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The Power Of Zero Show

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.

319 - Clark Howard Says Fixed Indexed Annuities Stink! (My Response)
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  • 319 - 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 you can’t lose money in a fixed index annuity in its simplest form.

    David touches upon the role of surrender charges and how Howard is wrong about them.

    In traditional stock market investing, you’re not supposed to withdraw more than 4% per year.

     

     

    Mentioned in this episode:

    David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code

    DavidMcKnight.com

    DavidMcKnightBooks.com

    PowerOfZero.com (free 3-part video series)

    @mcknightandco on Twitter 

    @davidcmcknight on Instagram

    David McKnight on YouTube

    Get David's Tax-free Tool Kit at taxfreetoolkit.com

    Clark Howard

    Wed, 27 Mar 2024 - 09min
  • 318 - 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, you will dramatically underperform the stock market over time. Furthermore, you won't be taking advantage of all the unique benefits each of the tax-free alternatives the IRS tax code affords you.

    The IUL should only be used as a complement to all these other streams of tax-free income, not a replacement for them.

    David goes through the characteristics that make the IUL a unique investment avenue.

    Would you rather adopt a retirement approach where you put every last dime of your retirement savings into an indexed universal life insurance policy? Or would you prefer your IUL to be just one component of a balanced, comprehensive approach to tax-free retirement?

    For David, the IUL is not the only way to grow your money productively over the course of a lifetime. When you have an experienced financial advisor shepherding you through the process, you can get extremely productive returns from the stock market.

    If you're younger than age 50, David recommends earmarking 30% of your retirement savings towards an IUL. 

    Why 30% and not 100%? Because 30% is a much more balanced, math-corroborated approach to using the indexed universal life policy.

    The IUL is not a dream in a dream. It's merely a financial tool. When utilized in concert with all of the other available alternatives in the IRS tax code, it can help you create a balanced, comprehensive approach to tax-free retirement planning.

    David reveals why Wall Street wants you to believe that the stock market is the only solution to stress-free retirement planning. 

    Most financial experts agree that tax rates in the future are likely to be higher than they are today. But that doesn't mean that you must reflexively default to putting all your retirement savings into an IUL.

    If you want to make money in the stock market, you're supposed to buy low and sell high. Unfortunately, most do-it-yourself investors do the exact opposite.

     

    Mentioned in this episode:

    David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code

    DavidMcKnight.com

    DavidMcKnightBooks.com

    PowerOfZero.com (free 3-part video series)

    @mcknightandco on Twitter 

    @davidcmcknight on Instagram

    David McKnight on YouTube

    Get David's Tax-free Tool Kit at taxfreetoolkit.com

    Wed, 20 Mar 2024 - 10min
  • 317 - 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 to a Roth IRA by either contribution or conversion.

    Once the five-year rule has been met, it’s been satisfied for good.

    Remember: any recent contribution to a Roth IRA can count as qualified tax-free distributions, even if they’ve been in the account for less than five years.

    David shares that Roth 401k plans have their own five-year rule, which is counted separately from a traditional Roth IRA.

    In case you’re unable to make a Roth contribution due to income limitations, you can make a non-deductible contribution to an IRA and then do a Roth conversion.

    Don’t forget that there aren’t income limits for IRA contributions.

    Dave discusses the fact that “the ordering rules for Roth IRA stipulate that withdrawals of after-tax contributions are made first, then conversions, and finally, earnings.”

    The Roth conversion five-year rule lets you know if you can access your converted principal penalty-free.

    The Roth contribution five-year period, on the other hand, lets you know if you can access your Roth earnings tax-free.

    Mentioned in this episode:

    David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code

    DavidMcKnight.com

    DavidMcKnightBooks.com

    PowerOfZero.com (free 3-part video series)

    @mcknightandco on Twitter 

    @davidcmcknight on Instagram

    David McKnight on YouTube

    Get David's Tax-free Tool Kit at taxfreetoolkit.com

    Wed, 13 Mar 2024 - 07min
  • 316 - 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% of investment decisions are driven by emotions is a big problem David sees in Buffett’s line of thinking.

    David sheds light on what has become known as the Prospect Theory.

    What leads “DIY investors” to buy high and sell low, instead of buying low and selling high as logic would suggest? David shares his thoughts on the matter.

    Adopting an index-based, Do-It-Yourself, motion-driven approach to investing will make you less likely to remain invested during extreme market volatility. 

    For David, one of the main purposes of a financial advisor is to hold your hand and keep you invested during jittery periods in the market.

     

    Mentioned in this episode:

    David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code

    DavidMcKnight.com

    DavidMcKnightBooks.com

    PowerOfZero.com (free 3-part video series)

    @mcknightandco on Twitter 

    @davidcmcknight on Instagram

    David McKnight on YouTube

    Get David's Tax-free Tool Kit at taxfreetoolkit.com

    Warren Buffett

    Berkshire Hathaway

    Wed, 06 Mar 2024 - 08min
  • 315 - 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 reality, it’s a money-eating monster.

    Yes, IULs are marketed by pretty scammy people on social media. However, there is a big difference between scammy life insurance agents and scammy life insurance products.

    IUL products are not created equal. It all depends on your personal situation and needs. Some products can be fantastic tools for building and protecting wealth and others can be catastrophic to your retirement. 

    For David, not only does the IUL serve as an extremely competitive bond alternative, but it’s also a great volatility buffer in retirement.

    Financial gurus are not in the business of nuance. It’s all about making sweeping black-and-white characterizations that fit neatly into their tiny box.

    According to David, recent studies demonstrate that bonds are much more volatile and much more correlated to the stock market than was previously thought.

    David explains that fees are only a problem in the absence of value. And when utilized in the right context, an IUL provides value that you simply can’t get any other way.

    David explains how the IUL fees are a strength and not a liability that the uninformed life insurance critics make it out to be. 

    When George says that the IUL is a money-eating monster, he’s only fixating on the fees in the early years of the contract. If he were to look at the average fees over the life of the program, a much different picture would emerge--one that paints the IUL as lower than the most cost-effective 401K plan. 

    David goes through the things George gets wrong about the death benefit options in an IUL. 

    The entire purpose of George’s video is not to educate you on the evils of an IUL. It's to get you to buy a term life insurance policy through Dave Ramsey’s endorsed broker of choice. 

    George's ultimate goal is to get you to take the money that you might otherwise have allocated towards an index universal life policy and redirect it towards a term insurance policy from which Ramsey himself ultimately benefits. 

     

     

    Mentioned in this episode:

    David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code

    DavidMcKnight.com

    DavidMcKnightBooks.com

    PowerOfZero.com (free 3-part video series)

    @mcknightandco on Twitter 

    @davidcmcknight on Instagram

    David McKnight on YouTube

    Get David's Tax-free Tool Kit at taxfreetoolkit.com

    Wed, 28 Feb 2024 - 18min
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