The Power Of Zero Show

Tax rates 10 years from now are likely to be much higher than they are today. Is your retirement plan ready? Learn how to avoid the coming tax freight train and maximize your retirement dollars.

How to Take Advantage of the Retirement Income Valley for Roth Conversions 04/09/2025

In What Order Should I Spend Down My Assets in Retirement? 04/02/2025

Suze Orman Says Have 3 to 5 Years of Living Expenses in CASH During Retirement (Good Idea?) 03/26/2025

Suze Orman Says Have 3 to 5 Years of Living Expenses in CASH During Retirement (Good Idea?) 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. David McKnight points out that Orman’s advice – keeping money in a volatility buffer account – is at odds with her stance on sustainable withdrawal rates. For Suze Orman, you shouldn’t be taking 4% withdrawals from your retirement portfolio. Instead, she recommends a 3% distribution rate. Studies show that if you withdraw only 3%, regardless of market conditions, you have a near 100% chance of never running out of money. David believes that by promoting the 3% rule AND encouraging people to keep 3-5 years of living expenses in a savings account, Suze Orman is doing a disservice to her listeners. The first problem with Orman’s advice is that, while she got the volatility buffer concept right, she failed to adjust her sustainable withdrawal rate accordingly. Following Orman’s approach could result in massive loss of purchasing power by keeping a significant portion of your net worth in a low-yielding savings account over an extended period. David explores whether there’s a “safe and productive” way to grow your money during retirement. Cash value life insurance, specifically in the form of Indexed Universal Life (IUL), is a financial vehicle that protects against market loss and grows at a rate of 5-7% (net of fees) over time – within a tax-free environment. David wraps up with some final words of advice for Suze Orman. Mentioned in this episode: David’s national bestselling book: (free video series) on Twitter on Instagram on YouTube Get David's Tax-free Tool Kit at /episode/index/show/powerofzeroaudio/id/35851425

5 Huge Benefits of the Roth IRA! 03/19/2025

5 Huge Benefits of the Roth IRA! 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 distribution. Tax regrowth is a second reason why David is an advocate for Roth IRAs. For David, going for a Roth IRA could be the right move if you believe that your tax bracket in retirement is likely to be higher than it is today. The Penn Wharton School of Business recently said that if the U.S. doesn’t write its fiscal ship of state by 2040, no combination of raising taxes or reducing spending will prevent the financial collapse of the country. Some experts are even predicting that tax rates could have to double in order to honor the nation’s massive financial obligations. A third huge benefit of a Roth IRA is that whatever money you don’t spend during your lifetime passes to your heirs, 100% tax-free –though they’ll have to liquidate those dollars within 10 years. Thinking about Roth IRAs? Just know that distributions from Roth IRAs don’t count as provisional income. In other words, they don’t count against the thresholds that cause Social Security taxation. David explains what can cause up to 85% of your Social Security to become taxable at your highest marginal tax bracket – leaving a huge hole in your Social Security. David has done the math hundreds of times: when you pay tax on your Social Security, you run out of money five to seven years faster than people who don’t pay tax on their Social Security. Finally, Roth IRAs are a tool worth leveraging for the fact that Roth IRA distributions don’t count as income-related monthly adjustment amount (also known as IRMAA). That translates to distributions from your Roth IRAs not counting against the thresholds that cause your Medicare Part B and Part D premiums to go up. David sees the Roth IRA as one of the crown jewels in the IRS tax code. Mentioned in this episode: David’s national bestselling book: (free video series) on Twitter on Instagram on YouTube Get David's Tax-free Tool Kit at /episode/index/show/powerofzeroaudio/id/35722365

