Should You Stop Roth Conversions at the 22% Tax Bracket?
The Power Of Zero Show
Should you stop your Roth conversions at the 22% tax rate, or push into the 24% bracket? David McKnight responds to a viewer's detailed case for stopping early, revealing why optimizing this year's tax bill can be the wrong retirement planning move over a 30-year horizon. You'll discover his "rip the band-aid off" approach and why saving money on taxes today isn't a victory if it costs you more tomorrow. In a recent video, David McKnight explained why he believes the 24% tax bracket is the sweet spot in the current tax code for Roth conversions. In this episode, he addresses a...
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Why Not Put Your Entire Retirement into 5.25% Treasuries? (Have You Won the Game?)
The Power Of Zero Show
Is putting your entire retirement planning strategy into 30-year treasuries really the safe bet it seems? David McKnight reveals why this approach could expose you to two hidden risks, and explains how the stock market and annuities might hold the real key to protecting your income. In this episode, David McKnight looks at whether putting your entire retirement portfolio into 30-year treasuries is the way to go. While it may seem like a pretty compelling argument, there’s a major problem with this strategy – and it comes down to two things: taxes and inflation. The U.S....
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Dave Ramsey’s 8% Retirement Rule: What Could Possibly Go Wrong?
The Power Of Zero Show
Dave Ramsey says retirees can safely withdraw 8% a year from the stock market, but does his retirement planning math actually hold up? David McKnight breaks down why Ramsey’s approach overlooks a critical risk, and why annuities may be the missing piece to sustainably boosting your retirement income beyond the traditional 4% Rule. In this episode, David McKnight examines Dave Ramsey’s 8% withdrawal rate claim and why retirement planning may need annuities, and not just the stock market. For Ramsey, you can take 8% per year out of your stock market portfolio in retirement, despite what...
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The Three Biggest Reasons Americans Hate Annuities
The Power Of Zero Show
Most Americans hate annuities and would tell you to avoid them… But what if the version you’ve been warned about isn’t the only option for retirement planning? David McKnight breaks down a strategy that’s quietly helping retirees sleep better at night and safeguard themselves against the 3 biggest annuities-related problems. In this episode, David McKnight looks at three perfectly legitimate reasons why Americans have been reluctant to embrace annuities, as well as a solution. The first problem is liquidity. David points out that one of the biggest fears in retirement is...
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Should High Earners Contribute to a Roth 401k?
The Power Of Zero Show
Should every dollar go into a Roth 401(k) if taxes will be higher? David McKnight reveals why that instinct could actually be one of the most expensive tax decisions a high-income earner can make when it comes to retirement planning. In this episode, David McKnight addresses two frequently asked questions: “If tax rates are going to be higher in the future, should I be putting every dollar into a Roth 401(k)?” and “Should I be converting as much of my IRA to Roth as quickly as possible?”. David believes that the current tax rates are as low as we’re likely to see in your...
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The Latest Proposal to Tax Roth IRAs: Should you be worried?
The Power Of Zero Show
Should you stop doing Roth conversions as part of your retirement planning after Senator Ron Wyden’s new legislation targeting specific retirement accounts? David McKnight breaks down the key aspects of the proposal and what it actually means for the average American (and their retirement). Show Notes In this episode, David McKnight looks at whether you should stop doing Roth conversions following Senator Ron Wyden’s introduction of legislation for taxing Roth IRAs. For David, 99.9% of Americans should continue investing in Roth accounts with a high degree of confidence. One of...
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The Hidden Reason Married Couples Need Roth Conversions
The Power Of Zero Show
One spouse passes away, and suddenly the survivor is filing alone, pushed into tax brackets they never saw coming. David McKnight explains why a Roth conversion, done now through smart retirement planning, could spare your loved ones the painful surprise known as Widow’s Penalty. Show Notes In this episode, David McKnight discusses something that could cause your taxes to rise dramatically even if Congress never raises taxes by a single percentage point! That's the so-called Widow's Penalty, and it's a critical piece of retirement planning that too many people overlook. The U.S....
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What If I Retire Into A Market Crash?
The Power Of Zero Show
David McKnight addresses one of the biggest fears people have as they approach retirement: “What if I retire right into a market crash?”. Not only this represents one of the biggest challenges in retirement planning but it’s also one of the reasons why David advocates for protecting yourself from sequence of returns risk. When it comes to long-term stock market investing, it’s important to understand the difference between retirement years and accumulation years. Sequence of returns is the order in which market returns occur in your portfolio. That order, David stresses,...
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The Five Biggest Roth Conversion Traps
The Power Of Zero Show
In this episode, David McKnight walks you through the five biggest Roth conversion traps, and how to avoid them. He is a big believer in Roth conversions. Because of the apocalyptic fiscal trajectory of the U.S., taxes in the future are likely to be dramatically higher than they are today. Hence, every dollar you reposition from tax-deferred to tax-free at these historically low tax rates may be one of the smartest financial decisions you ever make. However, while many people understand Roth conversions in theory, they still get them wrong in practice – David has seen some very costly...
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High Earners: Stop Making This Roth vs. Traditional Tax Mistake!
The Power Of Zero Show
David McKnight addresses one of the most common questions he gets: “If tax rates are going to be dramatically higher in the future, shouldn’t I be putting every dollar into a Roth 401(k)?”. Moreover, people often wonder whether they should be converting as much of their IRA to Roth as quickly as possible. David is a firm believer that the current tax rates are as low as we’re likely to see in our lifetime. The U.S. has over $39 trillion in debt and it’s going to increase by two trillion per year over the next 10 years and over $200 trillion in unfunded obligations for Social...
info_outlineIn this episode, David McKnight walks you through the five biggest Roth conversion traps, and how to avoid them.
He is a big believer in Roth conversions.
Because of the apocalyptic fiscal trajectory of the U.S., taxes in the future are likely to be dramatically higher than they are today.
Hence, every dollar you reposition from tax-deferred to tax-free at these historically low tax rates may be one of the smartest financial decisions you ever make.
However, while many people understand Roth conversions in theory, they still get them wrong in practice – David has seen some very costly mistakes over the years.
The first big Roth conversion trap is waiting too long.
True: nobody wakes up excited to pay a tax 10-20 years before the IRS absolutely requires it of them…
…but we’re living in the middle of “the tax sale of a lifetime”, which is likely to end in or around 2035 and will see the Federal Government forced to raise taxes.
The second Roth conversion mistake has to do with not maxing out the appropriate tax bracket.
If you have a substantial amount of money in your IRA or 401(k), David says that you won’t be able to fully execute your Roth conversion strategy unless you take full advantage of the 24% bracket.
“When 2035 rolls around, we’ll look back at the 24% bracket as a good deal of historic proportions”, highlights David.
Over-converting is the third big mistake people make when it comes to Roth conversions.
When people come to the conclusion that future tax rates are going to be higher than the current ones, they often panic and reflexively convert all of their tax-deferred retirement savings to Roth.
What they forget, however, is that, in retirement, they will still have a standard deduction.
Remember: Eevery retirement strategy you undertake should be calculated to extend the life of your investments, not shorten it.
Roth conversion trap #4 is letting the fear of IRMAA (Income-Related Monthly Adjustment Amount) dictate your Roth conversion strategy.
The fifth Roth conversion trap is not paying taxes on your Roth conversion out of the right place.
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
The Power of Zero: How to Get to the 0% Tax Bracket and Transform Your Retirement by David McKnight
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube