraw her retirement savings. According to Ramsey, if the lady invests $1000 every month for 15 years, she will have accumulated $500,000, which gives her permission to withdraw 10% of her savings every year for the rest of her life. The problem with this recommendation is that she will likely earn 9% returns per year, not 12%. She is also more likely to run out of mone
Complete Your Roth Conversion by THIS Date or LOSE!
Today’s episode is part three of David’s interview with Power of Zero Advisor Terry DuPont. Trump tax cuts were not permanent – David explains why 2026 is going to be a key year for that. In his book Comeback America, former Comptroller General David Walker predicted that, by 2023, tax rates would have to double – or more – to keep the U.S. solvent. David shares what he believes people should do in the next few years as the country approaches an “apocalyptic” scenario. Terry DuPont is amazed by
What your Financial Advisor Is NOT Telling You About Roth Conversions
Today’s episode is part two of David’s interview with Power of Zero Advisor Terry DuPont. David talks about the approach many major money management institutions follow, and how it differs from how David and Terry do things. There are situations where large money management institutions forbid their advisors from ever bringing up, for example, Roth conversions. David invites listeners to browse the web trying to find a Ken Fisher article discussing the benefits of a Roth conversion. David discu
Why Cash Value Life Insurance is EXPLODING in Popularity (Despite What Critics Say)
Today’s episode features some of the highlights of David’s appearance on the Your Money with David Hays podcast. David touches upon what he would focus on and how long he believes he would last if he were president of the U.S.. David’s next book will probably have the title Guru. For a while, David Hays has half-jokingly said that he would accept the responsibility of mayor. David introduces two perspectives into the picture: the point of view of financial gurus like Dave Ramsey and Suze Orman,
Dave Ramsey Beat the S&P 500 Over the Last 30 Years Because “It’s not hard to do.”
In a recent interview, Dave Ramsey claimed he beat the S&P 500 over the last 30 years because “it’s not hard to do.” The big question is, is it really that easy to beat the S&P 500 over time? According to David, it’s not. In fact, most active fund managers fail to do it over time. A recent study revealed that 85% of fund managers underperformed in the S&P 500 in the last ten years - this underperformance caused the disappearance of mutual funds altogether. Based on these stats, how do we rate D
Don't Buy an IUL Until You Listen to This Podcast!
David breaks down a recent article by financial advisor Brian Manderscheid on what insurance agents don’t tell you about Indexed Universal Life (IUL). David talks about the risk of consuming financial content online without seeking professional advice when making significant financial decisions. David reveals how the claims made by financial influencers tend to be overly promissory and exaggerate what the IUL can actually do for your retirement portfolio. He further adds that IULs were never exc
1-minute Summary of Every David McKnight Book on Retirement
David gives a 1-minute summary of all his books on retirement. The Power of Zero: How to Get to the 0% Tax Bracket and Transform Your Retirement. The book outlines a step-by-step plan for getting to the 0% tax bracket in retirement, because if tax rates double, as some experts predict, two times zero is still zero. Look Before You LIRP: Why All Life Insurance Retirement Plans Are Not Created Equal, and How to Find the Right One for You. David explains that while various LIRPs may help get y
My Review of the Anti-IUL Book "Lapsed"
David reviews an anti-IUL book, LAPSED, written by financial advisor Elan Moas, who believes IULs are designed to fail rather than succeed. According to David, the book is written with dramatic and highly-charged rhetoric around what will befall you if you make the mistake of purchasing an IUL. So the big question is, “Are IULs too good to be true?” For David, IULs do exactly what they're meant to do. Their true purpose is to give you stock market exposure up to a cap with a guarantee against ma
Dave Ramsey Says You Can Take an 8% Withdrawal Rate in Retirement! (Is He Right?)
Today’s episode revolves around whether Dave Ramsey is right – or wrong – in saying that people can take an 8% withdrawal rate in retirement. A group of fiduciary advisors recently confronted Dave Ramsey on Twitter. Just like David, they too thought that Dave Ramsey is living in a fantasy world because of the advice he shares with people. David points out a big flaw in Dave Ramsey’s recommendation of staying 100% invested in stocks your entire lifetime: the approach doesn’t account for investme
The Truth About Doug Andrew's Retirement Philosophy
David starts the conversation by describing why he’s not a huge fan of Doug Andrew’s retirement philosophy. David then talks about the differences between Doug’s approach and the Power of Zero approach for funding your retirement. According to Doug, you risk jeopardizing your retirement if you have money in an IRA or a 401K. There’s the danger of losing a sizable portion of your portfolio if the markets were to crash like they did in 2008. To protect your retirement, Doug believes it would be be
Why do Major Money Institutions HATE Tax-free Investing?
David starts the conversation by breaking down his book, Power of Zero, and the problem with America's ever-rising national debt. For David, the goal of the book is to guide people on how to move their assets into tax-free retirement vehicles - and how such a move is the only way to shield yourself from potentially higher tax rates in the future. David describes the difference between LIRPs and other life insurance products. All LIRPs are life insurance policies, but not all life insurance poli
Dave Ramsey Is WRONG About Fixed Indexed Annuities
David starts the conversation by describing why he believes Dave Ramsey is wrong about Fixed Indexed Annuities. In a recent live call, Dave Ramsey revealed why he is not a fan of annuities and what you should consider doing instead. Dave Ramsey’s thoughts on Fixed Indexed Annuities - They have a floor that cannot go below a specific number, say 6%. Fees are double what you might get in a mutual fund and the advisor commissions are four times as high. David’s response to Dave Ramsey’s thoug
Financial Guru Loses $400k to Ill-Advised Roth Conversion (Is Your Money Safe?)
David starts the conversation by describing how a financial guru, Derek Sall, allegedly lost $400k in an ill-advised Roth conversation. According to Sall, you’re way more likely to have a lower income in retirement than you have today, so you’ll likely be in a lower tax bracket in the future. But as we all know, tax rates must go up as early as 2026 to pay for unfunded government obligations. David made 3 observations to counter Derek’s claims: Your income in retirement is not likely to be way
Jeremy Schneider--All CPAs, CFPs and FInancial Advisors Hate IUL (My Response)
Jeremy Schneider is a financial guru who claims to have retired at the age of 36 with four million dollars. He recently shared an anecdote about a young millionaire who owned around $90,000 in cash value life insurance. The reaction of the host was quite interesting, as none of the other millionaires interviewed for the show brought up life insurance as a means of building or holding their wealth. If you scroll around on social media though, there is a huge number of financial gurus recommending
The Truth About Dave Ramsey's Investment Philosophy
Regardless of your age, proximity to retirement, or financial profile, Dave Ramsey recommends the exact same investment allocation: divided equally among four types of funds; growth, growth and income, aggressive growth, and international. Dave’s philosophy essentially boils down to investing in the stock market. The Money Guy show did a recent comparison between the Ramsey portfolio and the S&P 500. When the overall market was performing well, they both fared similarly, but the worst periods we
How Roth IRAs and Life Insurance Can COMPLETELY SHIELD You and Your Heirs From a Doubling of Tax Rates
The national debt is fast approaching $32 trillion dollars, nearly double from only a few short years ago. Neither parties are blame-free for the situation we find ourselves in as of 2023. That $32 trillion does not include the unfunded liabilities and obligations that we will be paying for over the next ten years. We got to this point without including the added costs of Social Security, MediCare, and Medicaid. Politicians are facing a situation where they either cut those programs, which is a
Why the Roth IRA Is NOT Enough (Graham Stephan Is Wrong!)
There are a number of popular finance YouTube personalities like Graham Stephan talking about how you can be a millionaire by simply contributing $18 a day into a Roth IRA, but that doesn’t tell the whole story. Not only is that advice too simple, it doesn’t take into account the value of a million dollars thirty years in the future. Inflation will approximately reduce the spending power of that million into $250,000. The 4% Rule says that if you constrain yourself to only taking 4% of your day
How to Implement the Power of Zero Retirement Strategy
Step one of the Power of Zero strategy is to realize that due to unfunded obligations for Social Security, Medicare, and Medicaid and interest on the exploding national debt, tax rates in the future are going to be dramatically higher than they are today. Step two is to understand that in a rising tax rate environment there is an ideal amount of money to have in your taxable and tax-deferred buckets. For your taxable bucket, that’s around six months of living expenses. For your tax-deferred bu
The Case for Contributing 30% of Your Retirement Savings to an LIRP
Your LIRP functions as the ideal volatility buffer because it grows safely and productively in a tax-free way. According to a recent study by Ernst & Young, investors that contribute 30% of their retirement savings to a LIRP will have their savings last longer than people who put 100% of their savings into investments alone. This seems to fly in the face of every financial guru who has ever opined about cash value life insurance like Dave Ramsey and Suzy Orman. It’s commonly understood that with
Dave Ramsey Is Disastrously Wrong on Roth Conversions
The biggest issue with Dave Ramsey’s view on Roth Conversions, and most of his advice in general, is his one-size-fits-all approach which costs his listeners hundreds of thousands of dollars. Dave starts off on the right foot by recommending people pay the taxes up front for a Roth Conversion but then veers off the track pretty quick. Dave breaks down a hypothetical married couple filing in 2020 doing a Roth Conversion, but makes the mistake of conflating the 24% tax bracket as a trap of the Rot
Roth Conversions: Avoid This Bracket at All Costs!
We know for sure that we currently have three more years of historic tax rates. The good news is that it’s fairly likely that those tax rates will be extended for another eight years, giving us a wider window of opportunity. Congress has essentially removed the limits on how much money you can convert to a Roth IRA. All you have to do is decide how much tax you want to pay. Most people assume that the 0% tax bracket is David’s favorite, but it’s actually the 24% tax bracket. For only an addition
Here's Why They're Going to Extend the Trump Tax Cuts Before 2024
The Trump tax cuts went into effect at the end of 2017, but because they lacked a supermajority of approval in Congress those tax cuts had an expiration date. David has long maintained that the government won’t let those tax cuts expire. There is a broad swath of Americans that are responsible for getting the current politicians re-elected and those people have short memories. If taxes go up, they’re going to blame those same politicians. No politician wants to be responsible for raising taxes o
Do ALL Financial Gurus Hate Cash Value Life Insurance?
For David, financial gurus seem to hold a deep hatred for permanent life insurance – be it whole life, universal life, index universal life, or variable life. A key question to ask: with so many financial gurus against life insurance, how can we conclude that it should be integrated into a balanced, comprehensive approach to tax-free retirement? David believes that such an approach stems from the fact that these gurus address a huge homogenous audience, who’s generally drawing in debt, and that
Should you do a Roth 401(k) or a Traditional 401(k)? (The Answer May Surprise You!)
The decision of whether to contribute to a Roth 401(k) or a Traditional 401(k) all comes down to whether you are likely to be in a higher tax bracket than you are now when you retire. The only determining factor in whether you should contribute to a Roth 401(k) is what you think your tax rate will be when you retire. David takes an example of two twin brothers and compares the difference between a Traditional 401(k) and a Roth 401(k) over the course of 30 years. The takeaway is that if tax rates
Ramit Sethi is WRONG About Annuities and Cash Value Life Insurance
When it comes to investing, I’ll Teach You to Be Rich author Ramit Sethi sees whole life insurance, annuities, and Primerica as major red flags. David believes that, in the Netflix documentary How to Get Rich, Ramit Sethi makes sweeping insurance product condemnations with little or no evidence to support his case. If David had a chance to sit down with Ramit Sethi, there’s a series of questions he would like to ask him, including “Why are annuities bad?” Yale Professor Robert Schiller recently
Dave Ramsey Says Don’t Do an IUL Because of Its Surrender Charges (Is He Right?)
Dave Ramsey contends that the IUL is a ripoff primarily because of two reasons: high fees and surrender charges He also recommends that if you have an IUL to surrender it immediately, thereby incurring those surrender charges immediately. The reason companies have surrender charges is to cover the costs of getting the program off the ground. They start off high and reduce gradually over the first fifteen years or so. The question is, ‘Is the surrender schedule something that should weigh on your
Now is the Best Time in History to Get to the 0% Tax Bracket
If you have the lion’s share of your wealth in a tax-deferred bucket, you have actually played your cards perfectly. You probably allocated that money at a time when tax rates were likely higher, and right now tax rates are at historic lows. This is the perfect time to move things into the tax-free bucket. The question is ‘How long will these historically low tax rates last?’ Traditional thinking says tax rates will revert to higher rates in 2026, but that seems pretty unlikely to happen. No pol
Does the IUL REALLY Work?
The internet is full of naysayers that are convinced the Indexed Universal Life Insurance Policy (IUL) is a ticking time bomb, but the question is “what does the evidence show?”. Over the last fifteen years we’ve seen catastrophic market declines and near-zero interest rates for a protracted period of time. This has created the perfect conditions to measure the effectiveness of the IUL. The stock market is one of two things that drives the return of the IUL, the second and more important factor
Dave Ramsey Is WRONG About the National Debt
In a recent video a high school senior called in to Dave Ramsey’s show where he offered some good advice but also played down the severity of the nation’s debt crisis. Dave refers to two different books on how the national debt was going to ruin the country back in the 80’s, which obviously did not come to pass. The trouble is not the level of debt a country has in general, it’s how much debt there is in relation to their gross domestic product. This is why the current situation is different. Th
Ernst & Young Study on Using Permanent Life Insurance for Retirement Income (Surprising Results!)