Two Huge Problems with Whole Life Insurance 03/12/2025

Academics LOVE Annuities – Why Do Investors HATE Them? 03/05/2025

How IUL Fits in a Balanced Approach to Tax-Free Retirement 02/26/2025

Your Authoritative Guide to Tax-Free Retirement Planning in 2025 02/19/2025

Your Authoritative Guide to Tax-Free Retirement Planning in 2025 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 arrest the financial collapse of the nation. “Former Comptroller General of the Federal Government David Walker says that we may have to double tax rates within the next 10 years in order to keep our country solvent”, says David McKnight. Something important to consider is how to best shield your retirement savings from the potential tsunami of higher taxes down the road. David recommends creating a balanced, comprehensive strategy that takes advantage of all the “nooks and crannies” in the IRS tax code. The cost of getting money into tax-free vehicles is that you have to be willing to pay a tax. The next nine years represent a historical opportunity to pay those taxes while they’re on sale. The approach David suggests thinking about can incorporate as many as six different streams of tax-free income – none of which shows up on the IRS’ radar but all of which contribute to you being in the 0% tax bracket. A tax-free investment means no taxes at all: no federal income tax, no state income tax, or no capital gains tax. When taking distributions, tax-free investments should not count as provisional incomes – meaning that they don’t count against the thresholds which cause Social Security taxation. The Roth IRA is the first truly-tax free retirement account David believes you should be contributing to in 2025. The second truly tax-free account worth considering in 2025 is the Roth 401(k). The potential for a company match is the one thing that makes Roth 401(k) impossible to ignore – and turns it into an instant return on your investment. After a Roth IRA and a Roth 401(k), the third tax-free alternative you should think about this year is a Roth conversion. David discusses the ideal scenario in which you should opt for a Roth conversion. Your IRA or 401(k) is the fourth stream of tax-free income David touches upon. Tax-free distributions from your IRA or 401(k) are what David refers to as “the Holy Grail of financial planning” – since they do something no other strategy can do. The life insurance retirement plan and tax-free Social Security are two additional strategies David dives into. Tax-free Social Security is unique because it shields you from several risks, including tax rate risk, inflation risk, long-term care risk, sequence of returns, and longevity risks. Mentioned in this episode: David’s national bestselling book: (free video series) on Twitter on Instagram on YouTube Get David's Tax-free Tool Kit at /episode/index/show/powerofzeroaudio/id/35307875

Expecting a Pension? Strongly Consider a Roth Conversion 02/12/2025

Expecting a Pension? Strongly Consider a Roth Conversion 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 be crucial for maximizing your after-tax spendable income. David shares an example showing that your pension and the taxable portion of your Social Security will consume all of your 10% bracket, and most of your 12% bracket – and that’s before you draw $1 from your IRA or 401(k). When you take money out of your IRA or 401(k) in retirement, those dollars will flow into your cylinder and land right on top of all your other income and get taxed at 22%. David explains that after the expiration of Trump tax cuts, the 22% will become 25% and, over the next 10 to 15 years, your personal tax bracket could be even higher! If that scenario were to play out, the portion of your IRA or 401(k) that you get to keep could get smaller and smaller… In case the Trump tax cuts extension does go through, then you could convert your IRA or 401(k) to Roth over nine years of historically low tax rates. David likes to refer to the Trump tax cuts as the “tax sale of a lifetime” – he shares an example that illustrates why. David touches upon what you can do, until 2034, to maximize your after-tax spendable income. Mentioned in this episode: David’s national bestselling book: (free video series) on Twitter on Instagram on YouTube Get David's Tax-free Tool Kit at /episode/index/show/powerofzeroaudio/id/35236225

Dave Ramsey: Fire Your Tax Advisor for Recommending a 401(k)! 02/05/2025

Dave Ramsey: Fire Your Tax Advisor for Recommending a 401(k)! This episode of the Power of Zero Show sees host David McKnight address Dave Ramsey’s advice – inviting a member of his audience to fire his tax advisor for recommending a 401(k). The problem with “financial gurus” like Dave Ramsey and the call-in shows they host is that they provide one-size-fits-all prescriptions that are delivered in very stark black and white terms. While David is an advocate for accumulating money in tax-free retirement vehicles, he also recognizes the importance of nuance with these types of recommendations. David explains that contributing to a Roth 401(k) is a good avenue to explore if you believe that your tax bracket in retirement is going to be higher than it is today. David believes that taxes will rise dramatically over the next 10 years. Following one-size-fits-all advice shared by financial gurus puts you at risk of running out of money faster because you may pay a tax along the way that you didn’t necessarily have to pay… David discusses when you should go for a traditional 401(k) and when it would be wiser to opt for a Roth 401(k) instead. According to a recent Penn Wharton study, if the U.S. doesn't right its fiscal ship of state by 2040, no combination of raising taxes or reducing spending will arrest the financial collapse of the country. David goes over a couple of strategies that could help your money last five to seven years longer. The fact that there are huge benefits to investing in tax-free accounts shouldn’t necessarily translate into you reflexively pouring all your retirement contributions into your Roth 401(k), says David. David shares his thoughts on when it may be a good idea to listen to Dave Ramsey and when it isn’t a clever move to follow his advice. Mentioned in this episode: David’s national bestselling book: (free video series) on Twitter on Instagram on YouTube Get David's Tax-free Tool Kit at /episode/index/show/powerofzeroaudio/id/35145290

