The Power Of Zero Show

David McKnight

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. read less
BusinessBusiness

Episodes

What Dave Ramsey DOESN’T Want You to Know About Indexed Universal Life
3d ago
What Dave Ramsey DOESN’T Want You to Know About Indexed Universal Life
Show host Arturo Johnson shares his experience with coming across David’s content – and how it has changed his perspective. David mentions a study that illustrates the benefits of putting 70% – and not 100% – of your retirement savings into a Roth 401k and the balance into cash value life insurance. Dave Ramsey is famous for stirring up a hornet’s nest among CFPs all across the U.S. David unpacks a shortcoming with one of Ramsey’s principles. David goes over what can happen when you utilize life insurance as a volatility shield/buffer. The only way to get an 8% distribution rate in retirement is by utilizing a financial tool that Dave Ramsey says is a hot pile of garbage: cash value life insurance. The reason why David likes IUL is because history shows that you can get five to seven percent net of fees over time in your IUL. David talks about something he dislikes in Ramsey’s views on IUL and that many “gurus” such as Suze Orman, Clark Howard, and Ramit Sethi say it’s a scam. “The IUL is not a stock market replacement, it’s a bond alternative,” says David.   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 DavidMcKnight.com DavidMcKnightBooks.com 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 Arturo Johnson Dave Ramsey Suze Orman Clark Howard Ramit Sethi George Kamel Tom Hegna
First Glimpse at Your Tax Bracket in 2026 (And What It Will Cost You)
May 8 2024
First Glimpse at Your Tax Bracket in 2026 (And What It Will Cost You)
David talks about what tax brackets will look like starting from January 1st 2026.  One of the things that will change in 2026 are the actual tax rates – with an increased percentage of tax attached to a given range of income. In 2026, tax rates will return to what they were in 2017. David points out that some people online mistakenly believe that, in 2026, things will simply revert back to the same tax rates of 2017, with the same income ranges attached to those rates. An important thing to note is the federal government will index the 2017 tax brackets for inflation, treating your 2026 tax bracket as if the tax cut had never happened. David shares a fairly accurate way of determining what your tax brackets are likely to be and what it will end up costing you.  Those in the 24% tax bracket or lower will see a slight uptick in their taxes in 2026 – not because of tax bracket compression but due to their tax rate increasing. David sees doing a Roth conversion as a huge planning opportunity to protect yourself. The idea is to take advantage of the Trump tax cuts while they’re still around so that, by the time they expire, you’ll have safely transferred a portion of your retirement savings to Roth IRAs. David believes that, even though tax rates will go up in 2026, they’ll increase even further in 2030 and 2031 to pay for interest on the national debt in Social Security, Medicare, and Medicaid.     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 DavidMcKnight.com DavidMcKnightBooks.com 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
Why Ken Fisher Does NOT Want You to Do a Roth Conversion
Apr 24 2024
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 DavidMcKnight.com DavidMcKnightBooks.com 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
How Much of Your Social Security is REALLY Getting Taxed? (and At What Rate?)
Apr 17 2024
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 DavidMcKnight.com DavidMcKnightBooks.com 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
Your Roth Conversion Roadmap for the Next 10 Years and Beyond
Apr 3 2024
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 DavidMcKnight.com DavidMcKnightBooks.com 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 Penn Wharton
Is IUL the Dream Investment that Doug Andrew Claims?
Mar 20 2024
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 DavidMcKnight.com DavidMcKnightBooks.com 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
The Two 5-Year Roth Rules Explained
Mar 13 2024
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 DavidMcKnight.com DavidMcKnightBooks.com 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
Warren Buffet Says AVOID Financial Advisors Like the Plague (Is He Right?)
Mar 6 2024
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 DavidMcKnight.com DavidMcKnightBooks.com 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 Warren Buffett Berkshire Hathaway
George Kamel Swings and Misses on Indexed Universal Life
Feb 28 2024
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 DavidMcKnight.com DavidMcKnightBooks.com 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
Is a 100% Tax-Free Retirement Really Possible?
Feb 7 2024
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 DavidMcKnight.com DavidMcKnightBooks.com 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 David Walker Penn Wharton study: “When Does Federal Debt Reach Unsustainable Levels?”
The Best Way to Make Sure Your Money Lasts as Long as You Do
Jan 17 2024
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 DavidMcKnight.com DavidMcKnightBooks.com 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
Exposing the IUL TikTok Trap
Jan 10 2024
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 DavidMcKnight.com DavidMcKnightBooks.com 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 David Walker
Expert Warns Your Effective Tax Rate Could Double by 2030
Jan 3 2024
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 DavidMcKnight.com DavidMcKnightBooks.com 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 David Walker Comeback America: Turning the Country Around and Restoring Fiscal Responsibility by David Walker