A recently published study claims that taking income from permanent life insurance and annuities in retirement can create a better outcome for investors. Ernst & Young compared five different strategies including investments only, investments and term life insurance, permanent life insurance and investments, deferred income annuities, and a combination of #3 and #4. In their comparison, Ernst & Young considered insurance products part of the fixed income allocation and bond replacements. They a
Max Loan Challenge: Whole Life vs IUL in a Fixed Account
IUL and whole-life policies both have their place. Whole-life advocates prefer it because your cash value is guaranteed to increase each and every year as the IUL has growth that is tied to the upward movement of a stock market index. The downside to the IUL is that down years do happen, and in those years you get credited a zero but still have the expenses associated with the IUL. David goes through a scenario where all premiums within a LIRP go to the IUL’s fixed account. By allocating money i
"That’s a Lie!” Angry Senator Confronts Janet Yellen Over Social Security Bankruptcy
Janet Yellen appeared in front of a Senate Finance Committee in March where explosive testimony erupted when a senator from Louisiana asked a line of questions regarding the impending insolvency of Social Security. The Social Security Trust Fund is due to go broke in nine years, at which point recipients will receive 24% fewer benefits when that happens. Of the $4.5 trillion in taxes proposed by President Joe Biden, none of those tax increases are earmarked for shoring up Social Security. A bipa
The 5 Biggest IUL Mistakes (And How to Avoid Them)
David breaks down the 5 biggest IUL mistakes people make and how to avoid them. He starts the conversation by explaining the impact IULs can have on tax-free retirement when used correctly. Mistake #1 - Getting an IUL through the wrong company. David highlights what to look out for before settling on an IUL provider. Mistake #2 - Getting the wrong IUL product. You could have the best carrier in the world, but if you choose the wrong product, it's all for nothing. Mistake #3 - The right adviso
How to Avoid Over-Converting Your Roth IRA
David sits down with certified financial planner Mark Byelich to discuss how to avoid over-converting your Roth IRA. They start the conversation by describing how over-converting your Roth IRA could sink your retirement plan. According to David, you should execute a Roth conversion if your tax bracket is going to be higher during retirement than it is right now. For stress-free retirement, David believes retirees should constantly think about future tax rates and ways to get to the zero percent
Why the Middle Class Could Soon Be Paying 45% Effective Tax Rates
David sits down with certified financial planner Mark Byelich to discuss why the middle class could soon be paying 45% effective tax rates. When asked what investors should pay attention to in 2023, David says it's now do or die for those looking to take advantage of the Trump tax cuts that are set to expire in December 2025. According to David, the most important thing you can do to help your money last longer in retirement is to pay taxes now at historically low rates. David believes taxes hav
How to Dramatically Lower the Tax Bill on Your Roth Conversion
David sits down with financial advisor Daniel Rondberg to discuss how to dramatically lower the tax bill on your Roth conversion. They start the conversation by describing why the Power of Zero message is crucial to tax-free retirement. According to David, stress-free retirement often comes down to only worrying about the things you can control. David and Daniel talk about the Power of Zero movie and what gave it great legitimacy. David explains how interest rates can affect your retirement.
The Top 2 Reasons to Have Indexed Universal Life
David starts the conversation by describing why it makes sense to have indexed universal life insurance. Did you know that any taxes you pay in your taxable brackets are, ironically enough, optional? David reveals that the ideal amount of money you should have in your taxable bracket is six months of living expenses. Once you've maxed out your IRA, David believes an IUL becomes a great avenue to reposition surplus money into a tax-free investment bucket. David explains that IULs are great becau
Indexed Universal Life--How to Find the Right Carrier, Product and Advisor
David starts the conversation by describing the three most important things you should look for in an IUL. All good IULs are sponsored by financially stable insurance companies - but not all financially stable insurance companies offer good IULs. David talks about the four main companies that rank life insurance companies. David explains what a Comdex ranking is and why you should consider it when choosing a life insurance carrier. According to David, the 5 essential attributes of a good IUL
The Difference Between a Social Security Tax and a Penalty (And How to Avoid Them Both)
David starts the conversation by describing the difference between a Social Security tax and a Social Security penalty - and whether it's possible to avoid them both. David explains that although some people use them interchangeably, a Social Security tax is different than a penalty. The first step to protecting your Social Security is understanding the main drivers behind taxes and penalties. The Social Security penalty arises when you begin drawing from your account before your full retirement
Three Claims Pro-IUL TikTokkers Make About IUL (And Why They're Wrong)
David debunks the top 3 unsubstantiated claims that pro-life insurance agents on social media make about IULs. David starts the conversation by explaining why we need to be clear on what an IUL is and what it's not. David is a big fan of IULs because he believes they form a crucial part of a balanced and comprehensive approach to tax-free retirement. Claim #1 - An IUL can beat the stock market - a TikTokker even went as far as to claim that there's an IUL that averaged a 15.3% rate of return ove
How to Transform a $1 Million Inheritance into a Tax-Free Juggernaut
David goes through five unique strategies to transform a $1 million inheritance into a tax-free asset. Although a non-qualified inheritance is tax-free, the step-up in the basis rule will lead to a huge tax problem as your asset grows over time. Strategy #1 - Pay the taxes on your Roth conversions. Remember, the worst way to pay taxes on a Roth conversion is on the IRA itself. Strategy #2 - Max out your Roth 401K for you and your spouse. Use your earnings to max out the $60,000 limit for both y
Indexed Universal Life is Too Expensive! (Dave Ramsey Debunked)
Dave Ramsey and other financial gurus claim that indexed universal life insurance(IUL) is expensive and a ripoff. Are they right? Suzie Orman even says you should never work with an advisor that recommends IULs as a possible investment option. According to David, when someone tells you that IULs are expensive, the first question you should ask them is, compared to what? David compares the fees you would likely pay in a traditional tax-free investment versus a lifetime IUL. David explains tha
Dave McKnight versus Chris Kirkpatrick (Debunking Anti-IUL Claims)
What are some of the most outrageous anti-IUL claims on the internet today? David debunks some shockingly misleading claims presented by social media influencer Chris Kirkpatrick. Claim #1: Indexed universal life insurance (IULs) were born from insurance companies wanting to scale down on whole life insurance policies because they could no longer pay guaranteed dividends and needed a new profit center just to break even. This is just false because IULs were a result of the stock market crash of
Dave Ramsey vs Indexed Universal Life--5 Claims Debunked
What are Dave Ramsey's thoughts on Indexed Universal Life Insurance (IUL)? David debunks the 5 myths presented in Dave Ramsey's article on why you should run away from IULs. Myth #1: IULs never perform to their full capacity because the cash portion of the portfolio gets eaten up by the super-high fees. Yes, the fees will be higher at the start of the program but will reduce dramatically the longer you keep the policy. In fact, when you average the fees over the entire program, the costs transla
Is Artificial Intelligence the Future of Retirement Planning? (I put ChatGPT to the Test)
What is ChatGPT? David starts the conversation by explaining what ChatGPT is and the things that make it so revolutionary. ChatGPT is so advanced it has Google worried about its search engine's future. Will the advanced AI chatbot ever replace retirement advisors? David tests the chatbot by asking it a series of questions designed to stretch its basic retirement planning capabilities. When David asks ChatGPT whether tax rates will go up in future, the chatbot replies that it's tough to predict w
The 12 Rules of Tax-Free Investing (Updated and Revised)
Rule #1: Tax rates will go up by 2030. The Fed needs huge sums of money to pay for unfunded obligations, so taxes will have to go up; otherwise, the country will go bankrupt. Rule #2: In a rising tax environment, there is a mathematically perfect amount of money to have in your taxable and tax-deferred brackets. David explains how you can calculate it. Rule #3: Anything above and beyond the ideal balance mentioned above should be systematically positioned to tax-free. Preferably you don't do it
Which LIRP is Best For You?
David kicks off the conversation by laying out the 3 basic Life Insurance Retirement Plans (LIRP) and how you can find the best one for your particular situation. For David, an LIRP is like marriage - it's a long-term commitment that you only ever consider if you're willing to keep it until death. If you are looking for absolute guarantees, David explains that no product compares to whole life insurance. The promise to pay a death benefit if the premium has been paid, plus the option of a very
The Roth Conversion Mistake That Could Sink Your Retirement
David kicks off the conversation by revealing that tax rates will revert to where they were in 2017 - you have only four years to take advantage of the historically low tax rates and do a Roth conversion. David explains that most people will try to accelerate their Roth conversion efforts before the 2026 deadline. The problem with this is that trying to accelerate your conversions could bump you into the dreaded 32% tax bracket. You don't have to be a mathematician to realize that the 32% tax
The Top 5 Ways to Protect Yourself from Higher Taxes
David starts the conversation by pointing out that more and more financial experts are convinced that tax rates will rise dramatically to pay for unfunded obligations in the future. One way to protect yourself against rising tax rates is to do a Roth Conversion. Taxes will be on sale for another 4 years before they go back to the 2017 highs. If you are serious about retirement planning, David believes you would be wise to take advantage of what he calls "The Tax Sale of a Lifetime." The second w
What's the Latest Update for Secure Act 2.0?
David starts the conversation by describing the changes you can expect from SECURE Act 2.0 and what these changes will mean for your retirement plans. According to David, too many workers retire without enough savings to comfortably live. However, SECURE Act 2.0 may change all of that by expanding coverage, increasing amounts on savings, and simplifying the current retirement system. David explains why SECURE Act 2.0 enjoys broad bi-partisan support. Although SECURE Act 2.0 still has a long way
Why Does Dave Ramsey Hate Permanent Life Insurance?
David starts the conversation by explaining why financial gurus like Dave Ramsey and Suzzie Orman hate permanent life insurance. With all the financial information floating around on the internet, who do you follow for advice on where to invest your money? David believes everybody's situation is different, but the best people to follow are the ones who are consistent with their messaging. David calls out The White Coat Investor for misleading people that interest rates won't go up, only for him
How Do I Protect My Pension From Rising Taxes?
In this episode of The Power of Zero Show, David McKnight talks about what you can do to protect your pension in the current rising tax environment. David explains that tax rates will rise dramatically within the next 10 years due to massively unfunded obligations like Social Security and Medicare. According to former Comptroller General of the United States, David Walker, tax rates will likely double by 2030 to keep the country from bankruptcy. Given the impending doom, David believes it's ti
Will There Be a Great Depression in 2030?
In this episode of The Power of Zero Show, David McKnight shares evidence that unless there is immediate and dramatic fiscal realignment by the Federal Government, the U.S. will be mired down in a Great Depression by 2030. Citing Brian Beaulieu, David discusses the role Baby Boomers play when it comes to Beaulieu's prediction of the U.S. undergoing a Great Depression beginning in 2030. David shares that Maya MacGuineas’ recent study showed that, just to prevent the debt from growing at a rate in
A Massive Increase to 401(k) Contribution Limits and Other IRS Thresholds
This episode of The Power of Zero Show addresses the recently-released new contribution limits for the 401(k) in 2023, as well as additional increases in other IRS thresholds. David shares that the IRS just released all their inflation-adjusted numbers for 2023. The biggest surprise is a 9.7% increase in the limits for the 401(k) contributions, which went from $20,500 this year to $22,500 next year. In addition to the contribution limits for the 401(k), the IRS has also increased the catch-up c
Should You Convert Your IRA While the Market Is Down?
Today’s episode of The Power of Zero Show is a segment of an interview David did with financial advisor, Ron DeLegge. They discuss, among other things, whether it’s a good idea to convert your Roth IRA while the stock market is down. David shares that there’s no such thing as a 0% tax bracket in the U.S. tax tables. Zero describes the condition of someone in retirement who isn’t paying tax. Being in the 0% tax bracket doesn’t happen by accident, says David. It’s the result of planning and proact
Should the Federal Government Get Rid of the Roth IRA?
Today’s episode of The Power of Zero Show addresses the question ‘Should the Federal Government get rid of the Roth IRA?’ In a recent MarketWatch article, Alicia Munnell, founder of Boston College’s Center for Retirement Research, opined that it’s time to start thinking about getting rid of the Roth 401(k) and the Roth IRA – and gave three reasons why. Firstly, Munnell believes that Roth IRAs can be hijacked by Congress to pay for expensive partisan legislation. Secondly, she thinks that Roth IR
The Truth about Suze Orman
In this episode, David tells the truth about Suze Orman, who’s been giving financial advice for the last 25 years and has some pretty black and white positions on most financial subjects. Suze Orman doesn’t seem to be a fan of cash value life insurances because of its perceived high expenses. The problem of her approach, according to David, is the fact that it looks at the annual expenses in the early years of the life insurance contract and projects those out over the life of the policy. Howeve
How to Supercharge Your Roth Conversion with a Reverse Mortgage
David had been skeptical about reverse mortgages and now considers himself a “late convert.” Don Graves sees reverse mortgages as a financial planning tool cleverly disguised as a mortgage. Using a football analogy, think of a reverse mortgage as the 11th player on the team (along with income, pension, social security, etc.), which will increase the chances of you winning. Don explains why reverse mortgages should be considered a tax-free stream of income, right along with Roth IRAs, Roth 401ks,
Is the Federal Government Going to Tax Your Roth IRA?
David suggests avoiding the shift of everything out of your IRA or 401k into the tax-free bucket because, by doing so, you would then have a standard deduction in retirement that sort of sits idle. $25,900/year is the standard deduction for a married couple. According to David, what you want to do is to be very careful about not converting too much money from the tax-deferred bucket. Most retirement savings are in tax-deferred vehicles, says David. Roth IRAs are the one thing that both consumer
How to Take Money Out of Your 401(k) or IRA 100% Tax-Free
David’s latest book, the 75,000-word novel The Infinity Code, is set to be released on September 27th. David says that the U.S. is facing a math problem of gigantic proportions: they have promised way more than they can afford to deliver in regards to Social Security, Medicare, and Medicaid. The issue is caused by a democratic glitch in the sense that the Baby Boomer generation has far fewer children than their parents had – leading to fewer people putting money into the government programs than
"Financial Advisors Are a Rip-off!"
Today’s episode addresses claims by the likes of Suze Orman, The White Coat Investor, and Clark Howard that financial advisors are a rip-off. After 25 years in the industry, David can say without a doubt that not all financial advisors are created equal. A good financial advisor will increase the likelihood that your retirement savings will last through life expectancy. According to a Vanguard study, tapping into the services of a financial advisor could help you improve your results by as much
Hastening the Debt Apocalypse – Student Loan Forgiveness
Today’s episode focuses on the impact of Joe Biden’s student loan forgiveness program on the fiscal trajectory of the U.S.. David shares that Biden’s plan has only one stipulation: your annual income must be less than $125,000 as a single person (or $250,000 for a married couple). The program only concerns federal student loans. and you can have up to $20,000 in student loans forgiven if you received a Pell Grant. Otherwise the limit is $10,000. David questions whether Biden could do what he ha
The Truth About Ken Fisher (Are Annuities Bad?)
Ken Fisher dislikes annuities. He is not shy about it and became controversially famous with his 'I Hate Annuities' campaign. But is his hatred justified? First, Fisher's claims that annuities have 'nosebleed' fees is just wrong. Most of them don't have any fees. The only exception is variable annuities, but the investor gets a guaranteed lifetime stream of income in exchange. Do annuities keep the promise they make to investors? Ken doesn't believe they do. But as David explains, annuities ensu
When Should You Use an LIRP?
Lane Martinsen from Financial Fast Lane interviews David McKnight on why you should use LIRP and the benefits of getting to the zero percent tax bracket. David explains the motivation behind his book The Power of Zero. David reveals why he is convinced that future tax rates will be significantly higher and why it makes sense to be in the zero percent tax bracket in retirement. If you are in or approaching retirement, David recommends taking advantage of the historically low tax rates before the
Did Joe Biden Just Solve the National Debt Crisis?
