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- 323 - 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 gurus believe that tax rates in the future are likely to be higher than they are today. But when you go to their websites, there are no practical strategies on exactly how you should arrange your assets to best shield yourself from the impact of higher taxes.
David highlights why Dave Ramsey is against any form of permanent life insurance. He even has a famous quote, “Permanent life insurance is 100 % crap, 100 % of the time.”
If you can fund your lifestyle out of your cash value life insurance in the year following a down year in the stock market, it gives your stock market portfolio a chance to recover before you take further distributions.
David explains how this act alone can increase the sustainable withdrawal rate on your stock portfolio from 4 % to 8%.
David and Bruce agree that people need to find ways to create multiple streams of tax-free income from multiple sources.
David reveals that conflict of interest is what prevents fee-based advisors from promoting the power of zero message.
David and Bruce talk about the unfunded obligation for Social Security, Medicare, and Medicaid--and the amount of money the government needs to have to pay for Medicare over the next 75 years.
Financial advisors are not educated enough about the reality of future higher tax rates. If they were, David believes they would be more familiar with the ways to mitigate against rising taxes down the road.
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
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, 24 Apr 2024 - 14min - 322 - 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 distributions and, therefore, your total provisional income, the percentage of your social security that becomes taxable quickly begins to rise.
The IRS says that if your provisional income is between $32,000 and $44,000, up to 50% of your social security can become taxable.
Fortunately, there are some scenarios where you wouldn't pay any taxes, thanks to standard deductions.
The most obvious thing to do if you don’t want social security taxation is to do a Roth conversion.
According to David, any income taken from a Roth IRA does not count as provisional income and, therefore, does not count against the thresholds that cause social security taxation.
However, the only time it makes sense to do a Roth conversion is if you believe that your tax rate in the future is likely to be higher than it is today.
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
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, 17 Apr 2024 - 09min - 321 - 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 replacement on steroids.”
Financial gurus tend to be jack of all trades but masters of none with IUL critiques that are either plain wrong or far too simplistic, says David.
As a result of these groups’ cumulative efforts, IUL is widely viewed as a caricature of a financial product.
David goes over how to objectively evaluate IUL on its merits and shares three of its positive utilizations as a dynamic financial tool.
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
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, 10 Apr 2024 - 10min - 320 - 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 that effective tax rates for all taxpayers need to double by 2030.
David touches upon what would happen if the government doesn’t increase its taxes by 2043.
David mentions what your Roth conversion roadmap should look like in the next 10 years – and beyond – if you have the lion’s share of your retirement savings in tax deferred accounts like IRAs and 401(k) plans.
There’s one thing that you shouldn’t do before the “tax deadline.” You should not bump into the 32% tax bracket or higher.
David goes over what he refers to as a “wait-and-see approach.”
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
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
Comeback America: Turning the Country Around and Restoring Fiscal Responsibility by David Walker
Wed, 03 Apr 2024 - 06min - 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
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, 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
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
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
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, 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
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 - 314 - 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 way to maximize retirement income.
There appears to be a massive information gap facing a generation of retirees who are unaware of the value annuities can play in helping them spend more income in retirement.
David shares an example by Dr. Michael Finke, one of the foremost experts on the benefits of guaranteed lifetime income.
David touches upon whether what Ken Fisher is doing can be considered illegal.
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
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
Richard Thaler’s New York Times articles
“Ken Fisher Can’t Have It All” by Dr. Michael Finke
Wed, 21 Feb 2024 - 08min - 313 - 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 8% retirement withdrawal strategy.
He gives a couple of examples that illustrate why that’s the case.
David believes that, to get the best bang for your buck with the highest success rate over a 30-year retirement, a guaranteed lifetime income annuity is – almost always – the best way to go.
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
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, 14 Feb 2024 - 06min - 312 - 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 paying them on your distribution years down the road.
A big advantage of contributing to a Roth IRA is that you’d be paying taxes at today’s historically low tax rates.
David thinks that believing Walker and the Penn Wharton study means accumulating the lion’s share of your retirement savings in tax-free vehicles like Roth IRAs and Roth 401ks.
David shares the approach he recommends having when it comes to Roth Conversions.
The Roth 401k is one of David’s favorite tax-free investments – he explains why.
For David, the real allure of the LIRP is that it provides a death benefit that you can receive in advance of your death for the purpose of paying for long-term care.
David lists the pieces of the puzzle that make for a balanced and comprehensive approach to tax-free retirement.
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
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
Penn Wharton study: “When Does Federal Debt Reach Unsustainable Levels?”
Wed, 07 Feb 2024 - 06min - 311 - 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 federal taxes and lower spending may have.
What’s the best tool to shield yourself from the coming tax apocalypse? David knows and shares it on the show.
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
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, 31 Jan 2024 - 06min - 310 - 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 retirement, what that actually entails, and Act 60.
David shares his experience living in Puerto Rico, and shares his #1 actionable retirement planning tip for people in their 50s.
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
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, 24 Jan 2024 - 13min - 309 - 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 a 30-year retirement.
The majority of people who save enough are also at risk of running out of money because they’re not managing their money well enough in retirement.
David defines sequence of return risk and how market declines in the early years of retirement could significantly reduce the longevity of your savings.
David talks about the benefits of owning annuities as well as the ones that work best for retirement planning.
According to David, the biggest mistake people make in retirement is having all their savings in tax-deferred accounts by the time they retire.
The name of the game is not just saving enough by the time you retire, but distributing in a way that your savings last through your actuarial life expectancy.
The 4% rule is hard to follow because it only works if you can constrain yourself to 4% each and every year of retirement.
If you can constrain yourself to 4% distributions adjusted for inflation in retirement, you have an 86% chance that your money will last through life expectancy. Every time you take out more than 4%, that success rate drops like a rock.
The assumptions we use in our retirement plans are important and have real life implications if we use the wrong assumptions.
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
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, 17 Jan 2024 - 09min - 308 - 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, including the “until death do you part” side of things.
It’s important to get to the 0% tax bracket and to shield yourself from the impact of higher taxes…but getting help from someone who has experience is just as important.
David points out two traits you would want your financial advisor to have as you plan for your retirement.
David goes over what he considers a balanced and comprehensive approach to tax-free retirement planning.
Many people forget that not all of the money that’s growing in your 401k is accruing to your benefit. A portion of that belongs to the IRS.
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
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, 10 Jan 2024 - 15min - 307 - 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.
David goes over why he wrote The Power of Zero back in 2014.
One key question David believes people should ask themselves is whether their tax rate is likely to be higher today or in 20 years.
For Former Comptroller General David Walker, the 20% of the income Americans are paying between federal, state, and local taxes, could go up to 40% by 2030.
David believes that the farther out your investment horizon and retirement date, the more critical it is for you to invest in tax-free accounts like Roth IRAs, Roth Conversions, etc.
David recommends planning for 50% tax rates and explains that there are three basic types of account to save money for retirement.
These three buckets are: the so-called taxable bucket, the tax-deferred bucket, and the tax-free bucket. David goes over the characteristics of each bucket.
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
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
Comeback America: Turning the Country Around and Restoring Fiscal Responsibility by David Walker
Wed, 03 Jan 2024 - 18min - 306 - 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 reasonable expectations. If doing that means the advisor is a hope stealer, then advisors can wear the hope stealer’s badge with pride.
The first three to five years of retirement are very important and can set the economic tone for the rest of your retirement.
For Khalen, investors must realize that their risk appetite might change as they get closer to retirement.
The closer you get to retirement, the more your need to protect accumulated savings becomes more critical, as there is less time to recover from significant market downturns.
When you’re 100% invested in stocks, the swings in the market tend to be much wider, and that exacerbates the sequence of return risk for the investor.
David adds that poor investment performance during the initial years of retirement can deplete the portfolio more quickly than anticipated.
Retirees who experience market downturns in the early years of their retirement and withdraw a higher percentage of their portfolio to cover living expenses might accelerate the depletion of the portfolio.
Even if the market rebounds in later years, the portfolio may struggle to recover because the initial losses reduce the base from which subsequent returns are generated.
Khalen highlights the substantial risk associated with an 8% withdrawal rate using real-life examples and historical data.
David and Khalen question Ramsey's aversion to bonds and insistence on a 100% stock allocation.
They discuss the psychological impact of market volatility in retirement, the importance of investing in bonds for portfolio stability, and why Ramsey's all-stock approach just doesn’t make sense.
According to Khalen, one of the most important aspects of retirement planning is addressing the sequence of return risk.
The sequence of returns risk is the risk of experiencing poor investment performance, particularly negative returns, in the early years of retirement.
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
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
@honest_math on Twitter
Khalen Dwyer on LinkedIn
Wed, 27 Dec 2023 - 26min - 305 - 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 overwhelmed by the number of alternatives.
“Cash now vs. an awesome retirement plan later” is another unethical tactic David discusses.
Beware: if you don’t liquidate your 401k prior to 59 and a half you’ll incur a 10% penalty.
Need to liquidate your 401k before then? Don’t do it all in one year.
Otherwise, all of that money would be realized as income and taxed at your highest marginal tax bracket – all in the same tax year.
Remember: closing out your 401k and stopping contributions will lead to you no longer receiving the company match.
Over the course of your retirement, this last point will end up costing you hundreds of thousands of dollars.
David stresses the lack of relevant questions being asked by the financial advisor featured in the TikTok video.
David deems the video to be one of the worst cases of IUL malfeasance he’s ever seen on social media.
Moreover, he believes that advisors like the one in the video should be outlawed and fined.
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
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 Dec 2023 - 08min - 304 - 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 distribution rates in retirement.
Ramsey has long complained about the 4% rule being a pretty expensive way to go…
David illustrates a key problem with an 8% withdrawal rate and discusses the role of a volatility shield.
David explains that the money you can put in a volatility shield has to grow tax-free and allow for tax-free distributions.
It’s possible to increase your sustainable withdrawal rate on your stock portfolio to as high as 8%, with a 95% chance of never running out of money – David explains how.
On an apple-to-apples basis, guaranteed lifetime income annuities give you a much higher income than living by the 4% rule in retirement.
Following this Dave Ramsey strategy? David believes that it’s likely going to force you to run out of money 15-20 years in advance of life expectancy.
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
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 Dec 2023 - 07min - 303 - 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 principles to his children--tithe 10%, save 20%, spend the remaining 70%.
Did you know Americans have 95% of their accumulated retirement dollars in IRAs and 401Ks?
It’s great that Americans are saving for retirement but the downside to this strategy is that traditional IRAs and 401Ks are tax-deferred. Taxes are deferred until the funds are withdrawn. Meaning you’ll potentially pay more in taxes in retirement.
David reveals why it’s okay to preemptively pay taxes before the IRS absolutely requires it of you.
Tips for individuals in their 20s and 30s on how to save and invest in tax-free accounts.
Why it’s never a good idea to spend most of your income on depreciating assets.
David shares how his system for investing differs from mainstream financial advice.
Tom and David agree that people cannot become wealthy by borrowing money to put into depreciating assets.
David’s investing principle is built on a simple formula: start saving money as early as today, put it in tax-free accounts, do it consistently for 40 years, wait, and you’ll have a great retirement.
According to David, whatever you decide to do in college, someone has to be willing to pay you money in exchange for the services you provide.
The longer your investment horizon, the more likely your taxes will be higher in the future.
Not only do you need to start investing early, you also need to invest tax-free. Remember, the longer your investment horizon, the more it makes sense for you to invest in tax-free accounts.
We are marching into a future where the cost of servicing the national debt will consume the entire federal budget. When this happens, David believes the Federal Reserve will be forced to raise taxes or risk going bankrupt.
So, how can Americans protect themselves from the risk of rising taxes?
First, acknowledge that taxes will be higher in the future, invest early, and start investing in tax-free accounts.
David and Tom share their thoughts on why permanent life insurance is by far the best tax benefit in the IRS tax code.
David announces his upcoming book, "Guru: Why Financial Gurus Are Leading You Astray and How to Get Back on Track," which critiques mainstream financial advice and offers a more personalized approach to tax-free investing.
