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David McKnight explores the so-called "22% Roth conversion mistake," which he considers a common and costly mistake when it comes to Roth conversions. He points out that, despite Trump tax cuts being made permanent with the passage of the One Big Beautiful Bill Act in July 2025, tax rates can change at any time with a simple act of Congress. That's why he refers to this as a "temporary permanent tax cut." The $200 trillion underfunding of entitlement programs and the exploding interest on the national debt makes it clear that tax rates are unlikely to stay this low for long. Many Americans currently find themselves in the 22% bracket and refuse to bump into the 24% bracket for Roth conversion purposes – because they've been told to stay in their current bracket. However, if you stay in the 22% bracket, you are unlikely to be able to convert a meaningful amount of your IRA to Roth before tax rates go up for good. David shares an example that illustrates why, by trying to save a little bit on taxes today, you actually set yourself up for a massive tax bill down the road. The other scenario – where you allowed yourself to rise into the 24% bracket – buys you the ability to convert a lot more money every single year. Even though most people would be willing to pay 2% more in taxes today if it meant avoiding potentially much higher tax rates in the future, most people don't consider this option.  That's because they have been conditioned to believe that any move into a higher tax bracket during the Roth conversion period is inherently bad… 10 years from now, you are probably going to look back at the 24% tax bracket as a good deal of historic proportions… Remember: you are not trying to minimize taxes this year, you are trying to minimize taxes over the rest of your life. For David, you shouldn't let the 22% Roth conversion mistake keep you from fully insulating your hard-earned retirement savings from the impact of future higher taxes. The goal, he reminds everyone, should be to get to the 0% tax bracket in retirement.     Mentioned in this episode: David's new book, available now for pre-order: The Secret Order of Millionaires David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight DavidMcKnight.com DavidMcKnightBooks.com 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 One Big Beautiful Bill Act

David McKnight discusses the three biggest retirement planning mistakes that show up over and over again. Avoiding them will dramatically increase the likelihood that your retirement savings will last as long as you do.  Mistake #1 pertains to over-accumulating in tax-deferred accounts like 401(k)s and IRAs – a mistake that surprises many people as they feel they're doing everything right. The problem here is that you're taking a deduction at historically low tax rates only to postpone the payment of those taxes to a point in the future where tax rates are likely to be much higher than they are today. The moment you hit age 73 or 75, Required Minimum Distributions (RMDs) kick in. In other words, the IRS is forcing you to take money out, whether you need it or not. Those RMDs get combined with all your other sources of income: The taxable portion of your social security, your pension(s), and your investment income. David notes that, before long, you can find yourself in a higher tax bracket in retirement than you were during your working years. Remember, RMDs count as provisional income, which can cause up to 85% of your social security to become taxable – plus, it can trigger IRMAA surcharges on your Medicare premiums too. Building a retirement plan that is almost entirely tax-deferred looks good on paper but leaves you entirely exposed to the impact of higher taxes in the future. The second mistake is waiting too long to execute Roth conversions. David touches upon the so-called "retirement income valley," the ideal window within which to fully execute your Roth conversion. Many people ignore it. They're hesitant, reluctant to pay a tax to the IRS before it's absolutely required of them. Failing to take advantage of the "retirement income valley" puts you at risk of having your social security become taxable, while also paying higher Medicare premiums for the rest of your life. When it comes to Roth conversions, David recommends having a "rip the band-aid off" approach.  It may hurt a little during the conversion period but once that money is in the Roth bucket, it's tax-free for the rest of your life. The third big mistake David sees over and over again is underestimating future tax rates and overestimating your control over them. Most retirement plans today are built on the dangerous assumption that tax rates in the future will look a lot like they do today. However, David stresses that looking at the fiscal trajectory of our country paints a different picture. The national debt will grow by $2 trillion per year over the next 10 years, and $3 trillion per year after that. With the rising interest costs and $200 trillion in unfunded obligations for Social Security, Medicare and Medicaid, there will be a financial day of reckoning where tax rates will be forced higher. David predicts that to be around 2035 – which gives you around 10 years to plan and execute on your plan. People spend their entire lives focusing on building as big a retirement nest egg as possible, but they give almost no thought to the type of accounts within which that nest egg is being built. The lack of consideration for the tax implications upon distributions is a huge oversight, says David.  At the end of the day, the only thing that really matters in retirement is how much money you get to spend after taxes. David concludes by highlighting that the best way to regain control over your after-tax income retirement is to pay taxes on it preemptively at historically low tax rates and on your terms (rather than on the IRS' terms).     Mentioned in this episode: David's new book, available now for pre-order: The Secret Order of Millionaires David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight DavidMcKnight.com DavidMcKnightBooks.com 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