Did Joe Biden just solve the national debt crisis? Here’s why you shouldn't be celebrating just yet. David explains why most people believe passing the Inflation Reduction Act might be the first step to taming inflation and curbing the national debt crisis. According to Maya MacGuineas, the President of the Committee for a Responsible Federal Budget, this legislation represents an essential first step toward fixing the debt crisis by enacting several policies related to energy, climate, health
The Inflation Reduction Act of 2022--Will It Raise Your Taxes?
David breaks down the Inflation Reduction Act of 2022 and how the bill will potentially curb inflation by reducing the deficit, investing in domestic energy production, and promoting clean energy solutions. As far as Biden's Build Back Better Initiative is concerned, imposing more taxes on individuals and couples who make $400k and $450k per year, respectively, is one of the major factors that contributed to the bill not going through. David analyzes whether the inflation Reduction Act will inc
Whole Life vs. Indexed Universal Life and More…
David is asked about the pros and cons of the Indexed Universal Life – or LIRP – and what to look for when researching it. As far as LIRPs are concerned, David suggests looking for contracts that are both tax- and cost-free. David discusses some mistakes that some experts such as Dave Ramsey make when talking about ‘buy term, invest the difference’. David explains that running out of money before running out of life is one the biggest risks retirees are facing today – and goes over two ways to p
How to Mitigate Long-term Care Risk…Without the Heartburn
David shares that he got into the industry during the “calm before the storm.” It was 1997 and, during the State of the Union, President Bill Clinton announced that the national deficit was simply zero. Today, less than 25 years later, the national debt is $30 trillion. By 2010, however, David Walker – former Comptroller General of the Federal Government and a personal hero of David’s – appeared on 60 Minutes saying that tax rates would have to double in order to keep the country solvent. 2010 a
Can You Retire on Life Insurance Alone?
There's this belief among financial experts that life insurance is the financial silver bullet. However, as David explains, that's not 100% accurate. Yes, life insurance can mitigate every retirement risk and solve all forms of retirement problems, but it's never a safe bet when implemented all on its own. A Life Insurance Retirement Plan (LIRP) should not be the only cog in your retirement machine because retirement is all about squeezing as much juice as possible from all available tax-free a
The Bombshell in the 2022 Social Security Trustees Report
David shares that the 2022 Trustees Report raises a sharp warning cry about the catastrophic short- and long-term trajectories of the Social Security program. The surplus that had built up over the years as Baby Boomers plowed money into the Social Security program is beginning to draw down as the same Baby Boomers are moving out of the workforce at the tune of 10,000 per day. David talks about the fact that, at the current pace, the trust fund will run out in 2035, and the incoming revenue base
The Anatomy of a Debt Apocalypse
One of David’s jobs as the host of the Power of Zero Show is to constantly remind listeners of the horrifying fiscal outlook the U.S. is facing. This episode looks at components that are contributing to this “fiscal apocalypse”. David Walker, former Comptroller General of the Federal Government, sees the Debt-to-GDP ratio as something worth focusing on. Currently, it’s about 108% – about the same percentage as in the immediate wake of World War II. However, it’s projected that it could increase
The Five Things Your LIRP Must Have
Life insurance retirement plans or LIRPs are long-term propositions. They only really work if you think of them like a marriage, meaning they work best if it's until death do you part. Don't start an LIRP unless you're planning on dying while it's enforced, even if that means you have to keep it for 40 or 50 years. Your LIRP needs to be a 0% loan. One of the things that makes the LIRP so appealing is that you can take the money out tax free, and you do that by way of a loan.. An LIRP may be tax
Catch 22: Inflation or Recession?
Today’s episode addresses the question ‘Do we continue to let inflation run roughshod over our purchasing power, or do we raise interest rates and risk plunging our country into a recession?’ David states that Federal Reserve Chair Jerome Powell is fast approaching a grim crossroad in which he may have to raise interest rates in order to rein in out-of-control inflation. David explains how Venezuela recently had inflation approaching 40%, and its government decided to raise interest rates to 42%
The Dave Ramsey Buy Term and Invest the Difference Fallacy
This episode focuses on the unsettling math behind Dave Ramsey’s recommendation to buy term and invest the difference. David shares the definition of the ‘Buy Term and Invest the Difference’ approach, and talks about Ramsey’s claim that permanent life insurance is a rip-off. For David, Dave Ramsey makes a big mistake for the fact that his analysis doesn’t include two major expenses: the cost of term life insurance and the expense ratio inside Roth accounts. David feels that Dave Ramsey omits key
Could Inflation Lead to Higher Taxes?
David shares a stat from the US Labor Department: as of May 11th, inflation over the last 12 months through April of 2022 has been 8.3%. David explains that the general belief is that inflation doesn’t necessarily translate to more taxes because the IRS has been historically good at indexing tax brackets to keep up with inflation. However, he says, there are a few thresholds in the IRS tax code that aren’t indexed to keep up with inflation – and could result in you paying higher taxes. Social Se
The Biggest Objection to a Tax-Free Retirement
“I don’t want to pay the taxes on my Roth Conversion” is the single greatest objection David sees every week. David believes that whoever makes that argument is basically saying that they don’t want to pre-emptively pay a tax before the IRS absolutely requires it of them and that they think their tax rate down the road will be lower than it is today. He sees the latter point as the greater concern. For David, if you’re in the 22% or 24% tax brackets – meaning that your taxable income is between
The Truth About Municipal Bonds
Today’s podcast explains why it might be a massive mistake to invest in municipal bonds. The reason why this is such an important topic is our unusual fixation with municipal bonds when trying to set up a tax-free retirement. Interest from municipal bonds counts as provisional income. That means that it counts against the thresholds that cause Social Security taxation. So, while you may be looking for a stable, predictable, tax-free income stream, you could unwittingly lose a portion of your Soc
The Tax Freight Train Bearing Down on Your Retirement Plan
For David, the problem is that the U.S. has promised its people way more than it can afford to pay. The debt clock says $30 trillion, which is a mind-boggling figure. According to other experts, however, the real number is actually higher than that. It is close to the $125 trillion mark. Citing Dr. Larry Kotlikoff from Boston University, David reveals that, according to a fiscal gap accounting, the projection over the next 75 years isn’t $30 trillion, nor $125 trillion… it sees true national deb
The Truth About Dave Ramsey
In this episode, David wants to share the truth about Dave Ramsey, look at the two pillars of his financial worldview, and deconstruct those beliefs. David believes that if Dave Ramsey’s audience followed his advice on paying off high-interest credit card debt, the U.S. would be a much healthier place from a financial perspective. In David’s assessment, Ramsey’s audience is made of lower to middle-income America, people who are making $50,000 per year but who are spending $60,000. With his appr
What is the Obamacare Surtax (And Should You Worry About It)?
David explains how Obamacare surtax, which was introduced back in 2013 when Obamacare passed, works and who it affects. The 3.8% of Obamacare surtax only applies to the investment income that reaches above and beyond specific thresholds: $200,000 for an individual person and $250,000 for a married couple filing jointly. David addresses the question of how this could affect you if you’re planning on doing a Roth conversion at some point in the next 10 years. According to David, not many people p
When Should You Draw Social Security in a Rising Tax Rate Environment?
This episode revolves around when you should draw social security in a rising tax environment. David believes that if you have taken stock of the fiscal landscape of the U.S., it seems fairly obvious that tax rates will have to rise dramatically in the next 10 years to keep the country solvent. This should have a bearing on when you elect to receive your social security. As David explains, each year you delay taking social security past age 62, your benefit will increase. The amount of the incre
Should High Income Earners Do Roth Conversions?
This episode focuses on a question David recently got from a couple – they made $650,000 per year and wanted to know whether they should consider doing a Roth conversion. Some details about the California-based couple who asked David their question: they’re both age 50, with $1.5M in their old IRAs and 401k. They had a lifestyle need of approximately $100,000 after tax, and had about $1M in liquid savings in their taxable bucket. And, lastly, they were contributing $100,000 per year to that buck
A Huge Surprise in the Secure Act 2.0
In May 2021, David recorded a podcast that focused on the Secure Act 2.0, the follow-up to the Secure Act that completely killed the stretch IRA and the stretch Roth IRA. Today’s episode looks at the big surprise that has surfaced in the latest updated iteration of the Secure Act 2.0 that’s currently gaining steam in Congress. In last year’s podcast episode, David outlined six major changes to retirement planning that this law is proposing. According to David, the one thing that the previous ver
When is the True Fiscal Day of Reckoning for Our Country?
In this episode, David focuses on the true fiscal day of reckoning for the U.S., and how it should inform important retirement decisions when it comes to the Power of Zero paradigm. For David, asking yourself ‘Over what time frame should I be shifting my tax-deferred retirement assets to tax-free?’ is one of the most important variables to consider when executing your Power of Zero strategy. David’s view is to consider shifting money slowly enough so that you don’t rise into a tax bracket that g
The LIRP vs Stock Market Investing
The idea behind today’s episode comes from a conversation David had with someone at a recent event he spoke at. He praised the LIRP as the “perfect Swiss Army knife-type of investment,” and couldn’t understand why more people didn’t make it their only investment tool. David isn’t a fan of conversations that position the LIRP as a “Holy Grail” of financial planning. David shares examples of questions and conversations of the arguments that may be made by someone who’s a big believer in the LIRP i
Effective Tax Rate vs Marginal Tax Rate in POZ Planning Decisions
Today’s episode focuses on the difference between your effective and marginal tax rate and which one is relevant in different financial planning contexts. For David, the American tax system works exactly like a graduated cylinder: your money flows in and it goes all the way down to the bottom. Some of it gets taxed at 10%, some at 12, 24, 32, 35 or 37% – even Bill Gates briefly has some of his earned tax income tax at 10% before it goes all the way to 37%. David explains that the marginal tax ra
How to Avoid Sequence of Return Risk in Your LIRP
David explains how, normally, we think of the sequence of return risk as the risk associated with the order in which you experience investment returns in your stock market portfolio in retirement. There are a couple of different ways you can safeguard yourself against sequence of return risk. The first one is to allocate money to an annuity that provides for your income during those early years of retirement so that you aren’t forced to take money out of the stock market. The second option is t
Two Ways to Use the LIRP to Get to Tax-Free
There are dozens of contexts in which life insurance gets used, but 95% of the time, and from a Power of Zero planning standpoint, it gets used in two different ways. David explains how having a certain amount in your taxable bucket may sound great because it’s liquid and you can access it, but by taking the inefficiencies in the taxable bucket, you amortize them out over the balance of your lifetime – and this may end up costing you hundreds and thousands of dollars. There are different ways yo
Can Mitt Romney Save America?
David discusses how Mitt Romney is at the forefront of trying to save Social Security, Medicare, Medicaid, solve the national debt problem, all while simultaneously trying to save the country. In a recent interview with former Power of Zero Show guest Maya MacGuineas, Mitt Romney discusses something that should resonate with you if you care about national debt and the future of the country. David believes that if Romney were to get through the Trust Act he has proposed, he could very well save t
How to Best Position the LIRP in Your POZ Strategy
Mark Byelich doesn’t know when taxes are ever going to be lower than they are right now. David sees Medicare, not Social Security, as the main issue because Medicare is five times more expensive and it’s what’s really going to be driving debt over time. David thinks that Social Security can easily be fixed by moving the age of retirement or by adding means testing like it happens in other countries. In his opinion, the challenge is how to renegotiate Medicare. It’s what is increasing by 6% each
The POZ Moves You Should Be Making Right Now
Normally, it takes a year to add $1 trillion to the national debt. With Covid-19, we have added $6 trillion to the debt. Something that usually happens in 6 years took place in 3 months. David believes that instead of cutting the various programs, the government is going to raise more taxes. Mark discusses main turning points of his career: being part of Ed Slott’s mastermind group since 2011, seeing one of David’s presentations, and getting a copy of The Power of Zero at a conference in San Die
Why Your LIRP MUST Have Interest in Arrears and Daily Sweeps
In a previous episode of the Power of Zero Show, David discussed the importance of having a guaranteed 0% loan provision in your LIRP. Beware: even if an insurance company has a guaranteed 0% loan provision, there's still another way that they can get you. There are two ways in which they can configure these loans: they can either charge you interest in advance or they can charge you interest in arrears. In the case of interest charged in advance, the insurance company charges you the interest r
Can Long-Term Capital Gains Push You Into a Higher Tax Bracket for Roth Conversions?
Today’s episode focuses on outlining the basic differences between long-term capital gains and ordinary income taxes, and showing how they interact with each other from a taxation perspective. The idea for the topic actually came from a question one of David’s POZ advisors had received ahead of a recent webinar David hosted. Long-term capital gains typically get added to your Adjusted Gross Income (AGI), which is important, because your AGI determines whether you can contribute to Roth IRAs, or
Why Your LIRP MUST Have a Guaranteed 0% Loan Provision
David’s upcoming book, The Infinity Code, is a novel that talks about important financial concepts and themes, and that will keep you on the edge of your seat through the entirety of the read. The book will be available on Amazon and other stores soon. In David’s opinion, starting a LIRP is a bit like getting married, so it’s important to be meticulous in your research. When it comes to LIRPs, the IRS allows you to take a loan – the way these loans work is that instead of taking a loan from your
Is Joe Manchin Coming Back to the Table on Build Back Better?