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
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, 06 Dec 2023 - 21min - 302 - 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 was right about the 4% withdrawal strategy and why Dave Ramsey's 8% withdrawal rate is misleading.
Why Dave Ramsey is not a huge fan of the 4% rule or the people who preach it — He believes it's too low and unrealistic. You don't need to withdraw 4% of your savings for your nest egg to survive.
According to Dave Ramsey, you're missing out on a big opportunity if you only withdraw 4% from an investment portfolio earning 12%.
David and Jay agree that Dave Ramsey lives in a fantasy world where he thinks stratospheric distribution rates are sustainable in retirement.
The biggest issue with an 8% withdrawal rate is that it doesn't account for market volatility. Just because you average 12% per year doesn't mean you're guaranteed 12% returns yearly.
The only way to have a productive conversation with people who don't think they can be wrong is to ask them open-ended questions in the hope that they come to the conclusion themselves.
According to David, we live in a world where anything you say that flies in the face of reason will be clipped and posted online.
Dave Ramsey does a great job of motivating people to get out of debt and get on the path of financial independence. The problem lies in his absurd retirement planning advice.
The biggest problem with Dave Ramsey is that he's not very nimble when it comes to changing his thoughts according to new research and data.
Jay and David agree that the 4% rule is not for everyone, but it's also not sustainable to follow the 8% rule.
Jay reveals what he would tell Dave Ramsey if he ever got the opportunity to talk to him again.
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
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
Jay Disberger at HopeFilledFinancial.com
The HopeFilled Financial Podcast
Wed, 29 Nov 2023 - 44min - 301 - 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 will be growing at a rate of 12%; factor in 4% for inflation, and you’re left with 8%.
It’s clear Dave Ramsey is oblivious to the sequence of return risk, which could force you to run out of money 15 to 20 years early if you experience a series of negative returns in the first decade of retirement.
The fact is, even if you average 12% rates of return throughout retirement, you won’t be getting 12% every single year. Some years, you’ll get 20%, and other years you’ll get -26%.
David explains that the 4% rule gives you peace of mind that regardless of the swings in the market, you’ll have a reasonably high chance of not outliving your money.
Because Ramsey has millions of dollars, he has the license to utilize planning assumptions that are wildly at odds with history and academic research.
If you’d like a stress-free retirement, ignore Dave Ramsey’s advice and embrace strategies that are built on sustainable retirement planning principles like the 4% rule.
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
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, 22 Nov 2023 - 14min - 300 - 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 retirement planning, steer clear of these types of advisors.
It’s unwise to build a retirement plan on the foundation of an IUlL and exclude every tax-free alternative in the tax code.
The second type of advisor is the one who believes in tax-free retirement planning but is not acquainted with the data that proves tax rates will rise dramatically in the future.
If you are interested in shielding your assets against the impact of higher taxes, avoid these types of advisors like your retirement depends on it. Because it does.
The third type of advisor is knowledgeable on data that proves tax rates will dramatically rise in the future and advocates for a balanced, comprehensive approach to tax-free retirement.
If you believe that tax rates in the future will be dramatically higher than they are today, then you also need to recognize that not all financial advisors are equally equipped to help shield your retirement savings from those higher taxes.
Your job as an investor is to get an advisor who understands the unique fiscal challenges facing our country and understands that the best way to protect yourself from those challenges is to implement a balanced, comprehensive approach to tax-free retirement.
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
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, 15 Nov 2023 - 07min - 299 - 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 money before running out of life if she withdraws 10% of her savings every year.
The gaping hole in Dave Ramsey’s investment approach is that he seems to have a limited understanding of the sequence of return risk. This is the order in which you experience investment returns in retirement.
Generally, it’s safe to show future returns based on a historical track record consistent with your future investment horizon.
For example, if you want to know what rates of return you’ll likely experience in the next 15 years in the S&P 500, you need to look at how the index performed in the past 15 years.
According to David, Ramsey’s overly inflated retirement variables are setting his listeners up for failure. By inflating his assumptions, Dave Ramsey gives his listeners an overly optimistic view of how much money they must save to reach their retirement goals.
But why does Dave Ramsey have such a flawed view of retirement planning?
David believes it comes down to two things:
- Dave Ramsey likes to portray himself as the retirement planning outsider who is at war with the mainstream financial planning community. He believes that if he can show his followers lucrative investment projections, more of them will sign up for his financial independence programs.
Don’t be seduced by Ramsey’s inflated rates of return or his massive withdrawal rate assumptions. You’re much better off using a 9% rate of return and a 4% sustainable distribution in retirement.
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
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, 08 Nov 2023 - 09min - 298 - 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 the fact that families and individuals don’t seem to understand the fact that the largest expense in their lifetime will continue to be the same.
According to Terry, the main issue is that people don’t calculate that expense into their future.
Terry asks David about the one thing he knows now that he wishes he knew when he started.
David opens up about the role David Walker has played in his journey as well as about his definition of success.
David warns people against letting a year go by without taking advantage of historically-low tax rates.
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
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
Comeback America: Turning the Country Around and Restoring Fiscal Responsibility by David Walker
Why Your Taxes Could Double (2009 CNN article by David Walker)
I.O.U.S.A. (2008 documentary featuring David Walker)
Wed, 01 Nov 2023 - 12min - 297 - 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 discusses what makes the Power of Zero approach stand out in the financial planning industry.
People seem to be hungering for real solid strategies that can help insulate them from the impact of rising taxes, says David.
David lists a few reasons why the advice people may get from gurus like Dave Ramsey or find on platforms like TikTok isn’t useful.
David recommends having a balanced and comprehensive approach to tax-free retirement that takes advantage of all the nooks and crannies in the IRS tax code.
There are different things David likes about Roth IRAs, Roth 401ks, Roth Conversions, Life Insurance Retirement Plans, and tax-free social security – he touches upon them.
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
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, 25 Oct 2023 - 10min - 296 - 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, and that of Ed Slott – whom USA Today dubbed “America’s IRA Expert.”
Many people underestimate the financial costs of long-term care for their parents, spouse, or partner, says David.
David illustrates the traditional way to approach long-term care and what would make the most sense for those thinking about it for their loved ones.
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
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, 18 Oct 2023 - 10min - 295 - 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 Dave Ramsey’s claims that he outperformed the index by 12% and 13% in some years?
David believes it’s not advisable to collect all your money and move the index fund route. The first step should be seeking the services of a financial advisor.
Good financial advisors will more than offset whatever fees they charge you in the form of enhanced returns that stem from sticking to your investment goals.
Unfortunately, most investors let their emotions undermine their investment decisions. We’re supposed to buy low and sell high, but most investors do the opposite. Fuelled by emotion, they buy high and sell low.
For David, a good financial advisor will help protect you from yourself and remind you of the plan you created and why you need to stay on track toward your goals.
It doesn’t matter how much money you have. It only matters how much you actually get to spend after taxes.
The three main takeaways from Dave Ramsey’s claims about beating the S&P 500:
Take everything Dave Ramsey says with a grain of salt. His entire business is built on making investing seem easier than it actually is.
Beating the S&P 500 is not as easy as Dave Ramsey claims.
You need a qualified financial advisor to help you yield much higher returns over time to increase the likelihood that your life savings will last through life expectancy.
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
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, 11 Oct 2023 - 06min - 294 - 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 exclusively available to the wealthy, and you should not expect 10% plus returns.
In Brian’s article, he describes why you must have a life insurance need before investing in an IUL.
If the IRS is willing to give you the benefit of a nearly unlimited bucket of tax-free dollars, you have to be willing to pay for life insurance and have the need for life insurance.
According to Brian, you need to structure your IUL correctly if you are to enjoy all the perks that come with owning an IUL.
David agrees with Brian’s views on the proper way to structure an IUL.
In order for the IUL to work, you must buy as little death benefit as the IRS requires and pump in as much money as the IRS allows. Your goal is to go after all the benefits of a Roth IRA without all the limitations of owning a Roth IRA.
According to David, IULs only work when considered as part of a balanced, comprehensive approach to tax-free retirement.
David talks about the lies peddled by financial influencers online - they focus less on creating reliable and accurate content and more on likes and views.
As an investor, it’s very important not to conflate actual historical returns with retro-engineered returns when considering an IUL. Anyone can create a retro-engineered index that looks great on paper.
David is much more impressed with an actual track record, even if that track record nets you only 5 to 7% net of fees over time.
One of the things not discussed in Brian’s article is how most solid IUL carriers give you the ability to receive a death benefit in advance of your death to pay for long-term care.
For David, Brian’s piece is one of the more accurate IUL articles on the internet today.
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
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, 04 Oct 2023 - 09min - 293 - 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 you to the 0% tax bracket, not all will do so with the same efficiency or effectiveness. In fact, finding the right LIRP for your tax-free retirement plan can be just like finding the ideal spouse. Just as you likely had a list of qualities you were looking for in a life-long partner, you should have certain attributes and provisions in mind when looking for the ideal LIRP.The Volatility Shield: How to Vanquish the 4% Rule & Maximize Your Retirement Income.
In this book, David breaks down financial truths that challenge conventional wisdom and reveal the gaping hole in people’s retirement picture. He also reveals how you can open a volatility shield account that allows you to pay for your retirement living expenses in the year following a down market.Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement.
David lays out a comprehensive, step-by-step roadmap for a secure retirement and how to shield yourself from longevity risk as well as the unintended consequences of higher taxes.The Infinity Code.
This book speaks of the evils of the modern monetary theory, which says that we can print an unlimited amount of money to pay for our nation’s burgeoning debt load.David shares insights from his upcoming book, Guru.
Americans love charismatic gurus who dish out one-size-fits-all financial advice that is easy to digest and implement. However, the dumbed-down financial advice offered by Dave Ramsey and other gurus is good for bad investors but bad for good investors. David believes that while these financial gurus sometimes dispense good advice, it’s nearly always at the expense of the best advice.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
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
Comeback America: Turning the Country Around and Restoring Fiscal Responsibility by David M. Walker
Wed, 27 Sep 2023 - 10min - 292 - 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 market loss.
IULs are not meant to be a stock market alternative. They are a bond alternative with returns of between 5% and 7% net of fees over the life of the program.
Insurance companies don't make money on Cap Rates. Cap Rates are a function of two things. First is the cost of options, which is informed by the volatility of the stock market. And second, the carrier's options budget, which is a function of interest rates.
David debunks Elan's theory on how IUL providers are intentionally and aggressively working to confiscate your money.
David shares a chart showing return rates from real and highly-rated IUL carriers.
Only when you see that the author is out to sell you a whole life insurance policy will you understand the motivation behind his misinformed book.
David believes the author's goal is to scare people out of their perfectly adequate IULs into a whole life policy that he would be more than happy to facilitate.
If you like whole life insurance, great. If you like IULs, great. But please don't waste everybody's time with intentionally misleading scare tactics.
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
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 Sep 2023 - 10min - 291 - 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 investment volatility.
Remember that just because you average 11.8% per year, it doesn’t mean that you’ll be getting precisely that result each and every year.
That’s because the order in which you experience returns in retirement is one of the biggest keys in determining whether your retirement assets will last through life expectancy.
David emphasizes the fact that most people who retire at age 65 need their money to last a full 30 years.
Ramsey’s “one-size-fits-all” approach is the reason why, David believes, he takes positions even if they aren’t supported by the data.
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
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
Debunking the Myth of the 8% Return by Wade Pfau
Wed, 13 Sep 2023 - 09min - 290 - 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 best to move all your money in the stock market into a Laser Fund/Indexed Universal Life Insurance.
David interprets this to mean that Doug dislikes stock market investing.
For David, the stock market is the single greatest engine of wealth creation the world has ever seen.
What about risks and volatility? David explains that the longer you invest in the stock market, the more likely you won’t lose money and grow your assets over time.
David prefers a retirement strategy that views the IUL as one component of a balanced, comprehensive approach to tax-free retirement.
David reveals why the Roth 401K is an extremely useful tool for funding tax-free retirement.
David shares what his preferred tax-free investment strategy would look like - and why the zero percent tax bracket is so powerful.