David McKnight explores a retirement planning phenomenon that almost nobody discusses, but that has been documented repeatedly in academic research. It's the idea that when retirees convert some of their savings into guaranteed lifetime income through an annuity, they actually spend more money and enjoy retirement more than those who rely on their liquid retirement savings alone. Even though many people assume that doing so would make retirees more conservative with their spending, research actually shows the opposite. According to academic studies, when retirees have reliable lifetime income, they actually feel more comfortable spending money. Moreover, when retirees rely purely on investment accounts for income, they often underspend even when they have more than enough money to support their lifestyle. One of the findings of David Blanchett's and Michael Finke's License to Spend research has found that retirees treat guaranteed income very differently than they treat investment portfolios. In some cases, those who have money sitting in investment accounts – rather than guaranteed income – spend about 40 to 50% of what financial models say they could safely withdraw from their portfolios. Behavioral economics, and the so-called loss aversion, more specifically, highlight the fact that human beings are wired to fear loss more than they value gain. David notes that guaranteed lifetime income annuities can actually increase the amount retirees spend and enjoy during retirement. David breaks down the concept of the Retirement Consumption Puzzle. People are comfortable spending income but are terrified of spending principle. In other words, if you give someone a monthly payment, they treat it as income and spend it freely.  On the other hand, if you give them a large investment account and tell them to withdraw money from it each year, they all of a sudden become cautious and tighten up the purse strings. When it comes to the stock portfolio, David suggests allocating 70% to a total U.S. stock market index and 30% toward a total international stock market index – and rebalance every time that allocation gets more than 5% out of whack.     Mentioned in this episode: David's new book, available now for pre-order: The Secret Order of Millionaires David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight DavidMcKnight.com DavidMcKnightBooks.com 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 David Blanchett Michael Finke Fidelity  The Urban Institute Ken Fisher

David McKnight touches upon what he considers the most overlooked tax-free income stream. What he's referring to is to leave enough money in your traditional IRA so that your required minimum distributions can be completely offset by your standard deduction in retirement. David believes that focusing on tax-free retirement strategies is more crucial than ever, since it's becoming increasingly clear that taxes are likely to rise dramatically in the future. The United States is $39 trillion in debt and, as interest on that debt continues to grow and compound, the Government will eventually have to find ways to service it. Historically, when Governments face massive debt burdens, they typically do a combination of two things: cut spending or raise taxes. David lists what he considers the best tools for tax-free income in retirement – and why you can justify their inclusion in your balanced, comprehensive tax-free retirement plan. The first resource is Roth IRAs, which allow your money to grow tax-free and be distributed tax-free in retirement. Plus, they provide tremendous liquidity too. Then there are Roth 401(k)s. They have many of the same tax-free benefits as Roth IRAs, but also have an additional advantage.  Many employers provide matching Roth 401(k)s contributions in their retirement plans. Hence, you can receive free money from your employer while still building tax-free retirement income. When it comes to Roth conversions, they're beneficial in that they allow you to convert money from tax-deferred accounts like traditional IRAs or 401(k)s into Roth accounts. Additionally, Roth conversions don't have limits on how much money you can convert each year – as long as you're willing to pay the taxes today, you can shift large amounts of money into the tax-free bucket. When designed correctly, cash value life insurance policies allow money to grow tax-deferred and to be accessed tax-free through policy loans. Moreover, they also provide a death benefit that you can receive in advance of your death for the purpose of paying for long-term care. In case you need a volatility buffer, you can use cash value life insurance to draw money from the policy after a down year on the market instead of selling stocks at depressed prices.  Leaving enough money in your traditional IRA so that your required minimum distributions can be completely offset by your standard deduction in retirement is the most overlooked tax-free income stream – David illustrates "the Holy Grail of financial planning". HSAs, health saving accounts, are the only other financial tool that allows contributions to be tax-deductible, the growth is tax-deferred, and withdrawals can be tax-free if used for qualified medical purposes. However, HSAs come with certain restrictions on how the money must be spent… David notes that, in a perfect retirement plan, you may have as many as six different streams of tax-free income. The idea behind it is to take advantage of every nook and cranny in the IRS tax code instead of relying on just one tax-free account.     Mentioned in this episode: David's new book, available now for pre-order: The Secret Order of Millionaires David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight DavidMcKnight.com DavidMcKnightBooks.com 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 Mitt Romney