Episode 165 of the Power of Zero show covered how Joe Manchin gave a firm ‘No’ to Joe Biden's signature legislation, the Build Back Better plan, in its current form. This topic is of crucial interest in regards to Power of Zero planning, because had he gotten that legislation through, it would have required the changing of the U.S. tax code to pull it off – this would have extended the Trump tax cuts for middle America by another 8 years. Democrats managed to get Manchin back to the negotiating
My Interview with Rebecca Walser, Author of Wealth Unbroken, Part 2
As David explains, there are two ways of controlling our budget: raising revenue or reducing spending (or some combination of the two), just like an American household. Rebecca Walser thinks that Modern Monetary Theory (MMT) could be decimated by Covid-19. And there are a few key issues that have surfaced: the U.S. Government printing $8 trillion and the equity market going up over 40% (pre-Covid) with no economic fundamentals to support it, 10 million job openings, supply chain issues, as well
My Interview with Rebecca Walser, Author of Wealth Unbroken, Part 1
Rebecca Walser thinks that the 401(k) is a failed experiment. In her opinion, the Revenue Act of 1978 was nothing more than a corporate tax dodge for highly compensated executives, and not a state retirement vehicle. While working as a benefits consultant, Rebecca was looking for a way to administer an alternative savings plan for a client as opposed to just a cash bonus savings plan. She came upon the 401(k) provision and noticed it was a “tax dodge” that could be leveraged. One of the main con
Joe Manchin Kills the BBB; What this Means for POZ Strategy
David has been tracking Joe Biden’s Build Back Better plan for the last 6 months – and the sticking points have been Joe Manchin and Kyrsten Sinema. Joe Manchin, in particular, has always been the one senator having issues with Biden’s signature bill. He has had issues with the size of the bill, and whether it was going to have an effect on inflation which is something that has already been ruled by many economists as no longer transitory. Jerome Powell, the Chair of the Federal Reserve, has in
Why the National Debt Has Hamstrung the Fed and Legislative Update
David’s latest book, the Infinity Code, is centered around the story of a shadowy cabal bent on transforming the US monetary policy and has recently been finished. The Fed is currently wrestling with raising interest rates in an effort to combat inflation, but they are facing an obstacle in the form of the national debt. If interest rates are raised, which is the way the Federal Reserve usually responds to inflation, the cost to service the national debt will rise dramatically and could force th
Interview with Doug Orchard, Director of The Baby Boomer Dilemma
The Baby Boomer Dilemma came about because of Doug’s work with David in the past. After a podcast crowdfunding event last January, Doug received enough funding to get things off the ground. The Baby Boomer Dilemma is based around the simple choice families face between a defined benefits plan or a defined contribution plan. During World War 2, there were price wage controls in place, and it was illegal to lure recruits away from other companies with a higher compensation. This became the basis o
Is Inflation Here to Stay?
Inflation is here, the question is “Is it here to stay?” Consumer prices soared in October 2021 and are up 6.2% from a year earlier, the fastest increase in over three decades. We’ve grown accustomed to inflation of 2% a year, so the current level of inflation is considerably higher than economists have expected and is having some serious impacts on people’s daily lives. High inflation will likely be with us well into 2022 and beyond. The reasons prices are rising are complex. One of the variabl
What I Would Do If I Were President
As a financial advisor, David came up with the concept of the three buckets and a quick five-minute presentation to convey the idea to clients. This developed into an hour-long presentation which eventually became the seed of the Power of Zero book. It took David just three days to write the book because the core of the material was already in place. He just had to commit to putting it onto the page. The book was republished in 2018 with new content by Penguin Random House. David is currently wr
My Upcoming Book, Legislative Update and Thoughts on Hyperinflation
The situation with the Biden infrastructure plan continues to evolve. Senators Joe Manchin and Krysten Sinema have continued to be obstacles in the Democrats' way from getting the bill passed. The Democrat caucus has been in disarray and seems to be pulling in different directions. Biden was hoping the bill would pass by having everyone vote before the legislation was written prior to him landing in Rome. Right now, it looks like things are dead in the water including raising tax rates on the r
Updated Tax Thresholds for 2022 AND Is the Biden Tax Plan Really Cost Neutral?
Joe Biden has talked about how his tax plan is cost neutral, where the increases in taxes on the wealthiest Americans will offset the costs. Maya MacGuineas recently took a look at the numbers to find out if that’s true. The Build Back Better Act is set to cost $2.1 trillion as it’s currently written. It relies on a number of sunsets and expirations to keep the costs down. If the plan’s temporary policies were made permanent, the costs would increase by an additional $2.2 trillion. When the fede
How to Access Your 401(k) Prior to 59 1/2 without Penalty
There is a little-known part of the IRS tax code that allows you to access your 401(k) or 403(b) prior to 59 and a half without penalty. Traditionally, the penalty is 10%, but the Rule of 55 gives you access without paying a penalty, but it comes with certain requirements. If you leave your job in the calendar year you turn 55 or older for any reason and your employer has stipulated that you have the ability to tap into your plan, you can do so without penalty. Some plans may require you to with
Can a Billionaire's Tax Save Joe Biden's Signature Legislation
The Joe Biden legislature is currently dead in the water. Congress people are looking for ways to pay for the package, but even if they could there may not be a package to pay for. Every Senator wields considerable power and a couple in particular have been vocal opponents of the proposed bill. Joe Manchin and Krysten Sinema have voiced concerns about the package and the price tag. Other members of the Democrat party have lambasted Joe Manchin on social media and on the floor, and he has not tak
The Importance of Multiple Streams of Tax-Free Income
David gets variations of one question pretty frequently whenever he gives one of his presentations, whether that’s in front of financial advisors or members of the general public. At the end of the workshop, there are five takeaways. The first is that tax rates are likely to be dramatically higher in the future than they are today. Mathematically speaking, we are past the point of no return. The second is that the only way to truly insulate yourself from the impact of higher taxes is to get to t
Is Biden's Tax Plan Going Up in Smoke?
It looks like Joe Biden’s landmark legislation is running into some challenges in Congress. Joe Manchin, one of the most powerful men in Congress right now, has pushed back on the $3.5 trillion bill and counter-offered with a more narrow $1.5 trillion plan. Progressive Democrats in the house are saying that it’s too small to make their priorities a reality. Both sides of the aisle are pulling in opposite directions and don’t seem to be able to come to a compromise. Joe Biden is making tax reform
The Bi-Partisan Debt Extravaganza
The increase on taxes on the rich with the Human Infrastructure plan is rumored to cost the average American nothing, but that’s not quite the full story. The long-term implications of the cost of the plan say differently. Fiscal insanity has been a bi-partisan venture, and it has been for at least the last 20 years. Debt goes up under Republican administrations just as much as Democrats. Under Donald Trump’s administration, the debt rose by an average of $2 trillion per year. Historically, the
The POZ Worldview: David McKnight versus Dr. Larry Kotlikoff
Dr. Larry Kotlikoff is the foremost expert in the world on fiscal gap accounting and has done a great job transforming how we should be thinking about a nation’s debt. Dr. Kotlikoff recently stated during an interview that most retirement planning is wrong. According to Dr. Kotlikoff, the basic problem with financial planning is that the goal of our life is not to accumulate wealth so that people can charge us fees on our assets. It’s about having the best lifestyle we can, given our resources,
7 Takeaways from the Recent House Tax Bill
Most of the changes of the two infrastructure bills working their way through Congress right now will mainly affect high-income earners, but the details may change as time goes on. There are seven major takeaways from the recent house tax bill. The first is that personal income tax rates are going up, but only for roughly 2% of households that make more than $400,000 per year. Joe Biden campaigned on not raising taxes on the middle class, and the current form of the bill seems to reflect that. T
Is the US About to Default on Its Debt?
Whether you like to talk about politics or not, the things that are happening in Congress right now will affect your retirement. All the unmitigated spending during the Covid pandemic is catching up with the US. Treasury Secretary Janet Yellin revealed further measures to avoid breaching the federal government’s borrowing limit and also announced they would be suspending reinvestments for a number of retirement funds. Debt negotiations have always been a game of chicken between the Democrats and
Could Joe Manchin Sink Joe Biden's Tax Bill?
If Joe Biden can’t get his tax legislation through before midterm elections, it’s unlikely he will be able to pass it at all. The situation in Afghanistan has lost Biden approval points in polls across the nation and since the midterm elections usually involve the sitting administration losing either the Senate, the House, or both, there may be no opportunity for him to push it through later. The Senate, which is currently controlled by the Democrats, has proposed a $1 trillion infrastructure, w
How Renowned Football Coaches Are Using the LIRP
In August 2016, the University of Michigan began a trend by offering their football coach a split-dollar life insurance arrangement as an alternative to deferred compensation. Other football coaches in different schools have similar arrangements. The overarching principles of these kinds of plans can apply to you as well without having to be rich or famous to take advantage of the benefits. This is a program where the employer agrees to loan dollars to an employee, generally over a period of 7 y
Could the Biden Tax Legislation be Retroactive?
Is it possible for the tax proposals moving their way through Congress to be retroactive for 2021? Biden has proposed raising the business tax from 21% to 28%, and when you add in the State corporate income tax of 7% that will put the US near the top highest corporate tax rates in the world. For individuals, Biden has proposed increasing the top income tax bracket from 37% to 39.6% for married couples making over $400,000 He has also proposed a large change to the FICA taxes. For people making $
News on the Timing of the Biden Tax Changes
Legislative hijinks are happening in Congress right now and they are going to have an impact on the timing of a potential tax increase coming down the road. The Senate has struggled for a while now to come to an agreement on a $1 trillion infrastructure package, but with some bipartisan cooperation they’ve pushed it through. Democrats in Congress have turned their attention to a $3.5 trillion budget that is going to be a much bigger challenge. Any tax increase that gets pushed through will be pa
Do Retirees With Annuities Have More Fun?
A new report says that retirees who convert their savings into guaranteed lifetime annuities effectively double the amount they are willing to spend each year on themselves and their families. This indicates that retirees holding more of their wealth in guaranteed income are more willing to spend on luxury items and experiences because of a higher comfort level with additional spending. The report looked at retired households with more than $100,000 in savings and spending more than $25,000 each
A Major Change to Social Security?
A Democratic representative out of California has introduced a bill to change the way that Social Security cost of living adjustments are calculated. It proposes to link the Social Security increase each year to the Consumer Price Index for the Elderly, instead of the CPI for Workers. The difference between the two indexes over the course of a 30-year period is roughly 0.2% each year, which doesn’t sound like much, but when you compound that over the 30 years, it adds up quickly. The cost of liv
Is Joe Biden's Tax Proposal Losing Steam?
Joe Biden campaigned on the platform of raising taxes on the top 1% of earners in America, yet six months into his administration, there haven’t been any increases thus far. The main pillars of his proposal are to increase the corporate tax rate from 21% to 28% and to increase taxes on married couples earning more than $400,000 per year ($200,000 for individuals) from 37% to 39.6%. For those making $1 million or more, your long term capital gains tax rates would increase from 20% to 39.6%, effe
The LIRP: When Does It Make Sense and How Old Is Too Old?
The 3% Rule says that if you want to have $100,000 per year in retirement, you would need $3.3 million saved up, which is not very attainable for most Americans. If you can offload longevity risk to a company that can handle it better than you can, you have to save far less. If you take a portion of your liquid investment portfolio and purchase an annuity, you can potentially achieve the same income flow at roughly half the cost. An annuity from an insurance company also mitigates withdrawal rat
The Psychology of Guaranteed Income and How Much Money Is Enough
David’s first appearance on the podcast was one of the most downloaded episodes. Back in 2014, David wrote the Power of Zero book and since then the national debt has grown considerably. We are now at $28 trillion in debt and the primary problem is that much debt is only affordable as long as interest rates stay historically low. At some point in the near future, the US will no longer be able to borrow money at the current rate and this will result in the cost of servicing the national debt will
Battle of the Massive Retirement Accounts: Peter Thiel vs. Mitt Romney
Roth IRA’s have been trending on Twitter recently because it was discovered that Peter Thiel accumulated over $5 billion in his Roth IRA. Peter Thiel was one of the original founders of Paypal in 1999 when the Roth IRA was still in its infancy. At that time, his salary qualified him to contribute to his Roth IRA and he placed 1.7 million shares of Paypal into his account. The shares started off at the value of one-tenth of one penny ($1700), and after Paypal went public, those same shares rose t
Three Possible Scenarios for Rising Tax Rates
Americans have over $30 trillion sitting in 401(k)’s and IRAs, and people are waking up to the fact that those accounts are in the crosshairs of the US government to solve their debt problems. In a recent interview with Maya MacGuineas, she said the fiscal condition of the US and what’s going to happen over the next 10 years is terrifying. The Biden administration will likely try to kick the can down the road and that’s only going to make the fix more draconian. The political class is hyper focu
What's in Biden's New Budget Proposal?