David goes through the 3 things that make IULs a unique tax-free investment route:
- A death benefit that doubles as long-term care. Serves as a great volatility shield in retirement. Safe and productive returns. Also functions extremely well as a bond alternative.
If you believe tax rates will be higher in the future than they are today, you should adopt a strategy that takes advantage of all the benefits in the IRS tax code.
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
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, 06 Sep 2023 - 11min - 289 - 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 policies are LIRPs.
David reveals why he believes HSAs(Health Saving Accounts) are the holy grail of financial planning - you get a deduction on the front end, let that money grow tax-free, and then take it out tax-free.
Can you have too much money in your 401K? Yes.
You want to ensure the balance in the IRA is low enough that RMDs (when you are finally forced to take them) are equal to or less than your standard deduction and low enough that they don't cause Social Security taxation.
You can have a million dollars in your IRA, but unless you can accurately predict what tax rates are going to be in the year you take that money out, you don't really know how much money you have.
David reveals why many financial planners detest tax-free investing.
Life insurance is not a silver bullet for tax-free retirement. It only works as a complement to other tax-free streams of income.
Is it a no-brainer to get life insurance? David believes it's not. It depends on your situation.
Always remember that the IRS is looking at how much money you withdraw from your IRA and 401k. If you take out too much, they'll tax a portion of your social security.
David talks about the benefits of having 4 to 6 different streams of tax-free income.
According to David, we are in the tax sale of a lifetime because taxes in the next three years will never be as low as they are today.
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
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
Comeback America: Turning the Country Around and Restoring Fiscal Responsibility by David M. Walker
Wed, 30 Aug 2023 - 24min - 288 - 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 thoughts on Fixed Indexed Annuities.
- Indexed annuities don’t have a 6% floor. If an index ever goes down in a given year, they simply credit you a zero. The floor is zero percent. Technically speaking, Fixed Indexed Annuities don’t have fees. You cannot lose money to fees or end up with less than your original contribution.
David goes through the benefits of investing in Fixed Indexed Annuities.
One of the dangers of being a financial guru is you have to project to your listeners that you’re an expert on every financial topic.
For David, fixed Indexed Annuities are not a stock market alternative. They’re a bond alternative.
David believes that if you’re a disciplined investor and want to purge longevity risk from your retirement picture, you should consider Fixed Indexed Annuities.
It’s clear that Dave Ramsey knows far less about annuities, and it’s troubling that he consistently gives investment advice on subjects he’s not familiar with.
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
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, 23 Aug 2023 - 07min - 287 - 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 lower than it is today. This is one of the huge myths foisted on a generation of baby boomers.
The single largest factor that should determine whether you do a Roth conversion is whether you believe the taxes you pay will be higher now than in the future.
You’re not necessarily guaranteed to be in a lower tax bracket in retirement. More and more experts are beginning to predict that tax rates in the future will have to rise dramatically to pay for unfunded obligations.
David explains that Derek might have unknowingly made a wise financial decision by making a Roth conversation at the 22% tax bracket.
You should always consider doing a Roth conversion, especially when young. Chances are, you will make a lot of money in your later years, so it makes sense to pay taxes now since taxes will likely go up in the future.
For David, Derek Sall did not make the wrong move by converting his 401K into a Roth.
In fact, he didn’t go far enough. He should have taken advantage of the 24% tax bracket as well.
David reveals whether there are certain times it doesn’t make sense for some people to do a Roth conversation.
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
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, 16 Aug 2023 - 06min - 286 - 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 investing in Indexed Universal Life Insurance because of lax legislation that allows the conflation of the insurance product as an investment vehicle.
The trouble with Jeremy’s dismissal of the IUL product is that he fails to distinguish between the deceptive practices of unscrupulous insurance salesmen and the product itself.
He also makes the incorrect comparison by saying indexed funds outperform the IUL over time, but that’s like comparing stocks to bonds. They aren’t the same thing.
If he were to acknowledge that IULs had a proven track record of between 5%-7% net of fees over time without taking any more stock market risk than you are accustomed to in your savings account, then he would undermine his anti-IUL narrative.
His gimmick only really works when he compares the IUL to a portfolio entirely composed of stocks, but when you consider bonds, an entirely different narrative emerges.
Jeremy Schneider also fails to acknowledge the reason that 70% of all people over the age of 50 buy the IUL is for the long-term care advantage. IUL plans with a chronic illness rider give you the opportunity to access up to 25% of your death benefit to pay for long-term care.
In the event you die without ever having the need to use the long-term care coverage, your heirs still get the death benefit, so there isn’t that sensation of paying for something you hope you never have to use.
As for his claim that no financial advisors would ever recommend an IUL, there are a number of experts and advisors that support the recommendation of the IUL.
Ed Slott, America’s IRA expert, is a big fan of cash value life insurance as a part of retirement planning.
What Jeremy is really addressing is the number of financial gurus on TikTok claiming that historically only the rich used cash value life insurance to build their wealth. The narrative is clearly false, and it’s important to realize that the IUL is not in competition with stock market investments and has some unique features that make it an attractive compliment to tax-free investment strategies.
For almost all the millionaires mentioned, there is a case to be made for the IUL in their retirement strategies.
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
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, 09 Aug 2023 - 11min - 285 - 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 were considerably worse for the Ramsey portfolio because it’s inherently more risky without the surplus returns that would justify the extra risk.
The S&P 500 outperformed the Ramsey portfolio in the last 1 year, 3 year, 5 year, and 10 year time periods.
Another glaring error is that the Ramsey portfolio does not contain bonds, no matter how far you are from retirement.
One tried and true investment approach is to take your age and subtract it from 100. That’s how much you should be allocating to the bond portion of your portfolio. Data supports this approach, but Dave feels they don’t perform as well as stocks.
When examined closely, the statistics don’t support that conclusion. The Money Guy show did another comparison showing that the two different approaches have very different results.
A 60/40 portfolio doesn’t have the highs of an all-stockportfolio, but the lows are where the real risk lies. A bond portfolio ends up taking less risk but earning a greater return over a 22-year timeframe.
If you are relying on your investments to support you in your golden years, one bad year in the market can completely derail your retirement. A 100% stock market portfolio exposes you to sequence of return risk that could send your retirement portfolio into a death spiral that it can’t recover from.
Dave Ramsey’s might have some merit if he didn’t unequivocally advise against guaranteed lifetime income annuities.
With a bit of planning, an annuity when paired with a company pension and Social Security can completely cover your living expenses in retirement. This allows you to earmark your stock market portfolio for extra expenses and also take more risk in the stock market portion of your portfolio.
With your lifestyle needs taken care of with this method, you could even remove the bond portion of your portfolio. By allocating 100% of your portfolio to higher yield stocks, you dramatically increase the likelihood your portfolio will last through your life expectancy.
Dave Ramsey’s one-size-fits-all anti-bond investment approach is contradicted by years and years of academic studies and empirical data. The question is why?
The unfortunate truth is that as a financial guru, Dave Ramsey does not have the luxury of nuance and has to dispense one-size-fits-all advice.
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
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
Come Back America by David Walker
Wed, 02 Aug 2023 - 10min - 284 - 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 surefire way to get kicked out of office, or dramatically raise taxes.
David Walker predicted that effective tax rates for Americans will rise to 45% by 2030. Right now, the effective tax rate for Americans on average is only 18%.
Rising tax rates aren’t just speculation, it’s in the tax code. The tax rates are scheduled to rise already unless the law is altered. In 2026, the steps between tax rate tiers are going to get much less steep.
The trust fund for MediCare is scheduled to go bust by 2027. The trust fund for Social Security is scheduled to go bust in 2032.
Many people think we can print our way out of our problems, but that’s not going to work with entitlement programs. Rising inflation due to printing money will ensure that we never really catch up with the problem.
Historically, the highest tax rate in America was 94%.
There is historical precedent for both raising taxes dramatically and cutting expenses. The trouble is that politicians haven’t had the backbone in the past to deal with these issues before they become crippling to the economy and average Americans.
Further trouble is due to the different circumstances in how we spend money. Unlike in the past, the debt-to-GDP ratio is worse and we are living beyond our means by a considerable margin.
We are spending money like drunken sailors and there doesn’t seem to be any willpower in Washington to change the direction.
Politicians also have the tendency to avoidtelling people what they really need to hear.
The Power of Zero strategy is basically the idea of systemically positioning your retirement savings to the tax-free bucket and protecting yourself from the ebb and flow of future tax rates.
We could see tax rates rival the 1970’s.
The Trump Tax Cuts are the tax sale of a lifetime. Most people that David works with are good at saving and find themselves in the 22% tax bracket. By converting up to the 24% tax bracket, those people have much better odds of converting the majority of their savings to tax-free before tax rates rise, possibly for good, once 2030 comes around.
2026 is an important date, but not as important as 2030. People should take advantage of historically low tax rates while they are still around and get their houses in order by 2030.
It can be especially challenging for widows in retirement when you factor in how the loss of a Social Security payment can impact cash flow and taxes.
Recent changes to inheritance laws are also making legacy planning more difficult. If you delay required minimum distributions from an IRA, there’s a good chance you can end up paying way more in taxes than expected.
Now is the time to look at your tax plan.
The antidote to all these issues is the Roth Conversion. If you die and your spouse inherits your Roth IRA, whatever the tax rates are at the time will no longer be an issue.
Roth Conversions aren’t the silver bullet. There are other strategies within the Power of Zero that allow you to truly reach the zero-percent tax bracket. Things like the Life Insurance Retirement Plan, Roth IRAs and 401(k)s, annuities, and multiple streams of tax-free income.
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
Come Back America by David Walker
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, 26 Jul 2023 - 32min - 283 - 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 one retirement balance, adjusted for inflation as income, you have an 86% chance of your money lasting through your life expectancy.
When you crunch the numbers, this would mean surviving on $10,000 a year in today’s dollars in retirement.
You have to be much more aggressive with your investing and saving as a 30 year old person.
Instead of just fully funding your Roth IRA as a 30 year old, you could also befully funding your Roth 401(k). By investing $82 a day, your final balance after thirty years would be over $4 million, or roughly $1 million after you factor in inflation.
According to a recent Ernst & Young study, if you were to earmark 30% of your retirement savings to cash-value life insurance you could as much as double your sustainable withdrawal rate in retirement.
It gives your stock market balance a chance to recover from any down years during the crucial first decade of retirement.
Even when you factor in that your Roth IRA and 401(k) will have lower balances, your ability to pay your lifestyle expenses allows you to take 8% distributions from your portfolio in retirement.
Because your cash value life insurance is growing safely and productively, it effectively replaces the bond portion of your portfolio. This gives you a permission slip to take more risk in your stock market portfolio and yield a higher overall return on investments.
When you factor all that in, with the 8% distribution rate, even with inflation, your distributions in retirement would be closer to the equivalent of $80,000 a year in today’s cash value.
If you heed these YouTuber’s advice, it’s a good start but you will end up with very little spendable cash flow in retirement. If you instead up your savings rate and fully fund your Roth IRA and 401(k), while allocating 30% to your cash value life insurance, you can supercharge to your tax-free retirement plan.
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
Come Back America by David Walker
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, 19 Jul 2023 - 09min - 282 - 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 bucket, the amount should be low enough that your RMDs in retirement are equal to or less than your standard deduction and low enough that it doesn’t cause Social Security taxation. For married couples, that amount is around $350,000, and for single filers, it’s half that amount. If you have a sizable pension, the amount could be zero.
Step three is to calculate how much time it will take to shift your balances to tax-free in order to achieve those balances. Preferably slow enough that you don’t rise into a tax rate that will give you heartburn, but quickly enough that you get all the heavy lifting done before tax rates rise for good.
2030 is currently the target date.
Step four is to see if you qualify for the Life Insurance Retirement Plan. With the LIRP, it gives you a death benefit that counts as long-term care and it can greatly extend the life of your stock market portfolio.
One of the primary reasons you are paying for your LIRP is being able to access your death benefit if you need long-term care, but if you die peacefully in your sleep your heirs still get the death benefit.
Step five is calculating your income shortfall in retirement. Figure out your after-tax needs in retirement that subtract any sources of guaranteed income like Social Security or a pension.