David McKnight addresses an issue he sees more and more in his conversations with retirees and pre-retirees: the so-called Roth over-conversion trap.  The problem stems from converting too much money with the result of shortening the lifespan of your retirement savings. David believes that the reason why many Americans are racing to convert everything they have in their IRAs and 401(k)s has to do with the fear about where the country is headed financially. Penn Wharton has warned repeatedly that, if we don't right our fiscal ship by 2043, no combination of raising taxes or reducing spending will arrest the financial collapse of the country. According to former Comptroller General of the U.S. Government David M. Walker tax rates could have to double to pay for the country's massive $200 trillion unfunded obligations for Social Security, Medicare, and Medicaid. The debt-to-GPD ratio, which is one of the simplest measures of a nation's financial health, keeps climbing higher: By 2035 it will be at 150%, while by 2043 at nearly 200%. David warns that what most people don't realize is that in their zeal to avoid higher taxes, they may actually be marching straight into an over-conversion trap – which is just as dangerous as not converting enough money into tax-free. If you end up not having taxable income left to be offset by your standard deduction, you'll end up having a tax shield with nothing to protect. In other words, your deduction will sit idle, completely unused, and will go to waste every single year. That's why David suggests leaving a small, strategic amount of money in your tax-deferred bucket. The idea is to want enough in your IRA or 401(k) so that when required minimum distributions begin at age 73 or 75, those distributions are offset by your standard deduction.  David touches upon what he refers to as the "Holy Grail of retirement planning:" You got a deduction on the way in, you grew your money tax-deferred and then you took the money out 100% tax-free by offsetting it with a standard deduction. The million dollar question is how much should you leave in your IRA or 401(k) to make everything work? That's roughly $400,000 for married couples, around $200,000 for single retirees. If you aren't strategic with your retirement planning approach, you may have up to 85% of your Social Security taxable at your highest marginal tax bracket. David sees ensuring your money lasts as long as you do as the #1 retirement planning goal.  Remember: you shouldn't reflexively convert 100% of your tax-deferred retirement savings to tax-free. You want to be aware of how the standard deduction in retirement works and execute your Roth conversion strategy accordingly.     Mentioned in this episode: David's new book, available now for pre-order: The Secret Order of Millionaires David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight DavidMcKnight.com DavidMcKnightBooks.com 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 Penn Wharton David M. Walker

