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The Power of Zero Show with David McKnight is a podcast that you can listen to anytime, anywhere to learn everything you will need to know heading into retirement. This is another outlet that we use to help educate our community and aid everyone in creating their perfect retirement plan, regardless of if you decide to work with us or not.
Is Our Country’s Fiscal Condition Past the Point of No Return? with David McKnight
January 15, 2020; Duration: 24:00
For a grim depiction, check out this article The Mathematical Certainty of U.S. Government Default by Ptolemy3 about the future of the US government’s debt situation. The US government reached the tipping point at least fifteen years ago where the only way out will be default. People who calculate d…
15 Things You Should Know about the Roth IRA–Part 2 with David McKnight
July 13, 2019; Duration: 15:53
Today, we continue last week’s discussion of 15 Things You Should Know about the Roth IRA, with Part 2. You can not take a required minimum distribution from an IRA and turn it into a conversion, you have to deposit it somewhere else. The ideal scenario is to preemptively convert all your IRA’s to R…
15 Things You Should Know about the Roth IRA–Part 1 with David McKnight
July 24, 2019; Duration: 14:12
A true tax-free investment will meet two basic tests. They will first be free from every type of tax which means free from federal tax, state tax, and capital gains tax. The second thing is that the investment can’t count as provisional income. Roth IRA’s meet all those criteria as long as you are a…
When Should I Take Social Security? with David McKnight
May, 15 2019; Duration: 09:40
When you take social security ultimately comes down to how long you are going to live. If you can accurately predict how long you are going to live you can accurately predict at what age you should draw social security. The question becomes “how do you figure out how long you’re going to live?” One…
The Truth About Dave Ramsey
May, 11 2022; Duration: 11:03
In this episode, David wants to share the truth about Dave Ramsey, look at the two pillars of his financial worldview, and deconstruct those beliefs. David believes that if Dave Ramsey’s audience followed his advice on paying off high-interest credit card debt, the U.S. would be a much healthier place from a financial perspective. In David’s assessment, Ramsey’s audience is made of lower to middle-income America, people who are making $50,000 per year but who are spending $60,000…
The Truth About Municipal Bonds
May, 25 2022; Duration: 11:37
Today’s podcast explains why it might be a massive mistake to invest in municipal bonds. The reason why this is such an important topic is our unusual fixation with municipal bonds when trying to set up a tax-free retirement. Interest from municipal bonds counts as provisional income. That means that it counts against the thresholds that cause Social Security taxation. So, while you may be looking for a stable, predictable, tax-free income stream, you could unwittingly lose a portion of your Social Security along the way. Municipal bonds are usually very attractive for retirees and would-be retirees because they promise low-risk and tax-free income…
Should You Convert Your IRA While the Market Is Down?
October, 26th 2022; Duration: 11:33
Today’s episode of The Power of Zero Show is a segment of an interview David did with financial advisor, Ron DeLegge. They discuss, among other things, whether it’s a good idea to convert your Roth IRA while the stock market is down. David shares that there’s no such thing as a 0% tax bracket in the U.S. tax tables. Zero describes the condition of someone in retirement who isn’t paying tax. Being in the 0% tax bracket doesn’t happen by accident, says David. It’s the result of planning and proactively trying to have a series of tax-free financial streams that include Roth IRA, Roth Conversions, and some form of Life Insurance Retirement Plan. Dave and Ron discuss the true cost of waiting when it comes to tax rates, and whether it makes financial sense to use the market decline to execute Roth IRA conversions to limit taxes. Having too much risk inside their investment portfolio is one of the big mistakes made by retirees – David explains why that should be a concern for those approachin…
Will There Be a Great Depression in 2030?
November 9, 2022; Duration: 08:22
In this episode of The Power of Zero Show, David McKnight shares evidence that unless there is immediate and dramatic fiscal realignment by the Federal Government, the U.S. will be mired down in a Great Depression by 2030. Citing Brian Beaulieu, David discusses the role Baby Boomers play when it comes to Beaulieu’s prediction of the U.S. undergoing a Great Depression beginning in 2030. David shares that Maya MacGuineas’ recent study showed that, just to prevent the debt from growing at a rate in excess of $1trillion per year by 2025, the Government would have to raise taxes on any dollar earned above 400,00 to 102%. David brings David Walker’s words into the conversation. According to Walker, on average, Americans pay about 21% of their income to federal taxes, and another 10% to state and local governments. By 2030, to pay the rising bills, that amount could be at least 45%, even higher that the average 42% that most Europeans pay. David talks about a couple of points Brian Beaulieu,…
Why Does Dave Ramsey Hate Permanent Life Insurance?
