Why Americans Hate Annuities
The Power Of Zero Show
David McKnight explores one of the most fascinating and misunderstood topics: Retirement planning annuities. In the article Annuitization Puzzles, Economics Nobel Prize winner Richard Thaler tries to answer a deceptively simple question: If annuities are so good at protecting retirees from outliving their money, why don’t more people buy them? Thaler, one of the founding fathers of behavioral economics, coined the phrase “the annuity puzzle” to describe a striking contradiction between theory and real life. According to traditional economic models, the rational choice would be for...
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The Only Three Assets You’ll Need in Retirement
The Power Of Zero Show
David McKnight discusses the three assets he believes you really need for a stable, predictable tax-efficient retirement. Getting them right will dramatically reduce the risks that derail most retirements: Market risks, sequence of returns risks, longevity risks, tax risks, and long-term care risks. Stock market investments, with a 70% total US stock market index and a 30% total international stock market index, are the first thing David recommends. He defines them as “Your growth engine, the one that pays for your discretionary expenses in retirement.” David goes over...
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The Top 5 Retirement Mistakes You May Be Making
The Power Of Zero Show
David McKnight explores the five biggest retirement mistakes people make. When it comes to retirement “traps”, the obvious things such as picking the wrong stock, missing the next bull market or retiring at the wrong time are what typically comes to mind… The first mistake people tend to make when it comes to their retirement is believing that tax diversification is good enough. “Having the bulk of your wealth in tax-deferred accounts is like going into a business partnership with the IRS: every year, they get to vote on what percentage of your profits they get to keep. Not a very good...
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The Only Three Investments Dave Ramsey Owns (Is This Smart?)
The Power Of Zero Show
The focus of this episode is on what Dave Ramsey refers to as the only three investments he owns. “I have three investments: my business, paid-for real estate with no mortgages, and mutual funds,” says Ramsey. He goes on to emphasize that he doesn’t play single stock, doesn’t screw around with gold or Bitcoin, and that he doesn’t need your stock tip from your “broke golfing buddy with an opinion.” Host David McKnight wonders whether Ramsey’s investment model actually works in principle, and if parts of it can be replicated by everyday investors… Ramsey’s business...
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The Roth Conversion Myth Most Financial Advisors Get Wrong
The Power Of Zero Show
David McKnight addresses a myth floating around the financial world: “For a Roth conversion to make sense, you need many years for the Roth to grow so you can recoup the taxes you paid to the conversion.” David stresses why this way of thinking is fundamentally wrong – it’s built on the wrong assumption that all the money in your IRA belongs to you… when it actually doesn't. Remember: your IRA isn’t one pile of money but two piles sitting in the same account. One pile belongs to you, while the other to the IRS. What’s unknown is how big the IRS’ pile is going to be when you...
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Trump: No Income Tax in 2026!
The Power Of Zero Show
This episode revolves around President Donald Trump’s claim that, due to the massive tsunami of tariff revenue that’s flowing into the U.S. coffers, Americans won’t have to pay income tax in 2026. David McKnight looks at the 2025 fiscal year: the Federal Government spent about $7 trillion and brought in about $5 and a quarter trillion in revenue. While breaking down the math related to the 2025 fiscal year, David points out that “Revenue from income taxes is the single largest source of Federal revenue”, while “Tariffs, by contrast, are one of the smallest.” Even Trump’s own...
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Congress Just Proposed a Major Change to Roth IRA’s—Here’s What It Means for You
The Power Of Zero Show
David McKnight addresses a brand new proposal that could transform the way Americans use Roth IRAs and Roth 401(k) – and that could have serious implications for your retirement flexibility, liquidity, and long-term tax strategy. With the current status quo, if a person has money in a 401(k) or even a Roth 401(k), they can usually roll it out into an IRA when they retire or leave their job. However, money can’t roll the other direction: you can’t take a Roth IRA and move it into a Roth 401(k)... A new bipartisan bill introduced by Republican Representative Darin LaHood and Democrat...
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What Are the Creditor Protection Rules for Roth IRAs and Roth 401(k)s?
The Power Of Zero Show
In today’s episode, David McKnight breaks down the creditor protection rules for Roth IRAs and Roth 401(k)s, as well as why more and more Americans are turning to tax-free accounts to insulate themselves from creditors… and the Government itself. In theory, under Federal Law, all IRAs traditional or Roths receive a certain level of bankruptcy protection under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. However, that protection is specifically tied to bankruptcy proceedings. If you’re sued in civil court, the Federal bankruptcy statute doesn’t automatically...
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Top Five Reasons to Pick a Roth 401(k) Over a Traditional 401(k)
The Power Of Zero Show
This episode features David McKnight sharing the top five reasons why a Roth 401(k) is far superior to a traditional 401(k). Something important to keep in mind: the decision you make today will determine how much of your retirement money your future self actually gets to keep. David touches upon the fact that choosing the wrong 401(k) could cost you hundreds of thousands of dollars in unnecessary taxes in retirement. Tax rate risk is the first big reason why you should consider investing in a Roth 401(k) over a traditional 401(k). David lists a series of key questions people who invest in a...
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Suze Orman Says Roth IRAs Are Great — But Here’s What She’s Missing
The Power Of Zero Show
This episode sees David McKnight look at Suze Orman, who, despite being one of the most widely recognized financial voices in America, shares what appears to be incomplete advice. David believes that Orman has done a lot of good for a lot of people thanks to her financial discipline-centered approach (in addition to being a big proponent of Roth IRAs). He agrees with Orman: “Roth IRAs are powerful, no doubt about it. You contribute after tax dollars, your money grows tax-free, and, provided you meet the requirements, you can withdraw those funds in retirement 100% tax-free”. The U.S....
info_outlineDavid McKnight addresses something that can make or break your Roth conversion strategy: how you actually pay the tax.
David kicks things off by sharing that Federal and state estimated tax payments are usually made in four equal installments: April 15th, June 15th, September 15th, and January 15th of the following year.
Did you know that doing a Roth conversion in December, like many people do, will lead to the IRS pretending that income was earned evenly throughout the year?
If you don’t account for that, you could get hit with an underpayment penalty (8% of the underpaid amount).
David goes over different ways you can handle the tax payment.
The first way is to pay it using cash or a taxable brokerage account – this allows the full conversion amount to move from IRA to Roth IRA.
By doing that, you’re essentially using your least efficient dollars, from a tax efficiency perspective, to catapult 100% of the converted amount into the Roth IRA.
David touches upon the IRS Form 2210 Schedule AI, which informs the IRS of the fact that your income was uneven and it can wipe out the penalty for the first three quarters of a year.
The second way is to withhold the tax at the time of conversion. While this method helps prevent the risk of penalty (and you don’t have to file extra forms) it comes with a downside: less money ends up in the Roth IRA.
Thirdly, you could make a second IRA distribution and withhold 100% for taxes.
David shares a word of caution: when using this approach, you don’t want to bump up into a higher tax bracket, especially if it’s a jump from the 24 to the dreaded 32% bracket.
Mentioned in this episode:
David’s national bestselling book: The Guru Gap: How America’s Financial Gurus Are Leading You Astray, and How to Get Back on Track
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