The Guru Gap: How America’s Financial Gurus Are Leading You Astray and How to Get Back on Track 01/29/2025

The Guru Gap: How America’s Financial Gurus Are Leading You Astray and How to Get Back on Track Today’s episode is a podcast guest interview David McKnight did for Josh Jalinski’s The Financial Quarterback Podcast. David gives Josh’s audience a quick bio that spans from his early days in the financial services space in 1997 all the way to his latest book The Guru Gap. The premise of The Guru Gap is the difference between the 1990s when people had very few options to vet out financial planning advice and today, where they have plenty of ways to vet out. Nowadays, whenever David makes a financial recommendation, 90% of his clients take to the internet to vet that recommendation. In The Guru Gap, David focuses on financial gurus Dave Ramsey, Suze Orman, Ken Fisher, Clark Howard, and Ramit Sethi – and their advice. Since financial gurus aim at taking important and complex financial principles and distilling them down into 10-second sound bites, they tend to give short shrift to a lot of details David’s clients would need to protect and grow their retirement savings. The #1 goal most Americans have is to have their money last as long as they do. Financial gurus have had an adversarial stance toward financial planners like David and Josh Jalinski. Some of David’s clients who seem to put more stock into what these gurus have to say tend to forget that their advice typically isn’t undergirded by math and actuarial science… Josh Jalinski shares a couple of stories that really tick him off when it comes to financial gurus and the consequences of their advice. David believes that America is better off with people like Dave Ramseys and the like in it than without them. “If you’re making $50,000 and spending $60,000 Dave Ramsey is precisely the person you should be talking to,” says David McKnight. David sees people like Dave Ramsey be “good for bad investors, and bad for good investors”. Wade Pfau thinks that following Ramsey’s advice of taking 8% withdrawal rates on your assets in retirement and putting 100% of your allocation in stocks, you’ll run out of money in advance of life expectancy 63% of the time. David touches upon the so-called Dave Ramsey circle of poverty: he gets you out of debt on the road to financial success, and then he promptly bankrupts you by taking an 8% withdrawal rate. Josh shares his thoughts on Dave Ramsey and explains that some people never save. Citing former Comptroller General David Walker and Penn Wharton David talks about what could be waiting for the U.S. in the near future. David gives out a couple of reasons why you should think about doing a Roth conversion. David and Josh talk about saving future taxes when someone passes away. A key question to ask yourself: Why not pay the tax today at 22% or 24%, so that your kids can inherit that money tax-free regardless of when they liquidate it? David reveals that, because of The Guru Gap, he has received a cease and desist from one of the financial gurus mentioned in the book. Josh and David dissect “the Ken Fisher approach” – including its key flaws and shortcomings. In Josh’s opinion, one of the negative traits of financial gurus is their lack of availability for debate. For David, the least expensive way to purge the longevity risk from your portfolio is an annuity. Josh and David bring up financial advisors dispensing advice on TikTok into the conversation. The overwhelming amount of tips shared by gurus leads to people making bad decisions or not making a decision at all. Of the five financial gurus mentioned in The Guru Gap, Suze Orman (the only CFP of that group) is the one David McKnight likes the most, also because her advice is most in line with the mainstream financial planning consensus. Ramit Sethi is the financial guru that seems to have the most adversarial approach toward financial planners. David used to be a fan of Clark Howard who now has a strong opinion about cash-value life insurance and fixed-income annuities. David lists steps people should be taking with their money from a tax and retirement perspective. According to David, if ever there were a time in the history of our country to be undertaking a Roth conversion, it’s over the course of the next nine years. Josh and David discuss a balanced financial plan that includes annuities to counter longevity risks, insurance to protect one’s family, money as a volatility buffer, equities to beat inflation, some Bitcoin, a little gold, and cash for emergencies. Mentioned in this episode: David’s national bestselling book: (free video series) on Twitter on Instagram on YouTube Get David's Tax-free Tool Kit at /episode/index/show/powerofzeroaudio/id/35034275