Step six is to contribute a portion of your IRA to an annuity in the form of a fixed indexed annuity with the piecemeal internal Roth conversion feature. You want to contribute enough today so that by the time you have finished your Roth conversion it will produce enough tax-free guaranteed lifetime income that it will bridge the shortfall in your after-tax shortfall.
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
Come Back America by David Walker
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, 12 Jul 2023 - 07min - 281 - 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 an investment-only approach to retirement, you build up a large pile of money and take a modest distribution rate each year adjusted for inflation. If you take out higher than 4% per year, you drastically increase the odds of sending your portfolio into a death spiral during down years in the market.
The most critical time is the first 10 years in retirement where you can expect two or three down years, any of which can cause your retirement portfolio survival odds to plummet.
The LIRP serves as a volatility shield during those first ten years by allowing you to take tax-free loans from the policy during those first ten years of retirement.
The LIRP has a few features that make it the ideal volatility shield.
You can’t combat market risk with an account that is exposed to market risk. LIRPs grow safely and productively. LIRPs in the form of universal indexed life insurance have a historical track record of 5% and 7% net over fees over time, making it easy to accumulate the amount of capital you need to shield yourself from volatility. LIRPs are tax-free. If you don’t have to pay taxes during the accumulation and distribution phase, your money will grow more efficiently and you won’t have to save as much money along the way. If you can take distributions tax-free, you aren’t exposing yourself to tax rate risk and those distributions don’t count as provisional income. If your LIRP is fully funded from day 1 of retirement, you will be in a position to pay for lifestyle expenses during the years following a down year in your stock market portfolio.According to the study, if you contribute 30% of your retirement savings to an LIRP you will find that your sustainable distribution rate skyrockets to as high as 8%.
The study made a statistical case that shows the LIRP can extend the life of all your other investments significantly.
The most viable retirement strategy is the one that gives you the highest likelihood that your retirement savings will last through life expectancy.
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
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, 05 Jul 2023 - 08min - 280 - 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 Roth Conversion strategy.
If you have more than a million dollars in your IRA, you will never convert to Roth before tax rates go up for good without taking advantage of the 24% bracket.
Dave then goes on to say that you should never do a Roth Conversion unless you have money sitting in cash to pay the taxes.
If Dave’s advice were taken by everyone, only 5% of people would realistically be able to take advantage of the Roth Conversion.
Some scenarios require you to pay cash for your Roth Conversion, but that’s not the only choice you have.
If you don’t have the cash to pay the taxes on your Roth Conversion, there is no harm in having the IRS withhold the tax from the Roth Conversion itself. It’s not optimal, but it’s far better than the alternative of leaving your money in your IRA and watching tax rates double over time.
Dave identifies the Five Year Rule on the Roth Conversion, but he fails to tell people that if you are older than 59 ½, the penalty won’t apply to you. This leads people to believe the rule of thumb is everyone should avoid the Roth Conversion unless you are five years or more away from retirement.
Dave Ramsey’s explanation of Roth Conversions is disastrous at every turn. All three of his recommendations are almost completely backwards.
When it comes to making important decisions about your retirement plans you should avoid financial gurus like Dave Ramsey at all costs.
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
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 Jun 2023 - 11min - 279 - 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 additional 2% in tax, you can convert an extra $170,000 to tax-free each year.
The 24% tax bracket is the sweet spot in the Trump Tax Cuts. The 24% tax bracket is still lower than the future level of the 22% tax bracket.
The average American is going to end up in the 40% to 45% tax bracket when everything gets settled, which will be a significant change for people in a negative way.
Denmark has a 50% tax rate, but in exchange the population gets universal health care, paid sick leave, paid maternity leave, and more. When the US gets to that point, it will all go to service the national debt.
David’s least favorite tax bracket is the 32%. Even if the tax cuts aren’t extended, which is unlikely, the future version of the 24% tax bracket is 28%, which is still lower than the current 32%.
Don’t preemptively bump up into the 32% tax bracket because you think you’ve got all the heavy lifting done before 2026.
Everybody’s situation is different so it’s very important to work with a financial advisor and go through the financial planning process to find what’s right for you.
When doing a Roth conversion, the ideal method is to pay taxes from an account other than the conversion itself, preferably the taxable bucket. If you don’t have enough money in your taxable bucket, withholding is your only other real option but you have to take into account the additional tax on withholding.
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
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, 21 Jun 2023 - 13min - 278 - 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 on that many Americans.
There is a high likelihood that if you are in the 10%, 12%, 22%, or 24% tax brackets, those tax brackets will be extended until 2031.
If you’re construed as someone who earns a higher income, you’re probably going to face higher tax brackets. Politicians seem to be focused on the 24% tax bracket and below.
The implications of these tax cuts being extended are vast. In 2018, we cut taxes and raised expenses, which was exactly the opposite of what we needed to do as a country.
By extending these tax cuts, we’re kicking the can down the road and the fix is going to have to be even more draconian.
We are currently spending our children’s future because there is no courage in Washington.
The debt ceiling is upon us once again and Congress is waiting until the very last minute to do anything about it.
The debt continues to rise for a variety of reasons. We’ve had Covid relief, wars, and tax cuts that led to additional borrowing. In the near future, the debt will be going up primarily because of Social Security, MediCare, and Medicaid.
It’s projected that the national debt will be around $51 trillion by 2033. Even if we stay at historical interest rates we would struggle to be able to afford to pay that.
President Joe Biden wants to raise the debt ceiling so that Congress can pay for things that have already been approved.
If the US defaults on its debt, most experts predict a recession, if not a depression, millions of people would lose their jobs, interest rates would go up, the country’s credit rating would plummet, and the status of the US dollar as the world’s reserve currency would be in question.
Even if people got their Social Security checks in that situation, there would be so much chaos in the economy that it would hardly matter.
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
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, 14 Jun 2023 - 12min - 277 - 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 they don’t have the luxury of nuanced explanation. Everything they discuss should either be good or bad.
Ed Slott, who the Wall Street Journal called ‘the best source for IRA advice’, is an expert whose approach differs from the ones mentioned above.
Slott sees life insurance as an investment that’s better than your typical investment accounts for the fact that it’s tax-free.
Slott goes so far as to say, “Roth IRAs and life insurance can single-handedly remove most of the taxes you or your beneficiaries will ever have to pay.”
The difference in approach between Ed Slott and other financial gurus has to do with Slott’s 30 years of experience working with actual clients that has allowed him to observe the impact that cash value life insurance has on the lives of retirees and their beneficiaries.
Ed Slott is not a financial guru using a one-size-fits-all strategy for the masses. He’s an educator who understands the IRS tax code and who clearly knows that tax planning and retirement require nuance, especially if you have substantial assets.
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
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
I’ll Teach You to Be Rich (book)
How to Get Rich (Netflix series)
Wed, 07 Jun 2023 - 09min - 276 - 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 remain the same, both plans are identical, but if tax rates are even just 1% higher than they are today then the Roth 401(k) will always win.
If tax rates go up, the Roth 401(k) wins hands down. If tax rates stay the same, then both plans will get the same results. The only scenario where the Traditional 401(k) wins is in the unlikely event tax rates are lower in the future.
Some economists have suggested that tax rates will have to double by 2030 just to keep our country solvent.
In his book Comeback America, former Comptroller General David Walker predicted that average effective tax rates in the US would have to rise to 45% by 2030 to pay for unfunded obligations, Social Security, MediCare, Medicaid, and interest on the national debt.
The farther out your investment horizon the more likely your tax rate in retirement will be substantially higher than it is today.
With the passage of the Secure 2.0 Act, you now have the ability to direct your employer’s match to the Roth portion of your 401(k).
When you retire, it is important to have some tax-deferred income in order to maximize your standard deduction.
If you have all your money in your Roth 401(k) then your standard deduction will stand idle and you will have paid taxes on your contributions unnecessarily.
The goal should be to allocate the lion’s share of your retirement money to your Roth 401(k) to protect you against future tax rate increases, and have the match put into the tax-deferred portion of your 401(k) so it can be offset by the standard deduction in retirement.
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
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, 31 May 2023 - 07min - 275 - 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 affirmed that bonds aren’t the best solution for managing risk in retirement.
While analyzing 10-year returns for stocks, bonds, and fixed index annuities, Schiller uncovered four startling truths.
For David, if you were to reach into your retirement portfolio, remove the bonds and replace them with a fixed index annuity, you would increase returns while safeguarding that portion of your portfolio against loss.
The 4% Rule says that if you have a 60-40 stock-bond mix, the most you can take from your portfolio, and maintain a high likelihood of not running out of money before you die, is 4% per year (adjusted for inflation).
If you have done a good job saving money, don’t take advice from financial gurus who are dispensing one-size-fits-all financial planning advice on Netflix.
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
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
I’ll Teach You to Be Rich (book)
How to Get Rich (Netflix series)
Wed, 24 May 2023 - 11min - 274 - 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 decision to do an IUL?’ The answer in most cases is no, as long as you plan on keeping the plan until death do you part.
An IUL is like getting married. You have to investigate the alternatives before choosing the one that’s right for you.
If Dave Ramsey adopted the same approach with the taxes and penalties in your 401(k), he would be singing a different tune.
If you were to take $100,000 out of your 401(k) at the age of 40, you’d end up paying the penalty and taxes at your current tax bracket, likely resulting in $40,000 in penalties.
The penalty schedule also doesn’t reduce over time when you consider that you’re likely to bump up into higher tax brackets.
The first fifteen years of your IUL, 401(k), or IRA are the years you should least want to access that money.
Like traditional retirement plans, IULs are generally long-term propositions. Don’t start an IUL if your plan is to take the money out in the first ten to twenty years.
If Dave Ramsey has a problem with the IUL surrender charges, he should likewise have a problem with all the taxes and penalties you will pay on your traditional retirement accounts over a much longer period of time.
The IUL only really works as part of a comprehensive approach to retirement and getting to the zero-percent tax bracket.
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
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David's Tax-free Tool Kit at taxfreetoolkit.com
Wed, 17 May 2023 - 06min - 273 - 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 politician wants to be the one that raises taxes on the largest voting block in America. The most likely scenario is that Congress will extend the Trump tax cuts at some point between now and 2026 for another eight years.
This may be the most important eight-year window in your life, given where tax rates will have to go into 2030 and beyond.
Citing out-of-control spending on Social Security, MediCare, MediCaid, and interest on the debt, former Comptroller General David Walker has predicted that tax rates will have to double in or before the year 2030.
Slowly shift your tax-deferred bucket into the tax-free bucket now while there is still time.
The 24% tax bracket is the greatest sweet spot of all sweet spots. It’s only 2% more than you’re likely paying right now and it allows you to shift an additional $170,000 a year to tax-free.
The 24% tax bracket is better than the future version of the 22% tax bracket, which is 25%.
Every year that goes by where you fail to take advantage of the 22% and 24% tax brackets is potentially a year beyond 2030 where you could be forced to pay the highest tax rates you’re likely to see in your lifetime.
Take advantage of the next 8 years to preemptively pay taxes on your retirement assets so that by the time tax rates potentially double, you’ve done all the heavy lifting and can withdraw those assets 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
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David's Tax-free Tool Kit at taxfreetoolkit.com
Wed, 10 May 2023 - 06min - 272 - 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 is interest rates.
You should expect target rates of return between 6% and 8% within your IUL, and the last 15 years have been a great laboratory to measure the effectiveness of accomplishing that goal.
The first example is a company that dates back to 2006, and despite the ups and downs of the market, the IULs have managed to keep pace with that projection.
The second example uses a set of historical returns back to 2006 as well, and averages them out to show a return of just over 7%.
The third example is a policy that goes back to 2009, enduring the ups and downs of the market and still showing a return of 8.03% over that time frame.
When you subtract the 1% in fees in the life of the program, you will be netting 5% to 7% over the life of the contract. This is why the IUL is not a replacement for the stock market portion of your portfolio, but is great as a bond replacement.
Reach into your portfolio and remove the bonds. Replace it with IUL and you will increase your return, lower your risk, and lower the standard deviation of your entire portfolio, and experience a better outcome over time.