November 23, 2022; Duration: 19:16
David starts the conversation by explaining why financial gurus like Dave Ramsey and Suzzie Orman hate permanent life insurance. With all the financial information floating around on the internet, who do you follow for advice on where to invest your money? David believes everybody’s situation is different, but the best people to follow are the ones who are consistent with their messaging. David calls out The White Coat Investor for misleading people that interest rates won’t go up, only for him to change his mind when Biden’s tax proposals threatened to raise taxes. According to David, there are two sides to every investment advice on the internet. Instead of stubbornly following one narrative and muting everything else, your job as an investor is to listen to both sides of the story and decide based on your current situation. When meeting with an investment advisor, David believes the least you can do is ask as many questions as possible. There is so much controversy around perman…
Episode 224: The Difference Between a Social Security Tax and a Penalty (And How to Avoid Them Both)
February 15, 2023; Duration: 09:19
David starts the conversation by describing the difference between a Social Security tax and a Social Security penalty – and whether it’s possible to avoid them both. David explains that although some people use them interchangeably, a Social Security tax is different than a penalty. The first step to protecting your Social Security is understanding the main drivers behind taxes and penalties. The Social Security penalty arises when you begin drawing from your account before your full retirement age while also earning above the minimum allowed threshold. David shares how the Social Security penalty works and how the damages can affect your retirement. David breaks down the minimum allowed income threshold and what the IRS counts as earnings. According to David, understanding the IRS’s views on provisional income is the best way to learn how Social Security taxation works. David highlights the unexpected income streams the IRS counts as provisional income – some of which might shock you…
Episode 233: Ernst & Young Study on Using Permanent Life Insurance for Retirement Income (Surprising Results!)
April 19, 2023; Duration: 08:18
A recently published study claims that taking income from permanent life insurance and annuities in retirement can create a better outcome for investors. Ernst & Young compared five different strategies including investments only, investments and term life insurance, permanent life insurance and investments, deferred income annuities, and a combination of #3 and #4. In their comparison, Ernst & Young considered insurance products part of the fixed income allocation and bond replacements. They also used the permanent life insurance as a volatility buffer, where they access the cash value of the policy to pay for lifestyle needs during periods of market volatility, similar to the concept in the best-selling book, The Volatility Shield. They ran 1,000 Monte Carlo comparisons with the goal of measuring sustainable income, and they used ordinary income tax rates. Each income scenario sustained a minimum of 90% probability of success. In the investment-only approach, it’s only inefficient f…
Episode 241: Here’s Why They’re Going to Extend the Trump Tax Cuts Before 2024
July 14, 2023; Duration: 12:08
The Trump tax cuts went into effect at the end of 2017, but because they lacked a supermajority of approval in Congress those tax cuts had an expiration date. David has long maintained that the government won’t let those tax cuts expire. There is a broad swath of Americans that are responsible for getting the current politicians re-elected and those people have short memories. If taxes go up, they’re going to blame those same politicians. No politician wants to be responsible for raising taxes on that many Americans. There is a high likelihood that if you are in the 10%, 12%, 22%, or 24% tax brackets, those tax brackets will be extended until 2031. If you’re construed as someone who earns a higher income, you’re probably going to face higher tax brackets. Politicians seem to be focused on the 24% tax bracket and below. The implications of these tax cuts being extended are vast. In 2018, we cut taxes and raised expenses, which was exactly the opposite of what we needed to do as a countr…
Episode 243: Dave Ramsey Is Disastrously Wrong on Roth Conversions
June 28, 2023; Duration: 11:08
The biggest issue with Dave Ramsey’s view on Roth Conversions, and most of his advice in general, is his one-size-fits-all approach which costs his listeners hundreds of thousands of dollars. Dave starts off on the right foot by recommending people pay the taxes up front for a Roth Conversion but then veers off the track pretty quick. Dave breaks down a hypothetical married couple filing in 2020 doing a Roth Conversion, but makes the mistake of conflating the 24% tax bracket as a trap of the Roth Conversion strategy. If you have more than a million dollars in your IRA, you will never convert to Roth before tax rates go up for good without taking advantage of the 24% bracket. Dave then goes on to say that you should never do a Roth Conversion unless you have money sitting in cash to pay the taxes. If Dave’s advice were taken by everyone, only 5% of people would realistically be able to take advantage of the Roth Conversion. Some scenarios require you to pay cash for your Roth Conversio…