President Joe Biden has recently proposed a $6 trillion budget designed to make the US more competitive. Spending is already on an unsustainable trajectory so we need to examine the impact this budget proposal will have on the fiscal outlook of the country. A lot of people believe a $6 trillion budget is too much, too soon and will exacerbate the debt problem in the long run. The budget proposal introduces budget deficits over the next several years, financed mainly by additional debt. This wil
Higher Taxes for the Middle Class? My Interview with Maya MacGuineas (Part 2)
Politicians are in a state of mind where they are not interested in fixing the problem, which means that the fix on the backend is going to have to be more aggressive and draconian. The damage the debt does is, in many ways, invisible to the average person. We have had decades to fix the debt problems but politicians have failed to do so. If we made these changes to something like Social Security years ago, we could have fixed it without affecting anyone depending on the system, but that is not
Higher Taxes for the Middle Class? My Interview with Maya MacGuineas (Part 1)
Maya is the President of the Committee for a Responsible Federal Budget. The committee itself has been around for a couple decades at this point and came about after several members of Congress left and realized how difficult it really is to be fiscally responsible with a government budget. It’s very difficult to govern in a fiscally responsible manner in a political environment because, in many ways, those two things are completely at odds with each other. Fiscally responsible is simply the not
America's True National Debt – Part 2
In Prosperity in the Age of Decline, the authors are predicting that 2030 will be the opening year of the greatest depression since 1930. Dr. Kotlikoff believes that it might not wait until 2030. China is already beginning to overtake the US in terms of GDP. By the end of the century, the US will no longer be the dominant economic superpower. It’s not looking good in terms of projection. For a depression to occur, there would usually have to be an event or collapse beforehand, which is definitel
America's True National Debt – Part 1
The official debt-to-GDP numbers are on track to be 110% by the end of the year, which is nearly a 30% increase over the last decade. The trouble is this calculation doesn’t count unfunded obligations like Social Security. Economic theory doesn’t differentiate between official borrowing and unofficial borrowing. The government has left a number of things off the books in order to keep the public in the dark about the true costs of what they are doing. Fiscal gap accounting puts everything going
The Coming Depression in 2030: My Interview with Brian Beaulieu
Brian Beaulieu is in the business of predicting economic trends. He’s been forecasting trends for the past 39 years and he’s very transparent about his methods. Brian is politically agnostic and aims to be as objective as possible. He doesn’t make money if the market goes up or down, he makes money by being right. Between March 20th and 28th of 2020, his GDP retail sales forecast came out with a 98% accuracy. When it comes to long-term trends, there are only a few ways they can play out. In term
The Secure Retirement Act 2.0 – 6 Things You Need to Know
There is a new bill moving through Congress right now that has bipartisan support and is fairly likely to pass in its current form. We can get a good sense of what the bill is intended to do by looking at the title page. The stated goal of the bill is to increase retirement savings, and to simplify and clarify retirement plan rules. Change #1 is that the bill enacts changes to required minimum distributions and does so according to a schedule that depends on how old you are now. This change will
The United States' Demographic Time Bomb
With the recent release of the US Census we are getting a picture of the upcoming demographic time bomb facing the country. The 2020 census revealed that there are 331 million US residents, which represents a 7.4% increase since 2010. This is significant since this period is the second slowest rate of growth we have experienced as a country since the Great Depression and roughly half the growth rate we experienced during the 90’s. When you combine the lower birth rate and declining immigration w
The Joe Biden Capital Gains Tax Proposal
This is an apolitical podcast. The goal is to call out fiscal irresponsibility no matter what side of the aisle it’s on. It’s less about politics and more about math. Joe Biden recently came up with a proposal to reform capital gains taxes. The increased revenue that is thought to come from this reform is earmarked to pay for childcare, universal pre-kindergarten education, and paid leave for workers. The state of capital gains taxes currently is that if you are in the 10% or 12% tax bracket you
The Case for Replacing Bonds with Annuities
If you want to maximize the amount of money you can safely spend in retirement some economists say that you should sell some of your bonds and replace them with annuities. According to Tom Hegna, there is only one mathematically ideal retirement plan and annuities are a key component. While you are working, a diversified portfolio of stocks and bonds is the most efficient way to save for retirement, but once you retire the rules of the game change and you need to start thinking about distributio
The Bernie Sanders Estate Tax Plan
Bernie Sanders is heading up the proposals regarding estate taxes, and his proposals are deviating to some extent from what President Biden has campaigned on. Joe Biden’s plan says that the estate tax exemption, which is currently $11.7 million as a single person, or $23.4 million as a married couple, will be reverted back to its 2009 levels. Anything above and beyond those limits would be taxed at a rate of 40% and as high as 45%. Bernie Sanders’ proposal begins at 45% and goes up as the amount
The Scourge of Modern Monetary Theory
Modern Monetary Theory (MMT) is a pernicious threat to the Republic and has become a popular theory among left-leaning economists. MMT is less an economical theory than it is a political theory. There are politicians in certain quarters that truly believe that MMT will solve all of our economic problems. They believe that the debt doesn’t matter, printing money has no consequences, and if we want something we can borrow or print as much as we need with no adverse effects. America is already in d
The Latest on Joe Biden's Tax Plan
Now that Joe Biden has the pandemic relief bill behind him, he can begin to focus on his tax plan which he heavily campaigned on before the election. Joe Biden’s pledge that nobody making less than $400,000 per year will face tax increases has a small asterisk next to it. That threshold only applies to families, and if you are filing as an individual, your threshold is $200,000, which means it will come into play for a much larger number of people. He is still planning on increasing the taxes on
Busting the Annuity Myths: My Interview with Tom Hegna (Part 2)
If you have a history of premature death or cancer in your family you may still be a good candidate for an annuity. If your spouse has longevity it can still be a good option. Even if you’re not in the best health there are still annuity products with certain features that can still make sense. Some people always want to have control of their money, but they have to realize that an annuity is not giving up control, it’s about taking control over your risk. Annuities give you control over longevi
Busting the Annuity Myths: My Interview with Tom Hegna (Part 1)
Popular speakers in the financial and retirement space like Ken Fisher and Suzy Orman have made annuities rather unattractive. The major objection has to do with the supposed fees of the product, even though many of the annuity options are not actually fee-based products. Ken Fisher has high fees, just like other investment options like commodities, hedge funds, and real estate. Variable annuities have higher fees than mutual funds but they also come with guarantees, and he’s essentially convinc
How to Protect Yourself from Our Country's Fiscal Challenges: My Interview with Van Mueller (Part 2)
The amount of money that we’ve printed over the course of the past year and what we’ll print in 2021 is equivalent to the entire economy of Japan. Van Mueller believes that at some point in the future the US dollar will no longer be the reserve currency, and when that happens the standard of living for Americans will go down almost immediately. Every country is printing money and destroying their currency’s purchasing power, but the US is doing it on a scale that’s unheard of. If you talk with t
How to Protect Yourself from Our Country's Fiscal Challenges: My Interview with Van Mueller (Part 1)
The general public should definitely be paying attention to the impact of inflation and what’s driving it. The government has gone to such ridiculous measures printing money that by the year 2029 the government will literally have to print the entire budget of the United States. Instead of inflation, we should be thinking of it in terms of a stealth tax. The M2 money supply is a good barometer for inflation statistics and by 2029 they are expecting the current M2 money supply to exceed $122 tril
"From Forever Taxed to Never Taxed": My Interview with Ed Slott (Part 2)
Some people have a concern about the implications of the tax arbitrage they could be receiving if they just waited. This is the key to the Roth plans and Life Insurance vehicles that Ed described. The big myth is that you will be in a lower tax bracket when you retire. If you let your IRA just continue to grow, at age 72 the plan will be out of your control, and you will be forced to take the money out at the prevailing rates, whatever they are at the time, for the rest of your life. For married
"From Forever Taxed to Never Taxed": My Interview with Ed Slott (Part 1)
Ed Slott has a new book coming out called The New Retirement Savings Time Bomb. It’s the updated version of the original book written 20 years ago where the time bomb was the tax building up in your IRA account. If you didn’t know how to plan, you could be hit twice and lose up to 80% and 90%. Some of the Estate taxes have gone away since then, but there are other new threats to your retirement savings than ever before. Congress always needs money, and they will always go for the lowest hanging
An 8-Year Extension on Middle Class Tax Cuts?
Joe Biden’s tax proposal has serious implications for anyone attempting to use the Power of Zero paradigm for their retirement planning. We know that the current tax cuts enacted by President Trump will remain at their current levels for the next five years and will revert to what they were in 2017 starting January 1, 2026. This tax sale gives us a historic opportunity to take advantage of low tax rates when we are executing a shift between the tax-deferred and tax-free buckets. If you wait unti
Financial Planning Changes and Updates for 2021
There are some basic updates and thresholds you need to be aware of if you’re interested in implementing the Power of Zero strategy. The first change is that your standard deduction went from $24,800 to $25,100. This may not seem like a big deal but does mean that you can have a larger amount of money in your IRA by the time you’re 72. The Roth IRA rules are not being changed at all, despite other account types having their thresholds changed. There haven’t been any dramatic increases within the
Changes to Section 7702 -- An LIRP Christmas Miracle
Due to low prevailing interest rates, the federal government has restricted the ability of industry experts to show the robust rates of return that LIRPs are capable of. When the Consolidated Appropriations Act was passed in the final hours of 2020 it amounted to a Christmas miracle, and it will be immensely positive for LIRPs and will position them to thrive in an environment of low-interest rates. Section 7702 is the section of the tax code that governs the tax treatment of life insurance and
My Interview with Former US Comptroller General David Walker (Part 2)
Things may seem bleak when you look at the numbers, but there are solutions that we can implement that could help our situation and ultimately prevent the worst outcomes when it comes to the national debt. David Walker’s book was divided into three parts: a wake up call, a call to action, and a way forward. He has a number of solutions that he’s proposed that meet six principles. Any solution would have to be: pro-growth, socially equitable, culturally acceptable, have mathematical integrity, be
My Interview with Former US Comptroller General David Walker (Part 1)
David Walker is a certified public accountant and has spent many years in public accounting. He’s run three federal agencies, two in the executive branch and one in the legislative branch. As the Comptroller General of the United States he was the chief performance and accountability auditor of the US. More recently, David Walker has run two non-profit companies and been a distinguished visiting professor at the US Naval Academy and has been on a number of boards and advisors groups dealing with
How to Maximize Your Net Worth When Doing Roth Conversions & More
David has written a number of books on the Power of Zero paradigm for retirement and still does about 90 speaking engagements each year. He also runs a program with around 250 advisors that help him espouse the Power of Zero worldview. The basic premise of the Power of Zero is that due to the fiscal irresponsibility of the US, tax rates will have to rise dramatically over the next few years just to keep the country solvent. Combine that situation with a skyrocketing national debt and unfunded li
My Take On Financial Gurus, Tax Fear Mongering, Tax Payment Procrastination, and More
There are a lot of stigmas around retirement planning and David’s new book addresses two of the most difficult problems facing retirees right now, longevity risk and tax rate risk, and how to deal with them at the same time. Tax rate risk has always been a big problem for retirees, but it’s not their biggest concern. Most people worry more about running out of money before they run out of life. David has observed that financial advisors are stuck believing they can solve one risk or the other. 9
A Power of Zero Amazon Review Rebutted
The Power of Zero occasionally gets a negative review. Today’s episode is going to deconstruct and rebut a recent one-star review and go through the different perspectives. The first claim is the book is based on a misleading assertion regarding taxes in retirement. They are basically subscribing to the idea of tax diversification and the idea that we don’t really know what taxes will be in the future, and in that case we should hedge our bets against all possibilities. This would be a fine appr
Will America Be a Super Power in 2040, My Review of David Walker's New Book (Part 2)
Last week David did part 1 of the review of David Walker’s new book and talked about the reasons why the US will probably no longer be a world superpower by 2040. In this episode we’re going to cover the proposed solutions. 40% of Americans don’t pay any tax at all with 20% of Americans receiving a refundable tax credit. This has been used in lieu of raising the minimum wage. The federal government forgoes $1.4 trillion in taxes per year in allowable deductions. One solution would be to shore th
Will America Be a Super Power in 2040, My Review of David Walker's New Book (Part 1)
David’s new book did quite well during the launch week, quickly becoming the 3rd most sold business book in the world. David Walker is well known for his expertise regarding the fiscal condition of the United States and is perhaps the person who most understands the potential impacts. Based on David Walker’s current projections for the US in the next 20 years things are not looking good. There is a real question about whether or not the US will still be a world superpower at that point. What doe
The ABCs of POZ
The historical paradigm says to put your money into a 401(k) or IRA, get a tax deduction and let that money grow tax-deferred so that when you take that money out you’re in a lower tax bracket. Experts and economists are starting to look at the fiscal condition of the US and the picture isn’t good. The US is $23 trillion in debt with unfunded obligations of upwards of $239 trillion. We are marching into a future where the very solvency of the US government is being called into question. We are g
My Thoughts on the Securing a Strong Retirement Act of 2020
The Securing a Strong Retirement Act is a bipartisan bill currently working its way through the house and has major implications for everyone in the country. We are finally getting some relief from RMD’s. With life expectancy increasing they are looking at pushing out Required Minimum Distributions until the age of 75. This primarily benefits people of substantial means since the average person with money in their retirement accounts are withdrawing it above and beyond the minimum and well befor
My Post-Mortem on the Presidential Election
At the time of recording this podcast the results haven’t been certified but it looks like Joe Biden will be the next US president. There are a couple of different outcomes that you need to pay attention to. The first involves him not controlling the Senate. In order to win the Senate Democrats would have to win two seats in a runoff election on Jan 5 but pundits are saying that result is unlikely. If Republicans control the Senate there will be a lot of obstruction for Joe Biden’s agenda. Every
Tax-Free Income for Life Preview, Part 3 – The Secret to Mitigating Tax-Rate Risk and Longevity Risk within the Very Same Financial Plan
Today’s episode covers the last secret to mitigating the two most concerning risks of people planning to retire. People are afraid of running out of money before they run out of life. Traditionally the way you can mitigate that risk is by accumulating a lot of money and restricting your distributions to 3% which gives you a statistical likelihood of not running out of money. The alternative is by guaranteeing your income by way of an annuity. Economists say that the ideal way to guarantee an inc
Tax-Free Income for Life Preview, Part 2 – How the Traditional Approach to Lifetime Income Annuities Could Spell Disaster for Your Retirement
In the previous episode, David explained the surprising benefits of having a guaranteed income stream in retirement via an annuity, including living longer. If there are so many benefits of owning a guaranteed lifetime income annuity, why aren’t more Americans taking advantage of these programs? There are three major barriers that are preventing people from ever entering into the transaction. The first issue that Americans have has to do with liquidity. In order to pull off the annuity deal, you
Tax-Free Income for Life Preview, Part 1 – The Surprising Benefits of Guaranteed Lifetime Income
This is the first of three podcasts leading up to the release of David’s latest book, Tax-Free Income For Life. According to a number of surveys, the number one risk that retirees are most concerned about is outliving their money. One of the ways to mitigate longevity risk is by having an annuity. There are a number of benefits that come with guaranteed lifetime income annuities, the first of which is retirement predictability. The first benefit of a guaranteed lifetime income annuity is closing
The Real Tax Implications of Biden's 401(k) Proposal
Joe Biden is coming for your 401(k) and it’s actually worse than David portrayed it in previous episodes of the podcast. Under Joe Biden’s tax proposal he is going to equalize the tax benefits of retirement plans. David breaks down exactly what this means for people in different tax brackets and what the implications of this plan are. In order for Joe Biden’s plan to be tax neutral the rate at which you receive a tax credit is 26%. This essentially means that anyone in a tax bracket under 26% is
The Post-Mortem on Trump's First Term
Today’s podcast is based on a recent article penned by Maya MacGuineas titled The Debt is Huge Because Trump Kept His Promises. Maya also appeared in David’s documentary The Tax Train is Coming. Much of what Maya says is that we shouldn’t be surprised by what happened during Trump’s first term since it has been exactly what he campaigned on. The debt that has accumulated has been a result of President Trump’s campaign promises of steep tax cuts and increased spending on both defense and veterans
What is The Elite POZ Advisor Group?