In this episode of the Power of Zero Show David McKnight gives you a blueprint with the key steps to follow for a successful and stress-free retirement if you're about five years away. The first step is figuring out your retirement income shortfall, the income you'll need every month in retirement, as well as how much of that will be covered by sources like Social Security and pensions. The retirement income shortfall represents the amount of income your retirement assets need to produce in order to fund your lifestyle. One strategy many retirees rely on is taking a portion of their liquid retirement savings, often from a traditional IRA or 401(k), and rolling it into an annuity designed to produce inflation-adjusted lifetime income. The second pillar of the blueprint discussed by David are investments: Roughly 70% to a total U.S. stock market index fund, and 30% to a total international stock market index fund. While things like paying the electric bill or putting food on the table are covered by your guaranteed income sources, this portfolio is designed to fund discretionary expenses (e.g. taking the grandkids to Disneyland, traveling, etc.) and unexpected shock expenses. David emphasizes that, by investing this discretionary bucket entirely in stocks rather than bonds, you increase the likelihood that the portfolio will last through your actuarial life expectancy. "When properly structured and funded, an index universal life policy or IUL can serve as a volatility buffer within your retirement plan", says David. Furthermore, a IUL policy can also provide a death benefit that can be accessed in advance of your death for the purpose of paying for long-term care… Remember: Retirement planning isn't about guessing what the market will do, it's about building a system where your basic needs are guaranteed, your growth assets continue compounding and you have the tools in place to manage volatility and unexpected risks.     Mentioned in this episode: David's new book, available now for pre-order: The Secret Order of Millionaires David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight DavidMcKnight.com DavidMcKnightBooks.com 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

Today's episode of the Power of Zero Show sees David McKnight address one of the most important decisions you'll ever make in retirement: where you should withdraw money from first. It's important to note that the sequence in which you draw down your retirement dollars can dramatically affect how long your money lasts and how much of it you get to keep. Since the Trump tax cuts were permanently extended on July 4th, 2025, retirees have been presented with one of the most significant tax planning windows they may ever see. The national debt continues to grow – with Social Security and Medicare obligations expanding every year, and interest on the national debt taking up a larger and larger share of the federal budget. Analysts at the Congressional Budget Office and several independent economists agree that, although the 2025 extension has delayed the inevitable, it has not solved the underlying math… In or around 2035, the Government will have to raise revenue to keep pace with rising expenditures. Every dollar you withdraw from tax-deferred accounts – like IRAs, 401(k)s, 403bs, 457s – is a dollar tax rate that may be the lowest you're likely to see in your lifetime. "The goal isn't to eliminate RMDs entirely but to shrink your tax-deferred bucket to the point where these distributions are completely absorbed by your standard deduction", says David. "That means tax-free distributions from IRAs and 401(k)s. Many experts have warned people: if the U.S. doesn't right its fiscal ship of state by 2043, no combination of raising taxes or reducing spending will arrest the financial collapse of the country. You're living in a decade where taxes are as low as you've seen in your lifetime… …and even though the tax cuts were extended indefinitely, the long-term fiscal math still points in one clear direction.     Mentioned in this episode: David's new book, available now for pre-order: The Secret Order of Millionaires David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight DavidMcKnight.com DavidMcKnightBooks.com 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