Assessing the success of your IUL is a matter of tempering your expectations and making the right comparisons.
They only really work if you keep them for your entire life but they do that admirably by providing a death benefit that doubles as long-term care, as well as the ability to grow tax-free wealth safely and productively.
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
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David's Tax-free Tool Kit at taxfreetoolkit.com
Wed, 03 May 2023 - 06min - 271 - 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.
The single most important measurement is the debt-to-GDP ratio.
According to the World Bank, a healthy debt-to-GDP is 77% or lower. Right now, the debt-to-GDP ratio is trending well beyond that threshold over the next 16 years.
Dave claims the average American investor should not have to worry about the national debt. While that’s partly true, what they really should be worrying about is the kinds of accounts they are investing their money in.
Former Comptroller General David Walker explicitly predicted that by the time 2030 rolled around the national debt would be so high and out of control that the government would have to raise effective tax rates on middle America to 45%.
Given the abundance of studies highlighting the dangers of the national debt, Dave Ramsey dropped the ball on helping a huge number of listeners.
Americans of all ages should be concerned about the national debt. It should spur you to consider when you want to pay taxes, either now when they are at historical lows or roll the dice and see what happens in the future.
Dave Ramsey is underestimating the risk of the national debt on the fiscal outlook for the US, and he missed an important opportunity to inform more Americans.
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
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David's Tax-free Tool Kit at taxfreetoolkit.com
Wed, 26 Apr 2023 - 09min - 270 - 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 also used the permanent life insurance as a volatility buffer, where they access the cash value of the policy to pay for lifestyle needs during periods of market volatility, similar to the concept in the best-selling book, The Volatility Shield.
They ran 1,000 Monte Carlo comparisons with the goal of measuring sustainable income, and they used ordinary income tax rates.
Each income scenario sustained a minimum of 90% probability of success.
In the investment-only approach, it’s only inefficient from both an income perspective and from the legacy perspective.
The strategy that produced the greatest combination of income and wealth to heirs is the scenario where 30% went into a permanent life insurance policy, 30% into a deferred income annuity, and the balance into investments.
They recast the numbers for couples in different age brackets, but the results were essentially the same.
The permanent life insurance policy used in this study was whole life insurance, which meant that the loans taken in retirement had to ultimately be repaid out of the investment portfolio.
Had they instead used indexed, universal life insurance in the comparison, they could have shown a higher rate of return over time and guaranteed a zero-percent loan provision for the volatility buffer concept. In other words, they could have taken tax-free and cost-free distributions from their life insurance, saving money on interest payments and avoiding the phantom tax bill from the IRS.
The conclusion of the study is accurate, but, by switching out the permanent life insurance for indexed universal life insurance, they would have improved their outcome even further.
If they ran a scenario where tax rates doubled over time, the scenario would have pulled even further ahead than the investment-only scenario.
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
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David's Tax-free Tool Kit at taxfreetoolkit.com
Wed, 19 Apr 2023 - 08min - 269 - 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 in this way, you will net a consistent rate of return that is not linked to the upward movement of a stock market index, even during a down year.
By allocating your premiums to your IUL’s fixed account, you can recreate all the attributes of the whole-life policy inside the IUL, only on a supercharged basis.
To discover the companies that David used to model this scenario, email him at info@powerofzero.com
The scenario takes a 40-year-old male contributing $20,000 per year until the age of 65. In either model, the factors were averaged out to make the comparison as fair as possible.
Starting with the whole-life policy, at age 66 it produced a loan of $42,675 every year until the age of 100. That is cumulative distributions of $1,493,625.
The IUL is able to produce a loan of $48,084 every year until the age of 100, with cumulative distributions of $1,683,940.
If you are just comparing maximum loans on the backend, the IUL comes out on top.
Whole-life policies do not have guaranteed zero-percent loan provisions which is one of the reasons that policy lags behind.
With that being said, you wouldn’t want to use an IUL for its fixed account.
Using a slightly different model, the benefit of the IUL races ahead considerably.
At 7% growth, the loan value jumps to $100,100 and the cumulative distributions go to $3,503,500.
By allocating your premiums to the fixed account inside of a maximum funded IUL, you can generate more income than you would inside a maximum funded whole-life policy.
By taking a little more risk in your IUL and tying the growth of your cash-value to the growth of a stock market index up to a cap, you can more than double your annual tax-free distributions.
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
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David's Tax-free Tool Kit at taxfreetoolkit.com
Wed, 12 Apr 2023 - 09min - 268 - "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 bipartisan group of senators has made repeated requests to meet with the president regarding the plan for Social Security, all of which have been ignored.
President Biden has proposed increasing the taxes on individuals making over $400,000 to address these issues. The challenge with that is, in order to put the nation on a sustainable path, tax rates would have to rise to absurdly impractical levels.
Doubling the debt-to-GDP ratio would be devastating for the economy, which is essentially the situation if the president doesn’t take action.
The scenarios are: we do nothing and all Social Security recipients receive a 24% cut in benefits, keep borrowing money and double the debt in the short-term, or try to put a sustainable plan into place. The third option has mostly been ignored up until this point.
There are honest politicians on both sides of the aisle. Unfortunately, many are not willing to make tough decisions for fear of alienating a portion of the electorate.
This exchange indicates that President Biden is opting for a delay strategy, which is bad news for Americans with the majority of their money in tax-deferred accounts.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
DavidMcKnightBooks.com
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David's Tax-free Tool Kit at taxfreetoolkit.com
Wed, 05 Apr 2023 - 12min - 267 - 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 advisor. You need an advisor who understands what it means to build a balanced, comprehensive approach to tax-free retirement - and, most importantly, will be in business for the long run.
Mistake #4 - Improper funding. David explains that IULs work best when you fund them religiously and keep them until death.
Mistake #5 - Making an IUL the only component of your tax-free retirement strategy. According to David, your goal is to make IULs one of four to six streams of tax-free retirement income.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David's Tax-free Tool Kit at taxfreetoolkit.com
Wed, 29 Mar 2023 - 08min - 266 - 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 tax bracket.
David and Mark predict that the Trump tax cuts will likely be extended, but they won't be extended forever.
David reveals why the 24% tax bracket is his favorite of all tax brackets.
The Social Security Trust fund is projected to run out of money by 2032. David explains how social security benefits would be immediately cut by about 23%.
Mark and David break down the Backdoor Roth IRA and instances it makes sense to use it.
Mark is convinced the future of Roth IRAs is bright, but people must be careful when converting their money.
David explains why life insurance is a great retirement planning vehicle but only when kept for life and used appropriately.
LIRPs are a safe and productive way to grow a portion of your money, but they should never replace the stock portion of your portfolio.
According to David, the most outstanding part of LIRPs is the death benefit and long-term care coverage.
No matter how much money you have in your tax-deferred bucket, the good news is you still have eight or nine years to move your money to tax-free.
Mark and David agree that the Roth IRA is the only thing that both the government and everyday Americans love.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David's Tax-free Tool Kit at taxfreetoolkit.com
Comeback America: Turning the Country Around and Restoring Fiscal Responsibility by David M. Walker
Wed, 22 Mar 2023 - 18min - 265 - 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 have to double by 2030, or the country might go bankrupt - gone are the days when people could get away with 10 and 12% tax rates.
Will the Trump tax cuts be extended past the 2025 deadline? David thinks they will, but there are no guarantees in life.
Mark echoes David's comments and says that the Trump tax cuts will be extended no matter who's in office.
Mark feels extending the tax cuts is a terrible economic move but a smart political move for those looking to stay or take power.
David predicts that when taxes go up, we might end up with 1960-like tax rates where the lowest marginal tax bracket was 22% and the highest was 88%.
Mark and David agree that the middle class could soon be paying 45% effective tax rates when tax rates go up.
David dissects what eight financial experts are saying about rising tax rates.
If you're an investor looking to plan for retirement, David believes your best move right now would be to have at least six streams of diversified tax-free income.
Your goal for 2023 and beyond should be to take advantage of everything in the IRS tax code and focus on getting to the zero percent tax bracket.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David's Tax-free Tool Kit at taxfreetoolkit.com
Wed, 15 Mar 2023 - 22min - 264 - 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.
David reveals why he moved to Puerto Rico and the tax benefits he gets from living in a foreign country.
Daniel and David discuss whether it makes sense to pay taxes on Roth conversions using LIRP loans.
Thoughts on reverse mortgages and why only 1% of children want to inherit their parents' home.
David shares why he is a big fan of IULs and what you can do to get the most out of them.
David reveals that 70% of the time, people are motivated to take on LIRPs because they promise to pay for long-term care in advance of a person's death.
Daniel and David discuss what happens to unused long-term care insurance benefits if a person never needs the care. Will the family get the money back?
Did you know that you could get your social security tax-free for the rest of your retirement if you got yourself to the zero percent tax bracket?
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David's Tax-free Tool Kit at taxfreetoolkit.com
Comeback America: Turning the Country Around and Restoring Fiscal Responsibility by David M. Walker
Wed, 08 Mar 2023 - 32min - 263 - 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 because they have no income limitations and no contribution limits.
According to David, IULs don't require you to take market risks, so they can serve as a suitable bond alternative with lower risks and higher returns over time.
If you're married and over age 60, an IUL makes it possible to get your death benefit in advance of your death for the purpose of long-term care.
David highlights the 3 main reasons people hate traditional long-term care insurance:
- It's getting more and more expensive with time. It's hard to qualify. Something like a bad back can mean you never get accepted. If you pay and die peacefully in your bed, the benefits pay for somebody else's care.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David's Tax-free Tool Kit at taxfreetoolkit.com
Wed, 01 Mar 2023 - 09min - 262 - 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 are:
A guaranteed zero percent loan provision.
Interest in areas.
Conducts a daily sweep.
Has an Overloan Protection rider.
Availability of a chronic illness rider.
David goes through the three things to look out for when looking for an IUL advisor.
If an IUL advisor claims that your IUL can beat the stock market or cannot lose money, run for your life.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David’s Tax-free Tool Kit at taxfreetoolkit.com
Wed, 22 Feb 2023 - 12min - 261 - 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 age while also earning above the minimum allowed threshold.
David shares how the Social Security penalty works and how the damages can affect your retirement.
David breaks down the minimum allowed income threshold and what the IRS counts as earnings.
According to David, understanding the IRS's views on provisional income is the best way to learn how Social Security taxation works.
David highlights the unexpected income streams the IRS counts as provisional income - some of which might shock you.
David highlights situations where up to 85% of your Social Security can become taxable at your highest marginal tax bracket.
Even if you reach full retirement, you can continue to pay taxes on your Social Security in perpetuity if you don't keep your provisional income in check.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Wed, 15 Feb 2023 - 08min - 260 - 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 over a 20-30 year period.
David highlights that IULs were not designed to replace the stock portion of your portfolio - plus, there is no way an IUL can average a 15.3% rate of return.
A good IUL with a dependable carrier should average somewhere between 6 to 8% over a 20 to 30-year time frame.
Claim #2 - You cannot lose money in an IUL.
David explains that although you will never be credited less than a zero in an IUL, there is always the risk that your policy could take a hit during a flat year.
Claim #3 - The IUL is a silver bullet.
No investment path is a true silver bullet. All an IUL does is give you the upsides of the stock market up to a cap with protection on the downside.
David reveals that IULs cannot match stock market returns or a 100% guarantee against loss - but they are a fantastic alternative to bonds.
According to David, an ideal tax-free retirement approach should have between four and six streams of tax-free income.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Wed, 08 Feb 2023 - 09min - 259 - 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 you and your spouse, and use the inheritance to fund your lifestyle.
Strategy #3 - Fully fund your Roth IRA. Not a year should go by when you and your spouse are not fully funding your Roth IRAs.
Strategy #4 - Use the inheritance to fund your retirement. If you're already retired, it may make sense to use the inheritance to support your lifestyle instead of going after your IRA.
Strategy #5 - Contribute money to a life insurance retirement plan. If you still have some money left after implementing the above four strategies, consider taking advantage of the flexible contribution limits of a LIRP.
David explains how you can productively grow your money in a LIRP tax-free.