Suze Orman: Here’s Why Annuities Are So Bad! (Avoid Them at All Costs!) 01/22/2025

Suze Orman: Here’s Why Annuities Are So Bad! (Avoid Them at All Costs!) David McKnight takes a closer look at Suze Orman’s take on annuities – and at why she recommends her audience avoid them at all costs. Suze Orman labels the 5.4% compounded annual rate of growth one of her audience members (Janet) has had over the last six years as “horrific in today’s market.” David believes that the main issue with Suze Orman’s approach is that it engages in a classic case of apples to oranges comparison. According to David, index annuities are a bond alternative and were never meant to be a stock market replacement. David makes the case for index annuities performing far better than bonds – with a lot less risk. The average return on corporate bonds is between 4% and 5%, the one for treasury return is 3-4%, while the average return on municipal bonds is 2.12%. In David’s opinion, Janet should only feel bad about her 5.4% return over the 6 year time frame if the advisor who sold it to her sold it as a stock market alternative. Suze Orman’s audience member Janet purchased a so-called non-qualified indexed annuity, which tends to get a “last in, first out” treatment for tax purposes. David isn’t big on non-qualified annuities for the fact that a person purchasing them will have to pay tax on the growth before they’re able to access the principal tax-free. Another flaw in Orman’s assessment: she doesn’t tell you that you can hold an annuity in an IRA and pay ordinary income, or you can hold an annuity in your Roth IRA and pay no taxes at all… Something financial gurus like Suze Orman have in common: they DON’T have the luxury of nuance. Dollars earmarked to retirement accounts generally have a 10% penalty when you access them pre-59 and a half. David points out how Suze has wittingly demonized all forms of annuities – even the IRA and the Roth variety. While Suze is right saying that most annuities have surrender charges, she misses the entire point of why people usually get annuities: to get a guaranteed stream of income they can never outlive. 401(k) has a surrender charge that’s far more punitive than any annuity David has ever seen. Mentioned in this episode: David’s national bestselling book: (free video series) on Twitter on Instagram on YouTube Get David's Tax-free Tool Kit at /episode/index/show/powerofzeroaudio/id/34925955

Congress Approves $200 Billion in Additional Social Security Benefits: Do You Qualify? 01/15/2025

Congress Approves $200 Billion in Additional Social Security Benefits: Do You Qualify? This episode looks at whether you qualify or not for the $200 billion Social Security benefits approved by the U.S. Congress. Host David McKnight shares that, with the current status quo, the Social Security Trust Fund is on pace to go bust by 2033. If that were to happen, only about 83% of benefits would be paid out… If signed into law by President Joe Biden, the Social Security Fairness Act would provide an additional $200 billion in Social Security benefits to nearly 2.8 million Americans over the next 10 years. The Social Security Fairness Act would eliminate two policies that have reduced benefits for public service employees: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). The people most likely to be affected by the elimination of these two provisions are about 28% of state and local government employees who are covered by alternative retirement systems and permanent civilian federal employees hired prior to January 1, 1984. U.S. Senators Sherrod Brown (Ohio) and Susan Collins (Maine), co-sponsors of the Social Security Fairness Act, believe that the WEP and GPO have historically penalized people for choosing to serve their communities by dramatically reducing Social Security benefits. While David believes that Americans should get their due when it comes to their Social Security benefits, he wonders whether this is something that America can really afford… According to the Nonpartisan Committee for a Responsible Federal Budget, the passage of the bill in question will accelerate the insolvency of the Social Security Trust Fund by six months. David sees the Social Security Fairness Act and its repercussions on Americans as “yet another unfunded obligation on the balance sheet of the Federal Government.” Mentioned in this episode: David’s national bestselling book: (free video series) on Twitter on Instagram on YouTube Get David's Tax-free Tool Kit at /episode/index/show/powerofzeroaudio/id/34848905