David McKnight discusses the allocation of $1M if he had it to invest in 2026.  David sees a taxable brokerage account as the least efficient investment account you could possibly own – since it's taxed every year and it's exposed to both short- and long-term capital gains. While this type of account is liquid and can serve as an excellent emergency fund, it's the most tax-unfriendly of all the investment alternatives. The goal, says David, isn't to grow wealth within this type of account, rather to use it as a funding source to systematically build multiple tax-free income streams for retirement. Roth IRAs, which can be funded for a combined $17,200 per year (for your and your spouse's Roth IRA) is the first place David believes the money should go. Next, you should aim at maxing out your Roth 401(k)s – which is $24,500 a person for people under 50 and $32,500 per person. David explains how you can convert taxable money into tax-free money without triggering a massive taxable event and without disrupting your lifestyle. 70% total U.S. stock market index fund, 30% total international stock market index fund is the only allocation you'll ever need, says David. Having to properly structure and fully fund an indexed universal life policy (IUL) is the most misunderstood piece of the strategy discussed by David. The idea is to see an IUL as a way to grow a portion of the $1M portfolio safely and productively, and not to use it as an investment replacement or stock alternative… Historically, IULs have grown 5-7% in net fees over time – with zero stock market risks. The goal of day one of retirement is to have 3-5 years of living expenses sitting in your IUL's cash value, tax-free. This is your volatility buffer. According to a recent Ernst & Young study, the strategy discussed in this episode provides far more income, a far greater likelihood that your money will last through life expectancy and far more money to the next generation compared to the investment-only approach. Suze Orman recommends the exact same strategy but with a difference: Instead of using an IUL she suggests using a savings account that has rock bottom taxable rates of return. However, an IUL is a more effective tool, as it grows far more productively as tax-free, protects your principal, and the death benefit can double as long-term care protection. David's strategy doesn't include bonds as an IUL is safer: No sequence of returns risk early in retirement, not being forced to sell stocks in a down market. "I generally don't ever recommend bonds. There are far better instruments that are safer, more productive, and more tax-efficient tools, with IUL being one of them", illustrates David.  Many experts expect tax rates to rise dramatically by 2035 to pay interest on the national debt, bail out Social Security, and bail out Medicare and Medicaid. When that happens, you just don't want to be sitting on a massive taxable account..! The goal is to shift as much as possible from the $1M portfolio into tax-free accounts before 2035 – you want to have them in your Roth IRAs, Roth 401(k)s, and IUL cash value. Conversely, you only want about six months' worth of living expenses sitting in your taxable account.     Mentioned in this episode: David's new book, available now for pre-order: The Secret Order of Millionaires David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight DavidMcKnight.com DavidMcKnightBooks.com 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 Dave Ramsey Ernst & Young Suze Orman

This episode of The Power of Zero Show sees David McKnight discussing the single most hated retirement strategy in America: annuities. Interestingly enough, annuities are also one of the most powerful tools you can use to protect yourself from the biggest financial risk you face in retirement. Longevity risk, a retirement danger most retirees never fully grasp, is the reason why this topic matters so much. As David explains, "Longevity risk is the risk of living longer than you expected, running out of money before you run out of life."  While some people shrug longevity risk off as a good problem to have, it's actually the biggest risk in retirement (from a financial standpoint), as it is a risk amplifier. In other words, it magnifies everything else that can go wrong – such as inflation, long-term care, withdrawal risk, and sequence of returns risk. The reasons why many people hate annuities are legitimate, while others are propaganda. For more than 20 years, Kenneth Fisher has led a massive anti-annuity crusade. Remember: there's only one way to truly eliminate longevity risk from your retirement, and that's through a guaranteed lifetime stream of income in the form of an annuity. Research on annuities – something that has been ongoing for the last four decades – has shown that people with a guaranteed lifetime income tend to spend more freely in retirement than people living solely off an investment portfolio. David touches upon Richard Thaler's concept of the Annuity Puzzle. Annuities solve a problem that no stock portfolio ever can: a portfolio can't guarantee lifetime income you cannot outlive. With the American national debt exploding, which would probably lead to higher tax rates, an internal Roth conversion allows you to get ahead of that.     Mentioned in this episode: David's new book, available now for pre-order: The Secret Order of Millionaires David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight DavidMcKnight.com DavidMcKnightBooks.com 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 Kenneth "Ken" Fisher Richard Thaler