According to David, if you inherit $1 million and leave the money in a taxable bucket, you will be paying taxes over the balance of your lifetime.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Wed, 01 Feb 2023 - 10min - 258 - 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 that judging IUL fees only makes sense if you calculate the expenses over the product's lifetime and not the first 5 years when the fees are the highest.
In today's example, David uses a 40-year-old man investing $20,000 a year into an IUL and compares the fees if the same man followed Dave Ramsey's investment advice.
In the first year, the man will pay $3502 for the IUL compared to $300 on Dave Ramsey's SmartVestor Pro program - maybe Dave Ramsey was right, after all.
However, by the 10th year, IUL expenses will have gone down to $2702, while the SmartVestor Pro will have risen dramatically to $3962.
David reveals that it gets worse for the SmartVestor Pro by the 40th year - while IUL fees remain low at $2964, SmartVestor Pro fees will have gone to an astronomical amount of $31,263.
This just proves that the expenses of an IUL are higher as a percentage of the balance in the earlier years but are much lower as a dollar amount in the later years.
In contrast, David explains that the SmartVestor Pro fees are much lower as a percentage in the earlier years but become much higher as a dollar amount in the later years of the plan.
David points out that IULs are meant to replace bonds and not the stock portion of your portfolio, as Dave Ramsey claims.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Wed, 25 Jan 2023 - 09min - 257 - 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 the early 2000's.
Insurance agencies created a product that allowed investors to link the growth of their cash value to the upward movement of the stock market index.
Claim #2: Insurance companies lure you in with artificially high cap rates, only to reduce them once they've sucked you in.
According to David, cap rates change from company to company. However, the one he uses averaged a 7.09% rate of return since 2006 - this is quite impressive considering all the chaos witnessed in the markets during that period.
Claim #3: IULs are 100% guaranteed to perform worse than initially promised.
This claim is just laughable considering David saw an averaged 7.09 rate of return in the IULs he currently uses.
Claim #4: Insurance companies drop cap rates early in the surrender period when the sting of cashing out is the greatest.
Yes, surrender charges are harsh in the first 5 years of the policy. However, what Kirkpatrick fails to mention is that this is also the period when it least makes sense to cash out because average rates of return are usually higher - over 7.5%.
David admits that IULs are not perfect, but neither are whole life insurances. Kirkpatrick is just a creative agent whose main agenda is to sell you whole life insurance at the expense of an IUL.
According to David, when you choose an IUL, you sacrifice guarantees for higher rates of return. In contrast, when you choose whole life insurance, you sacrifice higher rates of returns for guarantees.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Wed, 18 Jan 2023 - 13min - 256 - 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 translate to less than 1% of your balance per year.
Myth #2: IULs contain numerous fees ranging from surrender charges, administrative charges, premium expenses, etc.
David explains that IULs only work if you keep them for life - so fees should only be calculated after the contract expires, which often translates to 1% per year.
Myth #3: When you cancel your insurance policy, you give up your death benefit and almost all the cash value you've managed to build.
For David, this is by far the most ridiculous of all Dave Ramsey's claims on IULs. Not only is it misleading, but it is actually opposite to how cash-value life insurances work.
Myth #4: Excessive fees keep returns relatively low, so your IUL will never beat inflation.
This claim is just ridiculous, considering IULs were never designed to be a substitute for the stock market portion of your portfolio.
Myth #5: Market performance will affect your premiums - the higher the rates, the more likely you are to lose your policy.
According to David, this is a careless and poorly researched claim. Here, Dave Ramsey's primary goal is to lead you to strategically positioned links inviting you to buy term life insurance from him.
David believes the only reason Dave Ramsey is against IULs is that he wants you to drop your IULs in favor of his term life insurance policy, with no regard to the losses you might incur or where you are in the surrender period.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Wed, 11 Jan 2023 - 17min - 255 - 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 what future tax rates will be - a response David feels is rather "diplomatic."
David tries to push the chatbot further by asking it what a life insurance retirement plan is. He is impressed with its answer, which is much more specific and descriptive than what you'd normally find online.
After playing around with ChatGPT for over an hour, David believes the AI is not auditioning to replace financial advisors.
The even more impressive thing about the chatbot is that its answers are much more balanced and devoid of emotions.
Although the technology is not a replacement for financial advisors in the near future, David feels you can still use it to learn more about retirement planning.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Wed, 04 Jan 2023 - 12min - 254 - 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 all at once, but quick enough to get all the heavy lifting done by 2026.
Rule #4: The type of retirement account you contribute to should be determined by comparing your current tax bracket to your future tax bracket.
Rule #5: Roth retirement accounts are your best friend. These vehicles allow you to shift nearly unlimited money from tax-deferred to tax-free.
Rule #6: It would be best if you did most, if not all, of your heavy lifting before 2026. You have four years before the tax cuts end, and every year you wait to take advantage of these low tax rates is another year you will have to pay more than you need to.
Rule #7: The 32% tax bracket is your enemy. Remember, the 32% tax bracket is 33% more than the 22% tax bracket. So try as hard as possible to avoid it when shifting your money to tax-free.
Rule #8: Leave some money in your tax-deferred accounts. David explains that if you shift everything to tax-free, you won't have any taxable income left - which means you will needlessly pay taxes on money that you have received tax-free.
Rule #9: Make sure your tax-free retirement plan keeps you below the provisional income threshold that can cause social security taxation. In many cases, your money will run out five to seven years faster if your social security is taxed.
Rule #10: Never annuitize your retirement in the tax-deferred bucket. Annuities in your tax-deferred bucket will count as provisional income and cause you all sorts of problems.
Rule #11: Not all Life Insurance Plans (LIRP) are created equal. And it only makes sense to get an LIRP if you plan to keep it till death.
Rule #12: You will need more than one stream of tax-free income in retirement. There is always the risk that the IRS will legislate one of your tax-free streams of income out of existence.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Wed, 28 Dec 2022 - 13min - 253 - 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 stable and safe savings plan, make it attractive for most investors.
David points out that the potential to borrow money from a policy is one of the reasons some people buy whole life insurance.
However, whole life insurance has its drawbacks. For example, David reveals that unmonitored policy loans can derail your retirement plans or leave you with a significant income tax gain.
In the case of Variable Universal Life Insurance (VUL), David explains how the policy has investment subaccounts that allow the insurer to invest the cash value of a policy.
Although you may enjoy better-than-average returns with a VUL, your cash value can be significantly reduced due to poor performance of your investment options.
The thing that makes Indexed Universal Life Insurance (IUL) attractive is its ability to generate greater upside potential, flexibility, and tax-free gains.
However, David explains that the IUL is not designed to be a stock market replacement, nor can you experience the type of return you could get from a VUL.
When it comes to ILRPs, David is convinced there is no one perfect solution because all three have distinct attributes. Your job is to find the best one for your situation while protecting yourself against potential downsides.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Wed, 21 Dec 2022 - 13min - 252 - 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 bracket is a 33% increase over the 24% - and an unnecessary expense to your Roth conversion strategy.
According to David, the 24% tax bracket is the sweet spot in Trump's tax cuts because for an additional 2% on the margin, you can convert an extra $160,000.
David points out that the people who accelerate their Roth conversions and end up in the 32% tax bracket will be paying more to the IRS than is absolutely necessary.
David explains why the 32% tax bracket is the riskiest region of our current tax laws.
David believes the easiest way to get ahead of the 2026 deadline is to extend your Roth conversions past 2026 to 2028 - the three more years will guarantee that you stay in the 22 and 24% tax brackets.
Although taxes are going up in 2026, David believes you don't need to move heaven and earth to complete your Roth conversions. As long as you remain in the future versions of the 22 and 24% tax brackets, you will be safe.
Regardless of who takes office in 2024, David maintains that Trump's tax cuts will likely be extended, and the taxes for the American middle class will likely stay the same.
David explains why the year you should be worried about is 2030 and not 2026 when it comes to the risk of rising taxes.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Wed, 14 Dec 2022 - 09min - 251 - 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 way would be to contribute to your Roth 401K. It may make sense for you to stop contributing to your 401K and direct those contributions to a Roth 401K because now is arguably the best time in the history of the US to be making contributions to tax-free accounts.
The third point would be to max out on your Roth IRA. As of 2022, you are allowed to contribute $20,500 per year to a Roth IRA and an additional $6500 for catchup if you are above age 50.
Point number four is taking advantage of a Health Saving Account. A Health Savings Account allows you to set aside pre-tax dollars to pay for qualified healthcare expenses. Contributions are tax-deductible, grow tax-deferred, and can be distributed tax-free.
Last but not least is making contributions to a cash-value life insurance. David explains that Dave Ramsey and Suze Orman may preach against permanent life insurance, but the more experienced financial experts are all for it.
A great example is America's IRA Expert, Ed Slott, CPA, who went on live television to declare permanent life insurance as the single most valuable benefit in the IRS tax code.
David agrees with Ed Slott that making money from investments is harder than it ever was. The last thing you'd want to do is share your hard-earned gains with the government.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Wed, 07 Dec 2022 - 12min - 250 - 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 to go before being passed into law, the Senior Vice President of NAIFA, Diane Boyle, said she is "optimistic" the bill will be passed into law in 2022.
David highlights how one of the more notable changes in the proposed bill will move the date for required minimum distribution from 70 and ½ to 75.
Under current law, if you fail to take the right amount in a required minimum distribution, you will be forced to pay a 50% exercise tax. However, with the SECURE Act 2.0, the penalty gets reduced to 25% and down to 10% if you get everything corrected.
David believes, if passed into law, SECURE Act 2.0 will encourage more retirement participation.
For the workers still paying their student loans, David reveals how the bill will allow employers to match the amount employees pay towards student loans.
Several politicians have expressed the desire to get the bill passed before the end of the year. David believes now is the ideal time to get your affairs in order because some changes will come into effect as early as 2023.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Wed, 30 Nov 2022 - 08min - 249 - 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 to change his mind when Biden's tax proposals threatened to raise taxes.
According to David, there are two sides to every investment advice on the internet. Instead of stubbornly following one narrative and muting everything else, your job as an investor is to listen to both sides of the story and decide based on your current situation.
When meeting with an investment advisor, David believes the least you can do is ask as many questions as possible.
There is so much controversy around permanent life insurance because gurus like Dave Ramsey and Suzzie Orman have continuously peddled lies that life insurance doesn't compare well to the stock market and that the expenses are too high - both of which are false.
For David, permanent life insurance is like marriage; you should only invest in one if you plan to keep it till you die.
Although most financial advisors agree that interest rates will go up, David feels they need to take more action. Believing is one thing, but taking action to mitigate the risk of higher tax rates is a whole different story.
When asked what advice he would give to people approaching retirement, David explains they only need to plan for two things - higher taxes and outliving their money.
For the younger people who are not that close to retirement, David notes that tax rates will undoubtedly be higher in the future. So now would be a good time to take advantage of all the tax-free savings tools at their disposal.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Comeback America: Turning the Country Around and Restoring Fiscal Responsibility by David M. Walker
Wed, 23 Nov 2022 - 18min - 248 - 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 time we all start to think about protecting our taxable income streams.
David highlights that the pre-tax amount on your pension might be guaranteed, but your after-tax amount is not.
If you'd like to protect your pension from higher tax rates, David explains the first step would be to consider a lump sum pension distribution option. If this option is available for you, it would be advisable to move as much money into a Roth IRA to shield your dollars from the impact of higher taxes.
However, when moving pension dollars into an IRA, David reveals you must move slowly enough so you don't move into a tax bracket that gives you heartburn, and fast enough that you don't get caught up with higher tax rates.
David discusses the role of tax-deferred retirement accounts when combating the impacts of rising tax rates.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Wed, 16 Nov 2022 - 08min - 247 - 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 excess of $1trillion per year by 2025, the Government would have to raise taxes on any dollar earned above 400,00 to 102%.
David brings David Walker's words into the conversation. According to Walker, on average, Americans pay about 21% of their income to federal taxes, and another 10% to state and local governments. By 2030, to pay the rising bills, that amount could be at least 45%, even higher that the average 42% that most Europeans pay.