In every single book David has written he talks about why it’s so important to have a trusted and trained advisor in the Power of Zero paradigm. There are dozens of pitfalls standing between you and the zero percent tax bracket which is why it’s crucial you have a qualified guide to show you the way. You should work with an advisor that has internalized the Power of Zero principles to help you mitigate both tax-rate risk and longevity risk at the same time. The Elite POZ Advisor Group is a colle
5 Tax Changes You Can Expect If Donald Trump Is Re-Elected
Should Donald Trump win a second term in the Presidency there could be significant changes to the tax code. Donald Trump hasn’t laid out a fully realized tax proposal in the same way that Joe Biden has but he has outlined some of the things he would do. One of the things that Donald Trump has already done is unilaterally implemented a payroll tax deferral as an answer to the financial repercussions of Covid-19. It’s currently deferred, which means that the money would have to be paid back in 202
Why Most People Are Doing HSAs All Wrong
There is a benefit in the tax code that goes largely ignored. The holy grail of financial planning is an investment that gives you a tax deduction on the front end, lets your money grow tax-deferred and allows you to take that money out tax-free. In the Power of Zero paradigm that usually means a combination of Roth conversions and LIRP conversions. For most married couples, the ideal balance of the tax-deferred bucket is between $300,000 and $350,000. In that situation it qualifies as the holy
The Grand Unified Theory on a Happy Retirement, Part 2 – Principles 6-12
A quick recap of the first principles covered in the previous episode. #1 Mitigate longevity risk with an income annuity. #2 Your income annuity only needs to cover your basic lifestyle expenses. #3 Your income annuity needs to have a guaranteed lifetime income feature, inflation protection, liquidity, and a death benefit feature. #4 Cover discretionary expenses with your stock market assets in your LIRP. #5 Always draw your guaranteed lifetime income from your tax-free bucket. #6 Your LIRP must
The Grand Unified Theory on a Happy Retirement, Part 1 – Principles 1-6
There are 12 basic principles that make up the Grand Unified Theory when it comes to retirement planning. The first section tackles mitigating longevity risk. We know there are two basic ways to mitigate longevity risk, the first simply being to save up enough money. If you save enough money you can weather all the ups and downs of the stock market. Historically, there has been a 4% Rule that makes the calculation simple. More recently the rule has been revised. The new 3% Rule is more common. I
Is Joe Biden Coming for Your 401(k)?
Joe Biden has historically said that taxes won’t go up for anyone that makes less than $400,000 annually , but that may not be the case. Some people may lose some deductibility in their 401(k) contributions which would result in an effective increase in the tax they are paying. If you are in the highest marginal tax bracket of 37%, when you contribute $1 to your 401(k) you essentially save $0.37 in tax. Joe Biden’s perspective is that for people in higher income tax brackets, the tax savings is
Five Things Your LIRP Must Have
There are five important elements your LIRP must have if you are going to have it for the rest of your life. Similar to getting married, these are things you need to look for before committing to the plan. You don’t want to get 10 or 20 years in before you realize there is a ticking time bomb in your LIRP. The first thing your LIRP must have is the ability to get a guaranteed zero percent loan. The best strategy for your LIRP is to work with a company that allows you to take a loan against your
How to Avoid Over-Converting Your IRA
It is possible to convert too much money to your Roth IRA and not leave enough money in your IRA to use when you’re ready to retire. The first principle you have to realize is that in a rising tax rate environment, it’s okay to have some money in your tax-deferred bucket. You have to be very strategic about how you shift your money to tax-free and shouldn’t be too reckless when it comes to converting. You can have too much money in your tax-deferred bucket, you can have too little, what we are l
Can We Print Our Way Out of Our Problems?
A government can’t simply print however much money they want to be able to buy whatever it is that they want. The Deficit Myth was recently released and in the book the author argues that because the government issues its own currency, it doesn’t have to operate like a traditional household. According to the author, all we need to do is print $239 trillion and the US will be funded for the next 75 years. Stephanie Kelton is a proponent of what’s known as modern monetary theory, which is essentia
If You've Won the Game, Should You Quit Playing?
There is a well-known economist named William Bernstein who originally asked the question “When you’ve won the game, why keep playing?” But should people who are retired avoid the stock market completely? An article on the Motley Fool follows the same line of thought. You do need a plan for withdrawing your money in retirement that is different from your plan for building your nest egg and it needs to be in place before you need to withdraw from your assets. A good rule of thumb is to not have m
How a Piecemeal Internal Roth Conversion (PIRC) Could Save Your Retirement
The Piecemeal Internal Roth Conversion (PIRC) may be indispensable to your retirement plan. There are two massive risks that could waylay your retirement journey and prevent you from living a happy and stress free retirement. The first is tax rate risk, the risk that tax rates in the future will be dramatically higher, and the second is longevity risk, where you run out of money before you die. Historically, financial planners have been decent at mitigating either one or the other of those risks
Can You Be Too Old to Implement an LIRP?
David often gets the question of whether a person can be too old to implement an LIRP and like most questions the answer is “it depends”. There are a number of great reasons to implement an LIRP, but you have to keep in mind that it’s not a silver bullet for your retirement and should be paired with other streams of tax-free income. The first benefit of the LIRP is that the money in your account grows safely and productively, but that also means that you’re not going to hit any homeruns inside t
What to Expect if Joe Biden Gets Elected
In past episodes of the podcast David described the impact of a blue wave in the upcoming November election and what may happen to your finances if Joe Biden becomes the next president. The first major change would likely be the loss of the stepped up basis which could result in a large increase in the taxes on money you inherit in the future. No matter who gets elected in November tax rates will have to go up. There is a rumour that a fifth part of the Covid-19 relief bill will be coming in the
What Is Time-Segmented Investing?
Time-segmented investing is a critical concept in the Power of Zero paradigm. The traditional approach says that you can have an investment portfolio balanced in such a way as to protect against systemic risk, but this approach has a serious risk associated with it. A couple of down years in the stock market during a time when you are withdrawing funds from your portfolio can lead to you running out of money up to 15 years faster than you expected. The 4% rule is how people typically protected t
What Dalio, Cooperman, Slott, Kotlikoff and Swedroe Have Recently Said About the Future of Tax Rates
David Walker has been saying that tax rates are going to have to double since 2008. We didn’t do that. So that means the national debt will continue to accumulate until we reach $53 trillion, at which all the money flowing into the Treasury will only be enough to pay the interest on the debt. Many people other than David Walker are starting to speak about the future of tax rates as the national debt continues to skyrocket. Ray Dalio has said that the US will have little choice but to raise taxes
What is a Before and After Comparison? (And Why You Might Need One)
The Before and After Comparison is an indispensable part of the financial planning process and you can get help with yours over at davidmcknight.com. The comparison is made up of three different projections within some sophisticated financial planning software of side-by-side-by-side life scenarios. The comparison reveals the impact of using the Power of Zero paradigm on your retirement funds. The first projection shows what happens if you continue doing what you are doing right now under the un
Will Taxing the Rich Alone Solve Our Fiscal Challenges?
Every once in a while the idea of fixing all our fiscal problems by taxing the top 1% of the population is proposed, but it’s time to do the math and see if it’s true. The Committee for a Responsible Federal Budget put out a report a few years ago, prior to the latest spending due to Covid-19, where they analyzed what it would take to actually balance the budget. The first scenario looks at balancing the budget by not adding any more to the existing debt. The challenge with this scenario is that
My Family's Escape from Puerto Rico Following Hurricane Maria (and Financial Lessons Learned)
David moved his family to Puerto Rico about three years ago and within six weeks of arriving they experienced something that completely changed their lives. It’s been three years since Hurricane Maria hit Puerto Rico, but there are still residents with significant damage to their house. When deciding to move his family to Puerto Rico, the idea of a hurricane wasn’t even a concern since the last major hurricane to hit the island had happened in 1928. Unfortunately for David and his family, Hurric
Anticipating an Inheritance? Here's How to Plan for Tax Efficiency
Not everybody is going to get an inheritance but there are some very important strategies you can implement to minimize your taxes if you are going to receive one. The ultimate goal of the IRS, no matter how you inherit money, is to get all of the inheritance money into your taxable bucket within the next 10 years, preferably immediately, because that is how they make the most money. We know that if you inherit money from a taxable bucket you get a stepped-up basis for those investments. Since t
What Is the Coronavirus-Related Distribution (CRD) Roth Conversion Loophole (And Should You Do It?)
A Coronavirus-Related Distribution (CRD) is any distribution by a person diagnosed with Covid-19, this can also include a spouse or dependent. Alternatively, if you’ve been adversely affected by the Coronavirus in some way, for example being furloughed, you may qualify as well. The CRD allows you to withdraw up to $100,000 from your qualified plan and if you’re younger than 59½, the 10% penalty is waived. Another benefit is you are allowed to pay the money back over the course of the next three
What Happens if the U.S. Defaults on Its Debt?
The US is very likely to default on its debt at some in the future, but we’re just not sure exactly when. What we do know is that the sooner it happens to smaller the impact will be, but that doesn’t seem like it’s going to be the case. The reality of our financial situation as of May of 2020 is the US is on course for a $3.7 trillion deficit this year. According to Jerome Powell, we are going to need another stimulus package and could be looking at a deficit of over $5 trillion, a number which
How to Turn the 2020 Waived RMD In Your Favor
The federal government has waived the Required Minimum Distributions for 2020. There are 20% of Americans who don’t spend their RMD’s which means that 80% of the population relies on those RMD’s to pay for daily expenses. This change affects anyone who had an RMD due in 2020 from their 401(k), IRA, and other retirement accounts. The IRS takes the value of your account in December of the year prior. In this case the stock market of December 2019 was considerably higher than it is now. Over the pa
The Morality of the 0% Tax Bracket
Can you be in the 0% tax bracket and still be a good citizen?’ is a common question that David gets fairly frequently. David relates an exchange he had with a listener on Facebook where they stated that paying less taxes is inherently selfish and paying taxes is how we take care of people as a society. Most people have the thought of “what happens to society if everyone is in the 0% tax bracket?” The trouble is they are coming at the question from the wrong angle. Everyone who earns an income wi
How Long Will the Step-Up-Basis Loophole Last?
Families that aren’t quite rich enough to be affected by the Estate Tax, but have built wealth over time, have another benefit available to them called the step-up-basis loophole. Essentially, what happens with the step-up-basis loophole is when you pass on an investment to your beneficiaries, the present value at the time of your death becomes the new basis for that investment. This will wipe out the capital gains on that investment and can be a great deal which compares favourably to inheritin
Should I Do a Roth 401k?
Should you be contributing to your Roth 401(k)? The short answer is yes because anything with the word Roth in front of it is truly tax-free. What does it mean to be truly tax-free? Roth 401(k)’s pass both litmus tests for what makes something tax-free. If you’re younger than 50, you can put in $19,500 each year, and if you’re over the age of 50, you can catch up a bit with an additional $6,500. You can also still get the match when contributing to your Roth 401(k). Your company will put those d
Should a Single Person Own an LIRP?
Under what circumstances should a single person want to own an LIRP? There are a number of scenarios where it can make sense, but it definitely depends on the individual’s situation. We have to remember the primary motivation for having life insurance is having death benefit, but there are a few close second reasons. Using the death benefit in advance of your death to pay for long-term care is one such reason. With sufficient long-term care insurance, you are able to call the shots and have the
Should I Fund My LIRP or Annuity While the Market Is Down? with David McKnight
David often gets questions from people asking why they would want to liquify their investment portfolio to fund their annuity, especially now with the markets being down due to the coronavirus. There is an inverse relationship between stocks and bonds, when stocks are down bonds are up. Annuities and the LIRP share a lot of similarities and effectively replace the bond portion of a portfolio. Annuities can be superior to bonds for seniors, giving them high, guaranteed payments for the rest of th
What You Need to Know about the COVID-19 Stimulus Bill with David McKnight
Investors need to understand the latest coronavirus stimulus bill that was just passed. Investors can now take out up to $100,000 from their 401(k) or IRA prior to age 59 and a half without any penalty. The bill has also increased the loan size you can take out from your 401(k) to $100,000. Another big piece of news investors should be aware of is that required minimum distributions are going to be waived for 2020. The question is how will the IRS fill the hole in the federal government’s revenu
Why Now Is the Perfect Time to Do a Roth Conversion with David McKnight
The coronavirus downturn in the market is actually the perfect time to do a Roth Conversion because of the double sale that’s going on. The first sale involves the next six years where we get to enjoy the lowest tax rates we are likely to see in our lifetimes. The second sale is due to the 35% drop in the stock market, your assets are now at much lower values and that means the tax on a potential Roth Conversion is also 35% lower. If you were to hypothetically convert a $1 million IRA this year
Can the LIRP Serve as the Bond Portion of Your Portfolio? with David McKnight
A common question that David gets fairly frequently is whether or not the LIRP can be a substitute for the bond portion of a portfolio. A lot of people are funding their LIRP’s out of stock market portfolios that are growing at an average rate of 8%. If that’s the case and they take money out of that portfolio to get a 4% return in their LIRP, doesn’t that neutralize the tax benefit that justifies doing the LIRP in the first place? It can make sense for the LIRP to function as the bond portion o
My Thoughts on the Coronavirus with David McKnight
The two single greatest threats to your retirement are tax rate risk and longevity risk. The Power of Zero paradigm is the unified approach to mitigating both of these risks. As of March 9, 2020, the stock market is down 19% from its peak in February which has erased a lot of the returns from 2019. The infections of the Coronavirus are doubling approximately every six days. Around mid-May that doubling interval should start to taper off. People over the age of 70 are at the most risk from seriou
An Ominous Warning from the U.S. Comptroller General with David McKnight
It’s easy to forget how bad the fiscal situation of the United States actually is unless we are being constantly bombarded by experts telling us the truth of the matter. A recent article details a coming report from the Comptroller General. Come March 12, the Government Accountability Office is going to put out an assessment of the fiscal health of the federal government and unsustainability is the key takeaway. The Comptroller General put out a similar report in 2019 and not only has nothing ch
The Perils of Paying Long-Term Care Expenses from Your Tax-Deferred Bucket with David McKnight
If you’re between the ages of 50 and 65, there is a good chance that you have at least one parent or in-law that is going through a long-term care event. This may lead you to wonder how you are going to deal with your own long-term care events in the future. The government may be picking up the tab, but people in Medicaid-funded long-term care facilities tend not to live as long as at other facilities. A lot of people in that age range have a false sense of security around how they are going to
Is Your Annuity in the Wrong Bucket? with David McKnight
99.5% of all annuities are not in the right bucket. There are many reasons to use an annuity: they can be safe and productive, they safeguard against market risk while participating in the upward movement, and many people use them for a guaranteed stream of income. The alternative to annuities for creating a stream of income is the stock market but that approach comes with a set of rules including the previously discussed 4% Rule. When you factor in present conditions, the 4% Rule no longer hold
How Life Insurance Will Replace the Stretch IRA with David McKnight