David McKnight dissects Elon Musk's recent claims that, because of AI robotics and automation, the future will have such hyperabundance that ordinary people may no longer need to save for retirement.  In Musk's future, robots are going to do all the work, AI will create prosperity, and society will provide everything you need at a little or no – cost. While David likes Musk's vision for the future, he doesn't agree with him on this one. When examined through the lens of economics, government obligations, and retirement realities, Musk's idea of the future collapses. David identifies five specific reasons why that will happen. The first reason, and perhaps the biggest flaw in Musk's argument, is that AI productivity doesn't automatically translate into personal wealth.  David points out that, during major technological revolutions, productivity increases faster than wages, capital investors capture most of the gains, and wealth becomes more concentrated at the top. In the most optimistic AI scenarios, economists say that it takes decades for productivity gains to spread to the entire population; if they ever do. The second reason why Musk's predictions won't probably come true has to do with the fact that AI won't fix the U.S. national debt or entitlement crisis. The U.S. has $40 trillion in national debt, which is projected to grow $2 trillion per year over the next 10 years (with annual interest payments already over $1 trillion per year). Furthermore, the Social Security Trust Fund is forecasted to run out in 2033, while the Medicare Trust Fund in 2031, and 10,000 baby boomers retire every day. Yet, no rapid explosion of AI innovation will change any of this. The third pet peeve David has with Elon Musk's predictions is that AI has no built-in mechanism for sharing wealth.  "Musk's argument hinges on the idea that AI abundance will automatically be shared, but it won't. Here's how this will likely go down: the profits of AI companies will flow to shareholders, and governments will collect very little from that activity", says David. The fourth reason why David disagrees with Musk's views for the future is that universal basic income is NOT a retirement plan. The final reason why Musk is wrong about the need to save for retirement is that AI increases lifespans which, in turn, increases retirement costs. Any major economist studying debt trajectories seems to agree: tax rates in the future are likely to be much higher than they are today. The current status quo is where the power of your retirement strategy becomes indispensable.  Remember: if tax rates in the future are higher than they are today, then every dollar you withdraw from a taxable 401(k) or IRA is going to be worth a lot less than you ever thought possible. David's solution consists of, over time, repositioning your money into tax-free vehicles – primarily Roth IRAs and Roth 401(k)s.     Mentioned in this episode: David's new book, available now for pre-order: The Secret Order of Millionaires David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight DavidMcKnight.com DavidMcKnightBooks.com 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 Elon Musk Moonshots with Peter Diamandis  Daron Acemoglu Erik Brynjolfsson  Organization for Economic Co-Operation and Development (OECD) Brookings Institution The Congressional Budget Office Sam Altman Andrew Yang Social Security Trustees  Committee for a Responsible Federal Budget

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 retirees to annuitize at least some portion of their wealth – yet, only very few Americans go out and buy a pure life annuity. The answers to this contradiction are almost entirely psychological. Loss aversion, loss of control, complexity and distrust, fear of disinheriting errors, underestimating longevity risks are the key reasons why that happens. David points out that most retirees believe they won't live as long as they actually will;they underestimate the probability of living into their 90s. "The Annuity Puzzle exists because economics assumes we're rational, while real retirees behave like human beings. They're  driven by emotions, fears, and biases, not economic data," says David. Remember not all annuities are created equal. David touches upon the key differences between immediate and fixed index annuities. Did you know that, while they aren't stock market replacements, fixed index annuities (FIAs) make for excellent bond alternatives? Furthermore, FIAs do resolve the flexibility and liquidity concerns many retirees face.   In his book Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement, David discusses what he considers the most powerful innovation in the annuity space today – he shares more about it in this episode. What he discusses isn't the old single premium immediate annuity you may be familiar with… rather, he illustrates a modern retirement income engine that blends the science of risk pooling with the tax-free advantages of Roth planning.     Mentioned in this episode: David's new book, available now for pre-order: The Secret Order of Millionaires David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight DavidMcKnight.com DavidMcKnightBooks.com 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 Annuitization Puzzles by Richard Thaler, Shlomo Benartzi, and Alessandro Previtero S&P 500 Penguin Random House