David talks about a couple of points Brian Beaulieu, David Walker, and Maya MacGuineas seem to be in agreement on: that tax rates will have to go up dramatically by 2030 and that politicians are likely to kick the can down the road.
David touches upon what you can do to best prepare for the Great Depression of 2030.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
POZ Video: How High Will Biden Have to Raise Your Taxes?
Comeback America by David M. Walker
Wed, 09 Nov 2022 - 07min - 246 - 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 contributions for people over 50.
According to David, the Roth 401(k) has become one of the real juggernauts for those looking to build huge amounts of tax-free retirement wealth.
David goes over some of the additional changes and increases, as well as their repercussions on single people, married couples, and people over 50.
David reiterates the fact that the 24% tax bracket is the single biggest sweet spot in the Trump tax cuts, and goes over what will happen if you aren’t going to take advantage of it.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 02 Nov 2022 - 07min - 245 - 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 proactively trying to have a series of tax-free financial streams that include Roth IRA, Roth Conversions, and some form of Life Insurance Retirement Plan.
Dave and Ron discuss the true cost of waiting when it comes to tax rates, and whether it makes financial sense to use the market decline to execute Roth IRA conversions to limit taxes.
Having too much risk inside their investment portfolio is one of the big mistakes made by retirees – David explains why that should be a concern for those approaching retirement.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Video: The Math Behind Roth Conversion Procrastination
ProPublica article Lord of the Roths: How Tech Mogul Peter Thiel Turned a Retirement Account for the Middle Class Into a $5 Billion Tax-Free Piggy Bank
Wed, 26 Oct 2022 - 11min - 244 - 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 IRAs should be eliminated because they can turn into tax dodges for high rollers like Peter Thiel.
And thirdly, Alicia Munnell makes the case for Roths being an obstacle to fairer tax incentives.
According to David, Munnell’s points seem to overlook the fact that tax-free retirement instruments like the Roth IRA and Roth 401(k) are some of the only tools Americans have to shield themselves from the impact of higher taxes down the road.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Alicia Munnell’s MarketWatch article - Roth IRA and Roth 401(k): the World Would Be a Better Place Without Them
Boston College’s Center for Retirement Research
ProPublica article Lord of the Roths: How Tech Mogul Peter Thiel Turned a Retirement Account for the Middle Class Into a $5 Billion Tax-Free Piggy Bank
Wed, 19 Oct 2022 - 07min - 243 - 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. However, that isn’t how things typically work. In real life, the longer you keep your policy, the lower the average internal expenses go.
For David, whoever is dealing with a financial advisor recommending that their clients roll their entire IRA into life insurance policies should run the other way.
The fundamental issue David sees is the one-size-fits-all financial planning advice dispensed by some mainstream financial gurus. The problem lies in wealthy people not wanting to have a generic financial plan, rather a customized, comprehensive and balanced approach to retirement planning.
David calls out mainstream financial gurus like Dave Ramsey, Clark Howard, and Suze Orman for being generalists, instead of experts on specific facets of financial planning.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 12 Oct 2022 - 11min - 242 - 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, Roth conversions, LARPs, and so forth.
The idea is that, when you take income by way of a reverse mortgage, it’s a true tax-free stream of income. This income does not count as provisional income, thus not counting as a threshold that causes Social Security taxation.
Don shares a couple of examples of how reverse mortgages can lead to great outcomes.
Don describes the profile of the typical person for whom the reverse mortgage strategy may apply.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 05 Oct 2022 - 31min - 241 - 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 consumers and the Federal Government like because they lead to you using after-tax dollars and it gives more revenue to the Federal Government – and it does so today, not in 20 years.
For David, the Federal Government has several tools to deal with inflation. Raising interest rates as a possible solution can create a scenario where both interest rates and the cost of servicing the national debt go up.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
The Wealth & Freedom Nexus Podcast
Wed, 28 Sep 2022 - 13min - 240 - 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 those taking that money out.
According to several experts, David discusses, tax rates will have to double sooner or later to keep the system working.
The problem is that most Americans who are putting money into 401k and IRAs are living in the old paradigm of “putting money into these types of tax-deferred programs to get a tax deduction today, and postpone the payment of those taxes to tomorrow”.
When people “obsess” over wanting to convert every last dollar in their 401k or IRA to a Roth 401k or Roth IRA, they run into the risk of not having any income left in retirement, would they pay taxes on all those dollars.
A standard deduction of $25,900 is all a married couple in the scenario described above may be left with in retirement.
David talks about the fact that most people don’t realize that their Social Security can be taxed. When they find out, they’re mad because it feels like a double tax.
David debunks a sort of myth: it isn’t true that the same limitations that apply to a normal Roth IRA apply to Roth 401ks and Roth conversions.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 21 Sep 2022 - 15min - 239 - "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 as 3% points annually.
They can do so through three things: 1) By helping you stick to your plan and avoid making emotion-driven investments. 2) By setting you up with a sensible asset allocation that incorporates quarterly rebalancing. 3) Help you keep fees low by guiding you to low-fee alternatives.
David talks about the fact that most Americans don’t have a CPA and use software like TurboTax or services such as H&R Block to do their taxes. The problem with this is that these types of services are not paid or motivated to advise you on taxes you might pay on retirement distributions 20 or 30 years down the road.
CPAs themselves are not very motivated to save your taxes on your 401k IRA distributions, as their main goal is often to help you save on taxes today.
David shares three key things a good financial advisor can help you with: 1) to increase the rate of return on your investments. 2) to help you save on taxes at a time when you can least afford to pay them, like retirement. 3) to completely purge longevity risk from your retirement picture.
For David, a qualified financial advisor, through sophisticated retirement planning software, can help you anticipate what your tax burden might be years down the road and set up a plan that helps you maximize your after-tax cash flow in retirement.
David discusses the Longevity Risk, a situation in which investors go at it alone, seeking to neutralize longevity risk by attempting to follow the 4% Rule.
The 4% Rule states that if you never take out more than 4% of your retirement savings in a given year, you have a reasonably high chance that your nest egg will last through life expectancy.
The 4% Rule has recently been downgraded to the 3% Rule because some experts believed that the 4% Rule was built around overly optimistic and outdated variables.
For David, things aren’t as easy as they may appear because of what he calls the “Illusion of Liquidity.” Having money sitting around – as per the 3% Rule – can often lead to it being seen as an emergency fund or even a slush fund.
Mentioned in this episode:
Are Financial Advisors Worth It? - The Motley Fool (table included)
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 14 Sep 2022 - 10min - 238 - 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 has planned, something that seems to be suggested by David Walker – former Comptroller General of the Federal Government – as well.
David quotes Dr. Larry Kotlikoff who touches upon the fact that up to three million Americans over 60 are still paying off their student loans.
For the non-partisan Penn Wharton, President Biden’s plan includes three major components. They estimated that the debt cancellation alone will cost up to $519 billion, while the loan forbearance will cost another $16 billion, and the new income-driven repayment IDR program would cost another $70 billion.
According to Maya McGinnis, President of the bipartisan Committee for a Responsible Federal Budget, Biden’s plan will do nothing to actually make education more affordable – meaning that it will likely drive up tuition costs, all while raising prices on a variety of other goods and services for ordinary Americans.
Even the Washington Post concedes that the Biden plan will cause tuition to increase more rapidly, primarily due to its income driven repayment IDR provisions.
David illustrates how the approach of Biden’s plan will encourage students to take out more debt and colleges to charge more in tuition, and how this will impact you as you’re trying to get to the 0% tax bracket.
Mentioned in this episode:
Will the Inflation Reduction Act Raise Your Taxes? This Could Increase Inflation
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 07 Sep 2022 - 07min - 237 - 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 ensure a retiree never runs out of money, which is the one thing retirees fear more than death.
When it comes to withdrawing money during retirement, the 3% Rule is one of the most effective strategies you can use today.
According to David, Fisher's claims that annuities always mean more taxes is completely false. You can essentially solve all your tax problems by implementing what David calls the Piecemeal Internal Roth Conversion.
Fisher argues that annuities do not have a liquidity option. Yes, annuities do have surrender fees, but as David explains, most people don't need liquidity because their investments already guarantee they won't outlive their money.
Another of Fisher's issues with annuities is the abnormally huge size of annuity contracts. David counters that claim by saying he's seen dozens of contracts, and they are not as complicated as Fisher paints them to be.
Can annuities provide any real value to the average investor? Fisher thinks they can't. David, however, highlights that annuities offer value in ways no other investment vehicle can - your living expenses are taken care of regardless of the market environment, forever.
Fisher also maintains that financial advisors are the only people who gain anything from annuities. That's a little disingenuous coming from a person who built a $7 billion business from financial advising.
If anything, Ken Fisher is consistent - consistently wrong on all his criticisms of annuities. David further adds that his advice is dangerously misleading and primarily aimed at getting you to transfer your assets over to Fisher Investments.
Mentioned in this episode:
Financial Fast Lane on YouTube
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 31 Aug 2022 - 11min - 236 - 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 current tax code expires in 2026.
According to David, the most effective retirement planning technique combines all available tax-free strategies.
Does the 0% tax bracket really exist? David explains how Americans can get into the zero percent tax bracket without trying to game the IRS.
David goes through the strategies that can shield you against the risk of a higher tax bracket - and the main components of a comprehensive approach to tax-free retirement.
David breaks down what Life Insurance Retirement Plan (LIRP) is and why it's so effective when it comes to tax-free retirement.
David reveals the holy grail of retirement planning and what it entails.
Numerous studies have shown that the number one concern for retirees is not the risk of paying higher taxes, but the fear of outliving their money.
David talks about his second book, Tax-Free Income For Life, and how it can potentially help retirees mitigate longevity and tax rate risk through sane financial planning.
David's advice to retirees and people nearing retirement: Rising taxes are inevitable. Don't let a year go by without taking advantage of the historically low tax rates.
Mentioned in this episode:
Financial Fast Lane YouTube Channel
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 24 Aug 2022 - 18min - 235 - 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 care, and the tax code.
David points out that Maya is brilliant at what she does, but she might be wrong on this one because the data actually paints a totally different picture.
The numbers according to statista.com reveal the national debt is projected to be over 30.6 trillion by the end of 2022 and 43.3 trillion by the end of 2031.
David explains that since the Inflation Reduction Act will only save $313 billion over the next 9 years, it does nothing to reduce the current debt. It only slows the growth of the debt by a measly 2.5%.
As far as fixing the national debt crisis is concerned, David is convinced that the only way to drive change is to increase revenue and reduce spending.
The Inflation Reduction Act will introduce numerous impactful activities that might reduce government spending and solve inflation, but David feels it's not a serious attempt to fix the national debt.
As David explains, with the national debt crisis growing into an intractable problem, being in the zero percent tax bracket is now more important than ever.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 17 Aug 2022 - 08min - 234 - 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 increase taxes for all Americans.
David reveals the glaring errors in the proposed inflation act and whether changes to the bill will mean an end to Trump's tax cuts.
David explains how Biden's Build Back Better plan would have created an inflationary environment.
David demonstrates how the new tax laws are comparable to kings from the past imposing taxes on individuals based on crop yield in a matter that's unfavorable to the farmer.
David breaks down the key components of the Inflation Reduction Act of 2022 and how, if passed, might cure the inflation symptoms we're seeing right now.
The Inflation Reduction Act will introduce numerous government spending activities. Where will all this money come from? David believes these projects will be funded by more taxes.
As David explains, the passage of the bill will, directly and indirectly, affect all Americans, especially since higher taxes for businesses translates to higher costs for the concerned products or services.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 10 Aug 2022 - 09min - 233 - 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 prevent that from happening.
David is asked for his predictions on how the current fiscal trajectory is going to affect housing prices, your bottom line and wallet.
David recommends that young people try to be more inclined to contribute to tax-free today due to the fact that taxes are likely going to be higher when they’re in retirement compared to what they are at the moment.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 03 Aug 2022 - 16min - 232 - 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 also saw David McKnight starting to go around the country trying to warn and help people, and that’s when he developed a presentation, which then turned into his 2014 book The Power of Zero.
David explains that there are three basic types of accounts within which you can invest money for retirement and that the first two – the taxable bucket with yearly payments and the one with payments only at the end – are problematic given the rising tax environment.
