New Study: Retirees with Annuities Spend MORE than Those Who Rely on Investments Alone
Release Date: 01/01/2025
The Five Cardinal Rules of Roth Conversions
The Power Of Zero Show
David McKnight goes through his five cardinal rules for doing a Roth conversion. The first principle is simple: don’t do a Roth conversion that bumps you into a tax bracket that gives you heartburn. Not sure about what a heartburn-inducing tax bracket looks like? David shares a simple “rule of thumb” you can follow. In your zeal to get your Roth conversion done before tax rates go up for good, don’t bump into the 32% tax bracket along the way. The second cardinal rule ties into the almost certainty that Congress will extend the Trump tax cuts through 2033 – make sure to stretch your...
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How to Take Advantage of the Retirement Income Valley for Roth Conversions
The Power Of Zero Show
Wondering when you should start thinking about a Roth conversion? That’s exactly what David McKnight dives into in this episode of The Power of Zero Show. The retirement valley is that dip in taxable income that happens after you retire but before RMDs kick in – at age 73 or 75, depending on your birth year. David walks through an example: you’ve got $2 million in your IRA and want to convert all of it to Roth. If you take action during that valley, you can convert more while staying in the 24% tax bracket the whole time. Not taking action now? Think of 2035 as the year tax rates are set...
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In What Order Should I Spend Down My Assets in Retirement?
The Power Of Zero Show
David McKnight addresses the most efficient order in which to spend your assets in retirement. Online programs and algorithms that forecast and run calculations related to your retirement assets suggest starting with your tax-deferred assets like 401(k)s or IRAs. Such tools recommend spending down your tax-deferred assets now, when tax rates are low, and your tax-free assets later – when tax rates are likely to be higher than they are today. Reminder: regardless of the distribution strategy you choose, it should aim to maximize the likelihood that your money lasts as long as you do....
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Suze Orman Says Have 3 to 5 Years of Living Expenses in CASH During Retirement (Good Idea?)
The Power Of Zero Show
Today’s episode of The Power of Zero Show looks at a recent podcast episode in which Suze Orman recommended having three to five years of living expenses in cash during retirement. Experts have long debated the rate at which retirees can draw down their assets while maintaining a high likelihood of not running out of money before they die. Since the early ‘90s, the gold standard for sustainable distributions has been the 4% Rule. According to the 4% Rule, whether the market goes up or down, you can reliably withdraw 4% each year with high confidence that you won’t outlive your money....
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5 Huge Benefits of the Roth IRA!
The Power Of Zero Show
Today’s episode addresses five reasons why a Roth IRA is one of David KcKnight’s favorite tax-free investments. Unlike other retirement accounts, Roth IRAs give you 100% liquidity on all contributions. While David isn’t necessarily suggesting that you use your Roth IRA as an emergency fund, it’s nice to know that you won’t have to wait until age 59 ½ to be able to access those funds. If you happen to take out your Roth IRA contributions, you can put that money back within 60 days as long as your Roth IRA was not involved in a rollover during the 12 months preceding the date of...
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Two Huge Problems with Whole Life Insurance
The Power Of Zero Show
This episode of The Power of Zero Show is part of David McKnight’s podcast interview with Caleb Guilliams and Tom Wall, PhD. David touches upon a recent Ernst & Young study where whole life insurance was used as a buffer-type strategy. When it comes to the “risk continuum”, David sees IUL as slightly on the right side of whole life insurance. IUL is something worth doing only if you think that risk premium can get you a slightly higher rate of return over time. David recognizes that IUL has risks but that, in exchange for those risks, you can get somewhat of a higher rate of...
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Academics LOVE Annuities – Why Do Investors HATE Them?
The Power Of Zero Show
Today’s episode of The Power of Zero Show features part of David McKnight’s conversation with Caleb Guilliams and Tom Wall, PhD. David kicks things off by addressing the liquidity issue. Handing a chunk of your retirement savings over to an insurance company in exchange for a stream of income that’s guaranteed to last as long as you do sounds great in principle, but people often have consternation about it… The thought of losing liquidity on a significant portion of their net worth is what prevents some Americans from opting for SPEAs and DIAAs. David explains why a fixed index annuity...
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How IUL Fits in a Balanced Approach to Tax-Free Retirement
The Power Of Zero Show
This episode of The Power of Zero Show is part of David McKnight’s conversation with Caleb Guilliams and Tom Wall, PhD. David touches upon the “dangerous partnership” between the American people and the IRS. David is an advocate for a balanced, comprehensive, approach to tax-free retirement – he explains why that’s the case. One of the things David likes about IULs is the fact that they can perform specific applications that no other stream of income, such as Roth IRAs and Roth 401(k)s, can do. David goes over the unique trait of each of the streams of tax-free income he sees as key...
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Your Authoritative Guide to Tax-Free Retirement Planning in 2025
The Power Of Zero Show
In this episode of The Power of Zero Show, David McKnight addresses different strategies for tax-free retirement planning in 2025. Most Americans are a little nervous when it comes to the fiscal trajectory of the U.S.. According to expert forecasts, the likely extension of the 2017 Trump tax cuts would take the current $36 trillion of national debt beyond the estimated $54 trillion by 2034 – taking it all the way to $59 trillion. A recent Penn Wharton study predicts that if the U.S. doesn’t right its fiscal ship of state by 2034, no combination of raising taxes or cutting spending will...
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Expecting a Pension? Strongly Consider a Roth Conversion
The Power Of Zero Show
David McKnight discusses a couple of really good reasons for doing a Roth conversion when you’re expecting a pension in retirement. David sees the American tax system functioning in a similar way as a graduated cylinder. Your income goes in and flows all the way down to the bottom. Some of your money gets taxed at 10%, at 12%, 22%, some at 24%, 32%, at 35%, and some at 37%. Jeff Bezos, too, has some of his earned income taxed at 10% (only for about 3 seconds, though!). If you’re planning on receiving a pension in retirement, understanding how this “tax cylinder” works will...
info_outlineDavid McKnight looks at a recent study on retirees that seems to tell a different story compared to what many people in the U.S. tend to believe.
Americans often view guaranteed lifetime income annuities skeptically – they’re perceived as a drag on the growth of their stock market portfolio.
According to the study by retirement researchers David Blanchett and Michael Finke, retirees with guaranteed lifetime income spend about twice as much as their counterparts who rely on stocks and bonds alone for income in retirement.
Those who rely purely on investments alone in retirement end up spending less because they fear running out of money in advance of life expectancy.
David explains that “retirees with annuities spend more, not because they are wealthier, but because they have a form of wealth – a guaranteed income – that encourages them to spend.”
Comparing two couples, a risk-averse couple with a risk-tolerant couple, Blanchett and Finke’s study found a 1.1% difference in them taking an annual withdrawal rate from their portfolio.
David couldn’t have been any clearer: “If you want to spend more in retirement, taking an investment-only approach is usually the worst way of going about it.”
Mentioned in this episode:
David’s upcoming book: The Guru Gap: How America’s Financial Gurus Are Leading You Astray, and How to Get Back on Track
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