At What Tax Bracket Should I STOP Contributing to Roth: Responding to The Money Guy Show 01/08/2025

At What Tax Bracket Should I STOP Contributing to Roth: Responding to The Money Guy Show In this episode, host David McKnight tackles a question about the tax bracket at which you should stop contributing to the Roth IRA and start contributing to the traditional IRA. The inspiration for this episode was a recent episode of The Money Guy Show. David believes that advice such as that shared on The Money Guy Show doesn’t consider most of the people asking questions like the one addressed in the episode. Those are people whose combined marginal tax rates fall between 25% and 30%. Generally, David likes the idea of having a rule of thumb tax bracket that helps you determine whether or not you should go Roth or traditional. However, he warns against providing advice that ends up confusing a huge swath of investors. In fact, David sees the particular rule of thumb like the one shared on The Money Guy Show as something that isn’t going to be all that helpful to many Americans. David breaks down the power of zero rule of thumb when it comes to deciding between Roth or traditional. Your state tax in retirement is likely to be very similar to what your state tax is now. David’s rule of thumb: if you’re in the 24% federal tax bracket or lower, then go Roth all day. That’s because your current 24% bracket is still lower than the future version of the 22%, which is 25%... Remember: if you’re in the 24% or lower in the federal marginal tax bracket, go Roth. If you’re in the 32% bracket or higher, then go tax deferred. Generally, David DOESN’T recommend filling up your entire tax-free bucket and ignoring tax deferred altogether if you decide to go Roth. Simply allocating your match to the tax deferred portion of your 401(k) is a great way to accumulate the required amount in your tax deferred bucket. David tends to like the Money Guy Show, but he feels that, in this instance, they should simply ignore state taxes in the Roth vs. traditional calculus and draw a red line at the 24% tax bracket. Mentioned in this episode: David’s national bestselling book: David's : Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code (free video series) on Twitter on Instagram on YouTube Get David's Tax-free Tool Kit at /episode/index/show/powerofzeroaudio/id/34738935

New Study: Retirees with Annuities Spend MORE than Those Who Rely on Investments Alone 01/01/2025

The US Debt Crisis: Will DOGE Really Move the Needle? 12/25/2024

Why I Wrote a Book Exposing Dave Ramsey 12/18/2024

First Major Book Critical of Dave Ramsey Retirement Advice Set to Publish 12/11/2024

First Major Book Critical of Dave Ramsey Retirement Advice Set to Publish This episode is based on David McKnight’s interview with Lane Martinsen on Financial Fast Lane. David shares how he started in the financial planning industry, as well as the backstory of his new book, The Guru Gap. The Guru Gap focuses on several financial gurus such as Dave Ramsey, Suze Orman, Clark Howard, and Ramit Sethi. David finds it interesting to see financial gurus demonizing the types of recommendations him and his peers share – recommendations based on math and actuarial science. For David, America is better off for financial gurus being in the picture than out of the picture. The main issue is the fact that they aren’t trying to cultivate an adversarial relationship with mainstream financial advisors, says David. David brings up a real-life example of bad advice shared on the Dave Ramsey Show. The ideal reader of The Guru Gap is the sophisticated, disciplined, investor. Most Americans strive for their money to last until they die. David sees Dave Ramsey as an expert who is “good for bad investors, and bad for good investors”. There are lots of stories of people who, following Ramsey’s advice, have run out of money much sooner than they predicted. David believes that it’s time for disciplined investors to adopt an entirely different paradigm when it comes to maximizing their retirement savings. David goes over three challenges he faced when writing The Guru Gap. Hope is something Dave Ramsey seems focused on. However, in the context of financial planning, David sees hope as something that can be the opposite of math. David and Lane Martinsen discuss the chapters David is most excited about. David’s ultimate goal with The Guru Gap is to engender a massive dialogue between Americans and financial gurus. David hints at a future book that will focus on Millennials – a generation that is saving less and is less educated on investing than their Gen X and Baby Boomer forebears at the same stage in their life. Mentioned in this episode: David’s upcoming book: David's : Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code (free 3-part video series) on Twitter on Instagram on YouTube Get David's Tax-free Tool Kit at /episode/index/show/powerofzeroaudio/id/34357285