Historically, people who had large IRA’s, and who didn’t want their beneficiaries to squander their inheritance all in one year, could use a trust to make sure the funds were released over the course of their lifetime. However, due to the recently passed Secure Act, that beneficiary will be forced to spend down that money over ten years or less. The good news is that there is a way to control the flow of money in a similar fashion despite the legislation. Since it makes sense to pay taxes now wh
Is The 4% Rule Still Viable? with David McKnight
The 4% Rule originated with a man named William Bengen in 1994. He looked back and noticed that people were withdrawing from their portfolios at a very haphazard rate. Prior to 2005, a common way people used to determine how much they could withdraw was to look at the average return of the market at the time. When asked, 40% of retirees said that they could withdraw 10% annually from their portfolio starting from day one of their retirement without ever running out of money. William Bengen start
The Difference Between Tax-Deferred and Tax-Free with David McKnight
David gets the same question nearly every single week. Someone invariably asks about how if they do a Roth conversion, won’t they have less money working for them in the tax-free bucket and need more time to catch up compared to had they just left the money in the tax-deferred bucket? If the government came up to you and offered to loan you some money and wouldn’t tell you what the interest rate will be, would you cash the check? Putting money into your 401(k) is very similar, by doing so you ar
Could the Federal Government Take Away Your Roth or LIRP? with David McKnight
David prefers to be a clear-eyed realist and face things head on, mincing words about the fiscal situation of the United States would be a disservice to everyone. One of the big things that people have asked about after the previous episode is whether shifting all their money to tax-free will do anything for them. If the situation is so bad, what’s to stop the government from taking these programs away? There are two traditional approaches to retirement and taxation, namely, the government is go
What You Need to Know About Tax Changes in 2020 with David McKnight
The new year brings important changes to the IRS tax code along with various thresholds that we have to know about when it comes to Power of Zero planning. We have to be keenly aware of these thresholds because they can end up being landmines if we’re not doing things correctly. The new income threshold for the Roth IRA is $124,000 to $139,000 for a single person and $196,000 to $206,000 for a married couple. The good thing about the Roth IRA is you have until April 15th of the following year to
Is Our Country's Fiscal Condition Past the Point of No Return? with David McKnight
For a grim depiction, check out this article The Mathematical Certainty of U.S. Government Default by Ptolemy3 about the future of the US government’s debt situation. The US government reached the tipping point at least fifteen years ago where the only way out will be default. People who calculate debt for the US federal always do it incorrectly. The proper way to do it is to figure out the net present value of everything that we’ve promised over the years minus what we can actually afford to de
The SECURE Act Passes–Implications for Power of Zero Planning with David McKnight
The SECURE Act was passed a couple of weeks ago and we now know what it’s implications are. The big thing that everyone is talking about is that it eliminates the lifetime stretch provision for non-spouse beneficiaries of IRA’s, 201(k)’s, and Roth IRA’s. Now, if you’re leaving your IRA to a non-spouse beneficiary like a child, they will have to realize it as income over the following ten years. If your child will inherit your IRA, they will probably do so when they are at the apex of their earni
Will the POZ Approach Increase My Medicare Premium? with David McKnight
One of the most common questions that David gets is regarding what happens to the Medicare Part B premium if someone engages in a Power of Zero tax strategy. Are there unexpected consequences of shifting money from tax-deferred to tax-free? When you do a Roth conversion, it doesn’t count towards the income thresholds that determine whether you can do a traditional Roth IRA, but it does have an impact on your Part B Medicare premium as well as your prescription drug premium. IRMAA stands for inco
Will the Power of Zero Approach Still Be Valid after 2025? with David McKnight
Once you get past December 31 of 2019 you will only have six years left to reposition dollars from tax-deferred to tax-free before tax rates go up for good. Every year that goes by your timeline gets shorter. The question that David gets all the time is what is going to happen once 2026 hits and will the Power of Zero paradigm still exist? The Power of Zero was written in 2013 and plenty of people between 2014 and 2017 were taking advantage of the Power of Zero strategy before they even knew the
Last Call For Roth Conversions! with David McKnight
The last weeks of December are critical in terms of taking advantage of your last opportunities to do Roth conversions for the 2019 tax year. Many people think you can go all the way until December 31 but that’s not always going to be the case. Some companies require you to submit a Roth conversion much earlier because they can take some time to process. Missing the Roth conversion deadline can have major tax implications. With a traditional IRA you can fund it up until April 15 of the following
If Taxes Are Supposed to Go Up, Why Did They Just Go Down? with David McKnight
David gets a number of emails from listeners saying that he’s been wrong for years and the central thesis of the Power of Zero paradigm is incorrect. The question is, do the tax cuts of 2016 delegitimize what he and others have been saying? In reality, the problem has only compounded since the tax cuts came into effect. You have to consider whether the US government is prone to making bad financial decisions and has just kicked the can further down the road. David Walker says that anytime you ha
What Is a Risk Multiplier? with David McKnight
When someone is talking about a risk multiplier, they are essentially talking about longevity risk. The longer you live, the more likely it is for you to experience a subset of risks that could completely derail your retirement plan. There first major risk is the long term care risk. In many ways, you are better off dying than needing long term care, because a long term care event can completely decimate your savings and put your spouse into a very difficult spot. Historically, long term care po
When Bumping from a 12% to a 22% Tax Bracket Makes Sense with David McKnight
David is generally very reluctant to recommend something that would cause someone to bump from a 12% tax bracket into a 22% tax bracket. We’re trying to avoid the tax apocalypse that’s coming down the road, and that means thinking about the future. There are some circumstances where it makes sense though. A scenario to compare is between two 65 year olds with similar amounts of money in their three buckets. The first thing to do is figure out what their taxable income is by crunching the numbers
The 12 Rules for a Power of Zero Retirement with David McKnight
Rule #1: Everyone’s situation is different, and there is no cookie cutter approach. You can’t pick up the Power of Zero book and have the exact recipe for success. It will need to be tailored to your personal situation. Rule #2: It is unlikely that you will be in a lower tax bracket in retirement. The closer you are to 2029, the less likely you are to be in a lower tax bracket. We know when the tax cuts will end and when tax rates will go up. When you look at the ten-year horizon, it’s really to
The Holy Grail of Financial Planning with David McKnight
When David is working with a client, his recommendation is to reach the zero percent tax bracket is by having 5 to 7 streams of tax-free income. These can include Roth IRA’s, Roth 401(k)’s, and L.I.R.P.’s. David often asks advisors what they think is his favorite. Rarely, will anyone guess the truth is RMD’s (Required Minimum Distributions). The holy grail of financial planning is any investment that gives you a tax deduction on the front, grows tax-deferred, and you can take it out tax-free. A
What is the Public Pension Liability Crisis? with David McKnight
There are three words that don’t get mentioned very much, but they should scare the dickens out of you. Those words are Public Pension Liabilities. It’s a problem that is largely flying below the radar, but if you live in a state with a lot of public pension liabilities, it could end up like Detroit. Public pensions often end up swallowing up the state budget until there is little left over to provide basic services. A pension is a guaranteed stream of income that is paid to you either over your
What is an L.I.R.P. Conversion? with David McKnight
David becomes very uneasy when advisors recommend that their clients take the money in their IRA and convert all of it into an LIRP. The LIRP has a lot of benefits, but it really should be used in conjunction with other streams of tax-free income. The LIRP is powerful only to the extent that it’s used in collaboration with, in most cases, four to six other streams of tax-free income. That’s when it really shines. An LIRP conversion is something that you would use with a client when there are no
Meet the Politician Who Sounds Exactly Like a Power of Zero Advisor with David McKnight
There are two people today that are making waves in the national conversation for what they are saying about the national debt. This first is Ken Fisher. Ken says the debt to GDP ratio has been worse in the past and that we really have nothing to worry about. He also says that we borrowed some of that money from ourselves, so it’s really just an accounting issue. The trouble is, that’s all untrue. We owe the money to Social Security and that money has to come from somewhere. Social Security is u
Should I Take the Lump Sum Option with My Pension? with David McKnight
What are the implications of taking your pension normally versus a lump sum? A lot of companies offer the lump sum as a way to get out from under the financial obligation of paying you or your spouse until you die. As a stream of income, your pension will be coming out of your tax-deferred bucket. You also have to realize that once you opt to take your pension as a stream of income you are stuck with that choice regardless of what tax rates are in the future. It will always come out of your tax-
Why Line 10 Is My Very Favorite Line on the Tax Return with David McKnight
Line 10 on your tax return can be a great joy for you in retirement. Before the tax cuts of 2018, you may have known it as Line 43, and it simply means your taxable income. Taxable income is important to someone trying to achieve the Power of Zero paradigm because in a rising tax rate environment there is an ideal amount of money in both your taxable and tax-deferred buckets. Anything above those amounts should be repositioned to tax free. That’s approximately six months of living expenses in th
The Hallmarks of a True Power of Zero Advisor with David McKnight
Over the years David has noticed a number of advisors who have professed to be Power of Zero advisors, but there are a number of significant shortfalls in their approach. A true Power of Zero advisor believes that tax rates are going to be higher in the future than they are today and knows how to defend that position. They understand the national debt and the true amount of the unfunded liabilities as well as the implications of those things. In a rising tax rate environment, there is an optimal
How to Get Your Social Security 100% Tax-Free with David McKnight
Social Security can indeed be taxed, despite the feeling that you’re getting taxed twice. This year, 89% of all federal tax revenue is only going to go towards four things: Social Security, Medicare, Medicaid, and interest on the debt. These are non-discretionary spending items. It would take an act of Congress to choose not to pay for them and doing so would result in a worldwide depression. That means that only 11% is left to fund everything else in the budget and that doesn’t include the addi
My Response to an Amazon Review Critical of The Power of Zero with David McKnight
When you come from a tax-deferred paradigm, it can really skew how you view the types of accounts that you are accumulating dollars in. The main thrust of the reviewer’s critique is that we shouldn’t focus on minimizing taxes if that means that investment fees will leap up over the course of retirement. Of course, you shouldn’t build your financial plan while only considering taxes. If you look at the financial path the country is on, we can make some educated guesses on the future of tax rates
All About MEC's, 1035 Exchanges and Life Insurance Taxation with David McKnight
The IRS has a test called the seven pay premium test. It basically states that it’s possible to put too much money into a life insurance policy. If you fail that test than any loans that you take from your life insurance policy get treated differently. Traditionally, if you obey the rules of the IRS you put money into a life insurance policy after tax and if you take the money out the right way you can do it tax free, typically by way of a loan. The alternative is to take the money out of a non-
Do LIRP's Really Have High Fees? with David McKnight
The number one criticism of the Life Insurance Retirement Plan online is that the fees are simply too prohibitive, but the question is really what are they expensive compared to? The best way to compare the fees is to think about where else you could be putting your money, in most cases that’s going to be some sort of investment. When it comes to typical investment fees, you’re looking at an expense ratio of 1.5%. The baseline number to compare the fees with the LIRP is that 1.5%, which means yo
The Great Roth Conversion Myth with David McKnight
You will find articles on the internet that claim that if you are going to do a Roth Conversion you have to do it a number of years before retirement, because you must have the ability to recuperate the dollars you’ve paid towards tax, but that doesn’t stand up to the math. David goes over the example of two brothers, each taking a different approach to investing $100. One goes for the tax deduction on the front-end approach, and one for the tax-free approach. The moral of the story is that most
How the 72(t) Can Help You Get To Zero with David McKnight
There are a number of ways to get money out of an IRA before you are 59 and a half years old. One is a Roth Conversion, but the problem with that is you have to pay tax and potentially a penalty. The only other way is something called a 72(t). The 72(t) basically means separate equal periodic payments. What this means is that you can take money out of your IRA before your 59 and a half years old as long as you do it in separate equal yearly distributions that last for at least five years, or unt
3 Huge Retirement Mistakes and How To Avoid Them with David McKnight
There are three critical mistakes that most people make when preparing for retirement that really should be resolved beforehand. The first mistake is to assume that you will be in a lower tax bracket in your retirement years. This has been pushed by more than a few financial gurus online that tell people to get a deduction during their working years by putting money in 401(k)’s and IRA’s. This is likely a miscalculation on the part of many people getting ready for retirement. The country is $22
Reverse Mortagages with David McKnight and Harlan Accola
Harlon Accola is the National Reverse Mortgage Director for Fairway Independent Mortgage Corporation, and reverse mortgages are all he’s done for the last sixteen years. More recently he’s been training other professionals in how reverse mortgages mesh with overall financial planning. It is true that if you do a reverse mortgage you will lose equity, but it’s not about losing equity, it’s about spending equity. A reverse mortgage is simply a way to get your money back out in a tax free way that
15 Things You Should Know about the Roth IRA--Part 2 with David McKnight
Today, we continue last week’s discussion of 15 Things You Should Know about the Roth IRA, with Part 2. You can not take a required minimum distribution from an IRA and turn it into a conversion, you have to deposit it somewhere else. The ideal scenario is to preemptively convert all your IRA’s to Roth IRA’s before you would want to. Roth conversions have to be done before December 31 but that makes it a real challenge to know what your modified adjusted gross income will be for the year by that
15 Things You Should Know about the Roth IRA--Part 1 with David McKnight
A true tax-free investment will meet two basic tests. They will first be free from every type of tax which means free from federal tax, state tax, and capital gains tax. The second thing is that the investment can’t count as provisional income. Roth IRA’s meet all those criteria as long as you are at least 59 and a half. Anything with the word Roth in front of it should be embraced as a truly tax-free investment, including Roth IRA’s, Roth Conversions, and Roth 401(k)’s. You can’t make a signifi
Why Your Tax Rates Could Double (No Matter What) with David McKnight
Micheal Coleman texted a glowing testimonial to David about his latest book, “The Volatility Shield.” We often talk about why your taxes could double in an effort to keep the country solvent because of the vast unfunded obligations like Social Security, Medicare, and Medicaid. However, there is another scenario where your tax rates can double that has nothing to do with those factors. David relates the story of a limousine driver that he met that was quite proud of his financial planning. He had
The Surprising Tax Benefits of Living in Puerto Rico with David McKnight
In 2012, there were two Acts that came out in Puerto Rico that gave people massive tax incentives to move their business there. Act 20 says that if you own a qualified business and move it to Puerto Rico they will waive your federal tax, your state tax, and they will charge you a flat 4% tax. You have to become a Puerto Rican citizen in order to take advantage of the Act. Act 22 is even better, this Act says that Puerto Rico will also waive all your capital gains tax. This is why hedge fund mana
Part 2, Jonathan Krueger from Living a Richer Life By Design, interviews David McKnight
The math demonstrates that our elected officials have made promises that they can’t possibly afford to deliver on in the form of Social Security, Medicare, and Medicaid. To avoid getting voted out of office, they are likely to raise taxes dramatically in the future and the people who will suffer the most are the ones who have the majority of their retirement savings in 401(k)s and IRAs. The taxable bucket is the least efficient bucket to keep your money in, given that in reality, the optimal amo