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 aspirational and shock expenses. A Fixed Index Annuity (or FIA) is the second asset you'll need in retirement. A FIA is the one asset that eliminates the longevity risk, the risk of living so long that you deplete all your other assets.  Then there's Index Universal Life Policy (or IUL). A recent Ernst & Young study found that retirement plans that included IULs, as well as FIAs, provided more income in retirement, a higher likelihood of money lasting through life expectancy, and more money to heirs over the investment-only approach to retirement." Remember: If you withdraw money from your stock portfolio in a down market, you lock in losses and your portfolio has a much harder time recovering.  In other words, the IUL acts as your retirement shock absorber. Did you know that, because of its safe and productive growth, the IUL can serve as what we call a "volatility buffer" in retirement?  And there's more! In fact, an IUL can also serve as a bond alternative during the accumulation years – but without the interest rate risk or bond price volatility. David sees IULs as the most dynamic asset of them all – it's your volatility buffer, your bond alternative, and your long-term care safety net.     Mentioned in this episode: David's new book, available now for pre-order: The Secret Order of Millionaires David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight DavidMcKnight.com DavidMcKnightBooks.com 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 Ken Fisher Ernst & Young

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 business partnership, if you ask me," says David. The next mistake is one of the most subtle and expensive mistakes retirees make: ignoring the standard deduction when doing Roth conversions. The third big retirement mistake people make is trying to time the market instead of timing the tax code. Remember: "Markets move up and down, but when a country is in a debt crisis, tax rates only move in one direction: Up!"  Are you using bonds as safe money in retirement? That's what the fourth retirement planning mistake David has encountered often in his busy work schedule.  David suggests to time the tax code, instead of timing the market… Replacing your bonds with annuities that have a guaranteed lifetime income feature is something you should consider. The fifth and final mistake to stay away from is not taking enough risk in retirement. David explains that your annuities can provide income in the year after a down year in your stock portfolio. That gives your stocks a chance to recover before you take further distributions. Don't forget, the stock portion of the portfolio has one job and one job only: Make sure your money lasts a full 30-year retirement.     Mentioned in this episode: David's new book, available now for pre-order: The Secret Order of Millionaires David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight DavidMcKnight.com DavidMcKnightBooks.com 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 Tom Hegna

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 functions in two powerful ways: it provides current cash flow so he doesn't have to draw down investments, and it represents a large future liquidity event – this alone dramatically reduces the pressure on the rest of his portfolio. David highlights the fact that Ramsey doesn't pick individual stocks. Instead, he spreads his money across the entire global stock market using mutual funds. Ramsey famously advocates an even split: 25% in growth and income funds, 25% in aggressive growth funds, and 25% in international funds. David's recommendation is to "Invest 70% in a total U.S. stock market index, 30% in a total international stock market index, and 0% in bonds."  By doing that, you'll own the entire market instead of trying to outsmart it. It is possible to adopt a 100% stock portfolio even if you don't own a business or don't have a paid off real estate throwing off residual income – David explains how. You could have a guaranteed lifetime income annuity have the same role played by real estate in Dave Ramsey's approach.     Mentioned in this episode: David's new book, available now for pre-order: The Secret Order of Millionaires David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight DavidMcKnight.com DavidMcKnightBooks.com 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 Dave Ramsey

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 eventually take the money out of the account. David goes on to explain what happens as both piles grow and required minimum distributions kick in. You may end up with the IRS' pile being not just larger but taxed at a much higher rate too. With a Roth conversion, on the other hand, your conversion translates into you carving out the IRS' portion and handing it to them today – settling the bill while the balance is smaller and the rate may be lower. There's a key question David invites you to keep in mind when it comes to Roth conversions: "Is your tax rate lower today than it will be when you take the money out?"  The exploding national debt of over $200 trillion dollars in unfunded obligations for Social Security, Medicare, and Medicaid are going to require spending cuts, higher taxes, or some combination of the two. Beware: the problem with most retirement plans is that they assume that tax rates will stay low forever!  David points out that Roth conversions aren't about timing the market but about timing the tax code. In other words, they're about timing the advantage of known measurable tax rates today instead of gambling on unknown ones tomorrow.     Mentioned in this episode: David's new book, available now for pre-order: The Secret Order of Millionaires David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement by David McKnight DavidMcKnight.com DavidMcKnightBooks.com 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