David’s focus over the years has been on teaching people how to reposition their money from taxable and tax-deferred to tax-free so that all heavy lifting will be done by the time tax rates increase.
All of the experts David interviewed during his documentary shared the same message: “If we don’t change the course as a country, tax rates within the next 10 years will have to increase dramatically”. Some experts even went further than that, claiming that the U.S. will go broke as a country unless tax rates are doubled.
David’s main goal is “to put 100,000 people on the road to the 0% tax bracket in the next 10 years”.
David illustrates the fiscal gap accounting concept and point of view of Boston University’s Doctor Larry Kotlikoff, who was featured in the documentary as well. His point of view seems to paint a much more dramatic picture with the national debt standing at $239 trillion.
David shares the story of The White Coat Investor, a doctor out of Salt Lake City who believes that David’s advice in his book The Power of Zero isn’t good advice because “tax-free Roth Conversions are the devil”. Despite this, he eventually came around to David’s suggestions.
For David, the country is facing a completely politically-neutral issue: the maths problem of the U.S.’ fiscal problems.
David discusses why everyone should look at LIRPs as a valuable tax-free income stream.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 27 Jul 2022 - 15min - 231 - 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 accounts.
David demonstrates how no two tax-free retirement plans are created equal. The people that enjoy stress-free retirement are the ones that strategically take advantage of more than one tax-free retirement account.
The first reason you shouldn't go all-in with life insurance is the wisdom of not putting all your eggs in one basket.
The sequence of returns risk is the other major reason why it doesn't make sense to retire on LIRP alone. This essentially means a phase when you're forced to take money out of your retirement plan in a down market.
David describes how the timing of withdrawals from a retirement account can influence how long an investor's money lasts during retirement. Low returns early in retirement can deplete a retiree's portfolio faster than initially anticipated.
Going bankrupt during retirement is detrimental because, if you don't have at least a dollar in cash value to your name, the IRS makes you pay all the foregone taxes up to that point in your life, all in one year.
LIRP is not a substitute for the stock part of your portfolio. Its growth is not sufficient enough to stretch your retirement dollars through life expectancy.
David explains that if you retire at 65, your money must last for at least another 30 years. The stock market is well suited to such a scenario if structured efficiently.
David recommends doing one thing to safeguard your retirement: diversify as much as possible.
Mentioned in this episode:
David's books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 20 Jul 2022 - 09min - 230 - 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 based on the current levels of taxation would only be enough to pay 80% of scheduled benefits.
Historically, Social Security has provided the average retiree with roughly 38% of their average income during their working years – that number should go down to 27% by 2035. This means that Social Security will be playing a smaller and smaller role and that you’ll have to save even more of your paycheck in order to compensate.
For Social Security to remain fully solved throughout the next 75-year project (ending in 2096) there are three possibilities.
David raises a key concern that’s brought into the conversation by Social Security Trustees: if Congress acts now, the pain of fixing this program can be spread among Baby Boomers, Gen X’ers, Millennials, etc. However, for each year that goes by without a permanent fix for the Social Security program, the pain will get concentrated on fewer and fewer generations.
This means that the longer Congress waits, the higher the taxes these younger generations can expect and the lower their Social Security benefits.
David recommends doing two things from a retirement perspective: save money today to be less reliant on Social Security during your retirement, and invest tax-free.
Mentioned in this episode:
David’s books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 13 Jul 2022 - 09min - 229 - 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 up to 185% by 2052.
Not being able to find a way to live within our means seems to be the root cause of this issue. By 2052, Federal spending will equal 30% of GDP, while actual revenue will remain at about 18% (based on current tax rates).
David discusses the cost of servicing the U.S.’ burgeoning national debt – which currently sits at about 1.5% of the country’s GDP but that number is projected to reach 7.2%.
The fact that the Fed has begun increasing interest rates in a historic way has been evident. On June 15th, for instance, they raised the Federal rate ¾ of a point, the largest increase since 1994. And most economists predict an additional ¾ of a point in July.
David talks about non-discretionary spending, the spending over which we have absolutely no control. We’re either required to pay by law, like in the case of Social Security, Medicare, and Medicaid, or by the U.S. Constitutions – like in the case of interest on national debt.
David shares that, as we head toward 2052, non-discretionary spending tends to level off. However, the cost of Social Security, Medicare and Medicaid, as well as the interest on national debt, begins to shoot through the roof.
The main issue isn’t discretionary spending, but rather non-discretionary spending, and that’s what will eventually either bankrupt the U.S. or force your taxes to double.
According to David, the aging of America is the main driver of all this debt. It’s estimated that the cost of healthcare will rise to 20% of the entire economy. Additionally, by 2030, an astounding 70 million Americans will be age 65 or older and will qualify for Medicare, Medicaid, and Social Security.
And if that wasn’t enough, it’s estimated that the number of Americans contributing to Social Security for every one person that takes money out will drop from the current 2.8 to 2.2 by 2042.
David shares that in order to fully fund Social Security between now and 2035, the U.S. would have to have $2.9 trillion, but the country currently has no funds. With Social Security trust funds likely to be depleted by 2035, Social Security will have to be funded purely off of incoming revenue.
There are three scenarios that you could potentially face: a cut in your Social Security, a tax increase, or some combination of the two.
When it comes to consequences for individual families, David predicts a paycheck decrease: a four-person family will lose about $4,000 by 2028, $8,000 by 2038 and $16,000 by 2048.
As far as people planning on financing their retirement through distributions from IRAs or 401ks, all of this translates into them taking much less money home after-tax.
Mentioned in this episode:
PGPF.org (Peter Peterson foundation)
David’s books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 06 Jul 2022 - 08min - 228 - 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 free, but it’s not cost free. For starters, you aren't actually taking a loan from your own policy. You're taking the loan from the life insurance company and you're using your policy's cash value as collateral for that loan. I will explain how it works in this episode.
Some companies say that their current practice is to charge you 3%, but they reserve the right to charge you four, five or eight percent at their leisure, sometime down the road. And the longer you give them to decide, the more detrimental.
Your loan provision is the single most important provision in the entire contract. You absolutely have to make sure that you understand your loan provision and its implications before you ever sign on the dotted line.
The second thing your LIRP absolutely must have is interest charge in arrears (vs charge you interest in advance). If you give it to them at the beginning of the year, as opposed to the end of the year, you'll lose out on what that money could have earned for you.
The third thing you must insist that your LIRP have is daily sweeps. Some companies are so small that they have to wait anywhere from three to six months to pull up enough assets to where it's cost effective enough to purchase the options required to make those assets grow. In other words, it’s not going into your growth account and making you money right away.
Make sure your LIRP has an overloan protection rider. This means that when your cash value drops to a certain point, the insurance company will give you the option of having them essentially take over the policy. They will reduce your policy's death benefit to the point where the remaining cash value essentially pays the policy up.
What if you die before the policy is up? Don’t worry - you won’t have paid something and never get it back. Someone's still getting a death benefit, probably your kids or your grandkids. So there isn't really that sensation of having paid for something you hope you never have to use.
Mentioned in this episode:
David’s books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 29 Jun 2022 - 14min - 227 - 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% – and he feels that, soon, Jerome Powell may have to decide whether to take similar action.
In other words, Powell seems to be destined to push the U.S. economy into a recession in order to rein in inflation.
David cites Bloomberg Economics’ chief U.S. economist Anna Wang, who put the chance of recession in 2022 at 1 in 4, while a year from now it will go up all the way to 3 and 4.
She sees a downturn this year as an unlikely event and says that a recession in 2023 will be tough to avoid.
Mentioned in this episode:
David’s books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 22 Jun 2022 - 09min - 226 - 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 details about permanent life insurance over time, in an attempt to justify his claim that permanent life insurance is a rip-off.
David suggests making your permanent life insurance the bond portion of your overall investment portfolio. His advice is to reach into your current investment portfolio, take out your bond allocation, and replace it with permanent life insurance.
David discloses that he isn’t trying to make the case that you should put all of your money into the LIRP – what Dave Ramsey calls permanent life insurance. He suggests that Ramsey has taken a disingenuous approach in his claim that ‘Buy Term and Invest the Difference’ is the only way to go.
Mentioned in this episode:
David’s books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 15 Jun 2022 - 08min - 225 - 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 Security, for instance, counts as provisional income. This represents a problem because as your Social Security rises to keep up with inflation, you get pushed closer to the provisional income thresholds. This may not seem like a big deal if inflation increases at the historical rate of 3%, but initial projections show that, in 2023, Social Security could go up to 8%.
Selling your primary residence is another area where inflation could cause you to pay more taxes.
David explains that profits up to $250,000 – or $500,000 if you’re married – from a sale of your primary residence are tax-free. However, since this number hasn’t been adjusted to keep up with inflation since 1997, you run into the risk of your profit being subjected to capital gains tax if your home value increased as a result of inflation.
The Obamacare surcharge is another area where inflation can “hammer you”, says David.
David discloses that inflation could force you to pay a double tax on the sale of a home.
The Salt Tax, a $10,000 limit on the Federal tax deduction, hasn’t been changed since 2018. This means that if your income goes up, your state and local taxes rise commensurately – and a smaller and smaller percentage of that ends up being deductible on your Federal tax.
A “tax bracket creep” is when tax brackets fail to adjust for changes in consumer purchasing power due to inflation.
Some experts, David shares, think that the adoption of the Modern Monetary Theory in the form of printing tons and tons of money would also cause a dramatic rise in taxes.
David believes that getting to the 0% tax bracket in retirement is the best way to shield yourself against all the taxes impacted by inflation.
Mentioned in this episode:
David’s books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 08 Jun 2022 - 12min - 224 - 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 $83,550 and $340,100 – but are pushing the payment of taxes on your Roth Conversion down the road, you’re actually missing out on a good deal. Ten years from now, he argues, when the country’s tax rates will have risen dramatically, you’re going to end up realizing that you missed out on a deal of historic proportions.
David sees not being convinced that tax rates in the future are likely going to be higher than they are today and being reluctant to pay the cost of admission to the tax-free bucket as the greatest roadblock in getting you to the 0% tax bracket in retirement.
In case you feel as if you’re in the situation described above, David suggests educating yourself on what independent, third-party, experts have to say about the future of tax rates – and he recommends reading chapter 1 of his book Power of Zero and watching the documentary The Power of Zero: The Tax Train Is Coming.
David shares that, historically, tax rates have been substantially higher than they are today. Marginal tax rates post WWII were 94%, and marginal tax rates in the ‘70s were 70%. The highest marginal rate today is 37%. These rates have nowhere to go but up.
All the experts that were interviewed for The Power of Zero documentary said the same thing: if we don’t change course immediately, ten years from now tax rates will have to rise dramatically or we’ll go broke as a country. Some of them even said that tax rates will have to double or we’ll go broke as a nation.
David touches upon quotes from a MarketWatch article of his that featured insights from Ray Dalio, Leon Cooperman, Ed Slott, Larry Kotlikoff, and Larry Swedroe regarding the future of tax rates in the next ten years.
David brings up a key question you should ask yourself: wouldn’t you rather pay taxes today, on your terms, than postpone the payment of those taxes until the IRS forces you to pay them on their terms?
Mentioned in this episode:
David McKnight vs Financial Guru (Part 1): powerofzero.com/blog/Power-of-Zero-vs-White-Coat-Investor-David-McKnight-Response
David McKnight vs Financial Guru (Part 2): powerofzero.com/blog/the-white-coat-investor-responds-and-i-rebut-his-response
David McKnight vs Financial Guru (Part 3): powerofzero.com/blog/power-of-zero-vs-white-coat-investor-final-response
The Power of Zero: The Tax Train Is Coming--TheTaxTrain.com
MarketWatch Article: marketwatch.com/story/heres-a-way-to-make-your-retirement-savings-last-longer-2020-12-08
POZ episode 181: Should High Income Earners Do Roth Conversions--podcasts.apple.com/us/podcast/should-high-income-earners-do-roth-conversions/id1441026169?i=1000558116209
David’s books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
Wed, 01 Jun 2022 - 11min
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