Jonathan Krueger from Living a Richer Life By Design, interviews David McKnight
David has been in the industry since 1997, serving people and trying to insulate them from the coming tax storm. David’s wife and seven kids live with him in Puerto Rico, and he’s written several books to get the word out to the American people. David Walker was the former Comptroller General of the federal government, and in 2010 he created a movie called I.O.U.S.A. In that movie, he talked about how we are marching into a future where we are likely to go bankrupt as a country. David Walker is
The SECURE Retirement Act: Implications for Your Retirement with David McKnight
There are two pieces of legislation that are working their way through the House and the Senate. The goal of which is to incentivize and encourage people to save more often and save earlier, but there’s more to them than that. The Setting Every Community Up For Retirement Enhancement Act (SECURE) is the legislation moving through the House. The Senate has their own version of a similar act. Both pieces have a lot of things in common, namely they both want to create retirement plans that have ann
Can You Have Too Much Money To Get To The 0% Tax Bracket? with David McKnight
The simple answer to the question of whether or not you can have too much money to get to the 0% tax bracket is no. The thing someone would be afraid of in that regard is paying so much tax in the process that it wouldn’t make sense to try to get there. It really comes down to whether the next seven years will be a good deal in terms of how much taxes you can pay now versus pay later. Much of the answer relies on Required Minimum Distributions. RMDs are designed to force you to pay taxes on all
A Power of Zero Case Study (Pension Example) with David McKnight
The Power of Zero paradigm changes a bit when you have a pension. The best case scenario in terms of tax rates that you are going to experience is likely to be while you’re working. Let’s say we have two 60-year-olds that want to retire in 5 years. They have $500,000 in their IRA’s and 401(k)’s, and one of the spouses has a pension of $5,000/month. They are currently in the 22% tax bracket. If you have a $5,000 pension, that is construed as provisional income by the IRS. This means that up to 85
A Power of Zero Case Study (No Pension) with David McKnight
Let’s say we’ve got two 60 year olds that want to retire at the age of 65. They’ve got $300,000 in their taxable bucket, $700,000 in their tax deferred bucket between their IRA’s and 401(k)’s, and nothing in the tax free bucket. The first step to getting into the Power of Zero paradigm is being convinced that tax rates in the future are going to be dramatically higher than they are today. The second step is that given that tax rates are going to be higher in the future than they are today, reali
Five Key Takeaways of The Power of Zero Message with David McKnight
The five key takeaways of The Power of Zero message have evolved considerably, especially since the recent Trump tax cuts. The first takeaway is that tax rates in the future are likely to be dramatically higher than they are today. Politicians are extremely averse to cutting spending in any way because cutting the programs that are going to consume the most in terms of resources like Medicare and Medicaid is the third rail of politics. We are at $22 trillion in debt and it will continue to grow
When Should I Take Social Security? with David McKnight
When you take social security ultimately comes down to how long you are going to live. If you can accurately predict how long you are going to live you can accurately predict at what age you should draw social security. The question becomes “how do you figure out how long you’re going to live?” One of the best answers is to simply go through the underwriting process for the Life Insurance Retirement Plan. When you go through the underwriting process you get one of thirty different ratings and yo
The Historic Timing of the Power of Zero Message with David McKnight
You’re saying tax rates are going up, so you mean I’ve done this all wrong? Not necessarily… you want to put money into your tax deferred bucket when the deduction means the most to you, when tax rates are historically high. You want to take money out of your tax deferred bucket when taxes are low. Most people put money into their tax deferred accounts during a time when tax rates were higher than they are today. Starting Jan 1, 2018 and going until Jan 1, 2026, we have currently have as a low a
What’s Better, A Chronic Illness Rider or a LTC Rider? with David McKnight
The question often comes up, which is better? A chronic illness rider or a long term care rider? For 50 to 65 years, the primary benefit of the Life Insurance Retirement Plan is the ability to receive your death benefit in advance of your death in order to pay for long term care. The long term care rider basically says that for an extra charge you can receive your death benefit in advance of your death at a certain rate per month. Requiring assisted living in two out of six activities of daily l
A Conversation with Doug Orchard, The Power of Zero Documentary Producer, with David McKnight
After seeing what happened in 2008, Doug has been interested in creating films that can move the needle for society, specifically topics like the national debt, exercise, education, healthcare, and finances. In 2009, David Walker produced the landmark movie “IOUSA” that exposed the fiscal challenges facing the United States, and in many ways, he was the person that got Doug interested in the topic of national debts. Films have a finite lifespan, so creating another film on the topic is another c
What’s Better: Traditional LTC, Asset Based LTC, or Permanent Life Insurance? with David McKnight
The best way to pay for long term care protection is by way of a permanent life insurance policy. If you die peacefully in your sleep 30 years from now someone is still getting a death benefit. You are better off dying than requiring long term care, at least if you die your spouse becomes the beneficiary on all of your retirement accounts. Long term care insurance can prevent your spouse from enduring a bare-bones subsistence living in retirement if you end up needing to pay for long term care.
Sneak Peek: The Audio of Chapter 1 of “The Volatility Shield” with David McKnight
The audio version of the Volatility Shield won’t be released for another three weeks, so David gives you a sneak peek at the opening chapter of the book. The story opens with Jack driving down the highway preparing to leave his life behind and start something new. His plans change when he receives a call from his stepfather Ted. Jack visits Ted at his sports store and gets some surprising news. Ted has sold his business and needs a little help from Jack. Ted always seems to have some sort of ult
What’s Better - the Roth IRA or the LIRP? with David McKnight
Every once in a while an advisor will attempt to elevate the LIRP by diminshing the Roth IRA. They may, for example, say that the Roth IRA has some inherent limitations, including income limitations--if you make too much money or too little money--lack of plan completion insurance, and the inability to access the money until you’re 59.5 years old. You’re also susceptible to declines in the stock market. The Life Insurance Retirement Plan, on the other hand, has no contribution limits and no inco
The Back Door Roth and Roth Recharacterizations with David McKnight
With a Roth IRA you have income limitations. At a certain amount of income, the amount you can put into a Roth IRA begins to reduce and at $203,000 in yearly income you can no longer do a Roth IRA. This is problematic for people that have a lot of taxable income in a given year. There are ways around the limitation but it comes with strings attached. If you make more than $203,000 in gross income as a married couple, you can take advantage of a Traditional IRA. The tradeoff here is you get a tax
My Next Book “The Volatility Shield” Releases Today! - with David McKnight
The 4% Rule says that when you retire there is a finite amount of money you can pull out of your portfolio per year if you want your money to last your life expectancy. Based on Monte Carlo simulations, that number is 4%. If you take more than 4% out of your portfolio during down years, you’re getting hit twice. Too many years like that and your portfolio could go into a death spiral from which it may never recover. If you want your money to last, 4% is all you should ever take out. For example,
The Four Types of LIRP's (And How to Find the Right One for You) with David McKnight
The first type of LIRP is Whole Life. It goes back to the very beginning of life insurance and is designed to last you your whole life. You contribute money to your account and that money grows in a predictable way, earning anywhere from 3-5%. Because of this steady, predictable growth, people sometimes use this kind of insurance as the bond portion of their portfolio, enabling them to take more risk in other areas of their portfolio. Similar to Whole Life but with a few distinct differences is
How To Implement The Power of Zero Strategy with David McKnight
The whole Power of Zero paradigm is predicated on tax rates being much higher in the future than they are today. If you don’t believe that, the Power of Zero paradigm is not one you’re likely to warm up to. Step one is to recognize that taxes will be higher in the future than they are today. The fiscal gap is an estimated $239 trillion. That’s the difference between what we have promised and what we can deliver. Step number two is to recognize that in a rising tax rate environment, there is a pe
Should I Do A Roth Conversion? with David McKnight
Anyone can do a Roth conversion. You need to have money in an IRA. There are no income limitations. The question comes down to how much tax you want to pay. Do you feel like your tax bill will be lower or higher if you were to postpone the payment of that tax? Some opponents of Roth conversions will say that you won’t get the full amount of money in your IRA working for you. However, you have to remember that the IRS partners with you in that account and their portion of that money grows right a
What is the Fiscal Gap? with David McKnight
The basic gist of the fiscal gap is that the publicly stated national debt is $20 trillion which is more than enough to cripple our economy, but that’s not the whole picture. The fiscal gap is the difference between everything that we’ve promised to pay over the next 70 years and what we can actually afford to pay. According to Allan Arback and Larry Collicof, the real number is closer to $222 trillion. When you figure in all the numbers, the fiscal gap is growing an additional $6 trillion each
How To Take Tax-Free Distribution From Your Life Insurance Policy with David McKnight
The question is “how can we take money out of our life insurance tax free?” Is it possible to take money out of your life insurance policy and have it feel like a distribution from your Roth IRA? Every life insurance policy allows you to take out tax-free distributions, but not all of them allow you to take out tax-free and cost-free distributions. With a traditional life insurance policy, anyone can take out whatever they’ve put in. This is referred to as your basis. The trick comes in taking o
Should I Use Life Insurance For Long-Term Care? with David McKnight
David believes that life insurance in most cases is the best way to handle long- term care needs in retirement. Why do financial gurus say that you need long-term care insurance? 70% of us will need long-term care in our lives. Nobody wants to save money their whole life only to give it to a long-term care facility two years before they die. Typically a long-term care event lasts an average of 2.3 years and most people do not survive them. The idea behind long-term care insurance is to avoid blo
Four Ways To Save Our Country From Financial Ruin with David McKnight
When David speaks to his clients or the public, he’s often talking about the nation’s fiscal crisis, the national debt, and unfunded obligations. There are really only four ways to resolve our fiscal crisis. You decide what you think the most likely solution will be. The first thing we could do to prevent our country from going over a fiscal cliff is to cut expenses. We know that the real gushers in the fiscal budget are things that Congress doesn’t even have control over. Congress controls arou
David McKnight's Interview with the Nation's #1 Financial Podcast, Stacking Benjamins
The story David tells at the beginning of the book is a tale about David Walker, the former Comptroller General for the federal government. Back in 2008 he appeared on a radio show and told them that tax rates have to double. The math says that the country is going to go bankrupt unless tax rates go up dramatically in the next ten years. Most of us are putting money into tax-deferred plans hoping that taxes will be lower in the future than they are now. Back in the 70’s and 80’s the tax-deferred
Jill Schlesinger from CBS Radio Interviews David McKnight
The best financial decision that David has ever made was to acknowledge that taxes are going to be dramatically higher in the future than they are today. David is a husband and father of seven and has been in the financial services industry since day one. He was selling insurance policies at the beginning of his career and became an independent financial advisor in 2001. David mainly deals with clients who are retiring or in retirement and focuses in particular on the tax outlook. He aims to max
The Volatility Buffer with David McKnight
The 4% rule says there is a percentage that you can withdraw from your assets once you hit retirement, and still have a reasonable expectation that your money will not run out before you die. The industry runs Monte Carlo scenarios where they look at your stock allocations and run simulations, to see the likelihood of your money outlasting you. They have determined that if you have a 60% stock allocation, you have an 85% chance that your money will last through your retirement, as long as you st
Pensions and the Zero Percent Tax Bracket with David McKnight
About half of the people that David sees have pensions. The younger you are the less likely you are to have a pension. The burning question these people always have once they believe that tax rates are going to be higher in the future is “what can I do if I have a pension?” Have you elected the income option on the pension? Once you set that in motion, there is no way to unwind it. If you haven’t made your payment option yet, your company may offer a Lump Sum Distribution Alternative where you c
Clark Howard Article With David McKnight
There is no retirement planning class based on the Power of Zero book, but there is one that David created. He’s taught it to hundreds of advisors across the country. The Power of Zero is not the basis of the class, but it may be a homework assignment. The workshop conveys the idea that even in a rising tax rate environment, there is still a mathematically perfect amount of money you need in your taxable and tax-deferred buckets LIRP’s are the same greatness as Roth IRA’s. As with all tools, the
Power of Zero Documentary with David McKnight
Some people don’t read books. Creating a documentary is a way to reach those people. Plenty of people read the book but are still unconvinced that tax rates are going to be higher in the future than they are today. The documentary was a way of bringing together the most compelling experts in the country with something meaningful to say about debt and putting them on record. The tax train is coming. If you were sitting on a train track with a huge freight train bearing down on you what you do. Fo
The Tax Sale of a Lifetime with David McKnight
One of the things we tell 75 million Baby Boomers preparing to retire is that tax rates are going to be higher in the future. Some people will point to the latest tax cuts and think that the urgency of David’s message is diminished. David Walker has famously said we have to double taxes, reduce spending by a half, or some combination of the two. The question is what did we do with this latest tax cut? We lowered taxes but also increased spending by $1.5 trillion over the next ten years. All that
The Life Insurance Retirement Plan with David McKnight
The tax free paradigm essentially says there is an ideal amount of money you should have in your taxable and tax deferred buckets. Everything above and beyond that should be systematically repositioned in the tax free bucket. The ideal amount of money in your taxable bucket is around 6 months of your basic living expenses. The ideal amount of money in your tax deferred bucket should be low enough that Required Minimum Distributions in retirement are equal to or less than whatever your standard d
The Power of Tax Free Investments with David McKnight
Do you believe tax rates will be higher in the future than they are today? There is about $21 trillion in the 401(k)’s and IRA’s across the country. If you were to look at the cumulative amount of money in Roth IRA’s and Roth conversions, there is only about a trillion dollars. Most people believe taxes will be higher down the road and aren’t doing anything about it. You are either going to pay the IRS now, or you are going to pay them later. It’s as simple as that. If you put money into a tax d
Tax Deferred Investments with David McKnight
The number one piece of information you should consider when thinking about your tax deferred bucket is what you think the tax rate will be when you take out your money. Will it be higher or lower? You may hear the argument that If you take money out of your Roth IRA, you will have less money working for you and less money for your retirement. However, that’s not true. People think the money in their Roth IRA account is theirs, but really you have entered into a business partnership with the IRS
The Taxable Bucket with David McKnight
The taxable bucket contains investments that you get to pay a tax on. Things like savings accounts, money markets, stocks, and bonds. You know your investment is taxable when you receive a 1099 from the IRS. These are not the most efficient investments in the world. You can have as much money as you want in your taxable bucket, as long as you recognize that there is a financial consequence for doing so. It may not seem like a big deal, but if you take those inefficiencies and amortize them out t
The Coming Tax Storm with David McKnight
There is a massive disconnect between what people think the future of tax rates will look like and what they are doing to prepare for it. If you believe that tax rates will be 1% higher than they are today, you should have as much money as you can in tax-free vehicles like a Roth IRA. The national debt is currently around $21 trillion dollars. A lot of people think that is not necessarily a big deal since that is only 106% of GDP but that is only a piece of the overall picture. If we were to ru