Episode 244: The Case for Contributing 30% of Your Retirement Savings to an LIRP
July 5, 2023; Duration: 08:22
Your LIRP functions as the ideal volatility buffer because it grows safely and productively in a tax-free way. According to a recent study by Ernst & Young, investors that contribute 30% of their retirement savings to a LIRP will have their savings last longer than people who put 100% of their savings into investments alone. This seems to fly in the face of every financial guru who has ever opined about cash value life insurance like Dave Ramsey and Suzy Orman. It’s commonly understood that with an investment-only approach to retirement, you build up a large pile of money and take a modest distribution rate each year adjusted for inflation. If you take out higher than 4% per year, you drastically increase the odds of sending your portfolio into a death spiral during down years in the market. The most critical time is the first 10 years in retirement where you can expect two or three down years, any of which can cause your retirement portfolio survival odds to plummet. The LIRP serves a…
Episode 245: How to Implement the Power of Zero Retirement Strategy
July 12, 2023; Duration: 07:50
Step one of the Power of Zero strategy is to realize that due to unfunded obligations for Social Security, Medicare, and Medicaid and interest on the exploding national debt, tax rates in the future are going to be dramatically higher than they are today. Step two is to understand that in a rising tax rate environment there is an ideal amount of money to have in your taxable and tax-deferred buckets. For your taxable bucket, that’s around six months of living expenses. For your tax-deferred bucket, the amount should be low enough that your RMDs in retirement are equal to or less than your standard deduction and low enough that it doesn’t cause Social Security taxation. For married couples, that amount is around $350,000, and for single filers, it’s half that amount. If you have a sizable pension, the amount could be zero. Step three is to calculate how much time it will take to shift your balances to tax-free in order to achieve those balances. Preferably slow enough that you don’t r…
Episode 250: Financial Guru Loses $400k to Ill-Advised Roth Conversion (Is Your Money Safe?)
August 16, 2023; Duration: 06:46
David starts the conversation by describing how a financial guru, Derek Sall, allegedly lost $400k in an ill-advised Roth conversation. According to Sall, you’re way more likely to have a lower income in retirement than you have today, so you’ll likely be in a lower tax bracket in the future. But as we all know, tax rates must go up as early as 2026 to pay for unfunded government obligations. David made 3 observations to counter Derek’s claims: Your income in retirement is not likely to be way lower than it is today. This is one of the huge myths foisted on a generation of baby boomers. The single largest factor that should determine whether you do a Roth conversion is whether you believe the taxes you pay will be higher now than in the future. You’re not necessarily guaranteed to be in a lower tax bracket in retirement. More and more experts are beginning to predict that tax rates in the future will have to rise dramatically to pay for unfunded obligations. David explains that Derek…
Episode 255: My Review of the Anti-IUL Book “Lapsed”
September 20, 2023; Duration: 10:18
David reviews an anti-IUL book, LAPSED, written by financial advisor Elan Moas, who believes IULs are designed to fail rather than succeed. According to David, the book is written with dramatic and highly-charged rhetoric around what will befall you if you make the mistake of purchasing an IUL. So the big question is, “Are IULs too good to be true?” For David, IULs do exactly what they’re meant to do. Their true purpose is to give you stock market exposure up to a cap with a guarantee against market loss. IULs are not meant to be a stock market alternative. They are a bond alternative with returns of between 5% and 7% net of fees over the life of the program. Insurance companies don’t make money on Cap Rates. Cap Rates are a function of two things. First is the cost of options, which is informed by the volatility of the stock market. And second, the carrier’s options budget, which is a function of interest rates. David debunks Elan’s theory on how IUL providers are intentionally and a…
Episode 278: George Kamel Swings and Misses on Indexed Universal Life
February 28, 2024; Duration: 19:36
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 alternati…
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