The Power Of Zero Show Podcast Por David McKnight arte de portada

The Power Of Zero Show

The Power Of Zero Show

De: David McKnight
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 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.The Power Of Zero Economía Finanzas Personales
Episodios
  • The 8 Taxes You Could Pay When Doing a Roth Conversion (Is it worth it?)

    The 8 Taxes You Could Pay When Doing a Roth Conversion (Is it worth it?)
    May 14 2025
    In this episode of the Power of Zero Show, host David McKnight looks at every possible tax or cost that may result from a Roth conversion. The first tax you’ll have to pay when executing a Roth conversion is federal income tax. Whatever portion of your IRA you convert to Roth is realized as ordinary income and piled right on top of all your other income. David is an advocate for not converting to Roth unless you think your federal tax rate in retirement is likely to be higher than it is today. The second tax you could end up paying when doing a Roth conversion is state tax. The situation will vary depending on where you live – in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming, you don’t have to pay state tax, including on Roth conversion. Do you live in Illinois, Iowa, Mississippi, or Pennsylvania? Then, you’ll have to pay state tax, but Roth conversions are exempted. If you’re thinking about moving to one of these states to avoid paying these taxes, just know that, while they may not charge income tax on Roth conversions, they do make up for it in other ways (sales and property tax, for example). IRMAA – the Income Related Monthly Adjustment Amount – is the third cost you could end up paying when doing a Roth conversion. IRMAA represents an additional charge you could be required to pay on your Medicare Part B and Part D premiums. The next potential tax you could pay as a result of doing a Roth conversion is Social Security taxation. The fifth cost you could incur because of a Roth conversion is NIIT (Net Investment Income Tax) – also known as the Obamacare surtax. NIIT is a 3.8% surtax on the lesser of your net investment income or the amount of your modified adjusted gross income that exceeds the threshold of $200,000 for single filers and $250,000 for married filing jointly. The sixth tax you could potentially pay as a result of doing a Roth conversion is an indirect one and results from the phase out of certain credits or deductions. The list of credits and deductions includes child tax credits, student loan interest deductions, the saver’s credit, and education credits. Underpayment penalties is the seventh tax you could potentially pay by doing a Roth conversion. David explains that many people opt to pay taxes on their Roth conversion in the fourth quarter. The problem, however, lies in the fact that when you pay the taxes on your Roth conversion out of cash in the fourth quarter, the IRS expects you to have paid taxes on that Roth conversion evenly throughout the year. The eighth and final tax you could end up paying as a result of doing a Roth conversion applies to those who are getting health insurance through the Affordable Care Act. Does your Roth conversion push you above the subsidy threshold? If so, know that you could have a partial or total loss of subsidies or may have to repay subsidies at tax time. “Think of all of these additional taxes or costs as tradeoffs, not problems or unintended consequences,” says David. For example, you may pay increased Social Security taxation during your Roth conversion period, but will then eliminate Social Security taxation altogether by the time your conversion is complete. If President Trump extends his tax cuts, then the national debt will grow to $62 trillion by 2035. Most experts believe that the only way we can service this massive debt load is to dramatically increase income tax rates. According to a recent Penn Wharton study, if the U.S. doesn't right its fiscal ship by 2040, no combination of raising taxes or reducing spending will prevent the nation’s financial collapse. Remember: while it’s true that Roth conversions do cause you to pay additional taxes and expenses in the short term, they do dramatically reduce those costs over the balance of your life, once your conversion is complete. Mentioned in this episode: David’s national bestselling book: The Guru Gap: How America’s Financial Gurus Are Leading You Astray, and How to Get Back on Track 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
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    11 m
  • Should You Take More Risk in Your Roth Accounts Than Your Other Investments?

    Should You Take More Risk in Your Roth Accounts Than Your Other Investments?
    May 7 2025

    This episode of the Power of Zero show explores whether you should be taking more risks in your Roth accounts than in your other investments.

    Host David McKnight kicks things off by stating that if you have Roth IRAs or Roth 401(k)s in your portfolio, you should be allocating 100% of these dollars to a stock allocation.

    That’s because these are your most tax-efficient investments and they’ll remain tax-free right up until your death – and even 10 years beyond.

    Remember: you want the biggest returns in your portfolio to take place in a tax-free environment.

    David explains which of your assets you should be allocating towards bonds.

    David isn’t a huge fan of bonds because of three words: fixed index annuities.

    He uses a study by the University of Chicago’s Dr. Roger Ibbotson to illustrate his preference for fixed index annuities over bonds.

    Ibbotson’s research showed that the stock FIA portfolio did not just increase, but it did so with less risk, while also protecting the investor to some extent from irrational investment behavior that erodes returns over time.

    David is all in favor of allocating your Roth IRAs to your most aggressive investments, as he thinks you should want your tax-free accounts to house your most explosive investments.

    While conventional wisdom advises people to allocate the rest of their assets to bonds, David believes in a better alternative: incorporating a fixed index annuity into your overall strategy.

    By doing so you’ll increase your return, lower your risk, lower the standard deviation of your entire portfolio, and give yourself a better outcome over time.

    David concludes by pointing out that you don’t have to love annuities for this strategy to work – you just have to love the idea of increasing the likelihood that your money will last as long as you do.

    Mentioned in this episode:

    David’s national bestselling book: The Guru Gap: How America’s Financial Gurus Are Leading You Astray, and How to Get Back on Track

    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

    University of Chicago

    Dr. Roger Ibbotson
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    7 m
  • Debunking Doug Andrew’s Roth IRA Hit Job Video

    Debunking Doug Andrew’s Roth IRA Hit Job Video
    Apr 30 2025

    In this episode of The Power of Zero Show, host David McKnight looks at Doug Andrew’s recent video in which he implored his audience to never use a Roth IRA or a Roth 401(k) again.

    Andrew sees Indexed Universal Life insurance (IUL) as far superior and believes it should be the source of the vast majority of your distributions in retirement.

    While David likes IUL in certain circumstances, he isn’t a fan of sales strategies that debase every other viable tax-free alternative in an effort to exalt IULs.

    For David, the video is riffed with errors, exaggerations and omissions.

    Moreover, Andrew’s video appears to have an obvious pre-commitment to persuading you to reposition the lion’s share of your retirement savings into an IUL.

    In the video, Doug Andrew’s liking for IUL as the top investment vehicle is evident.

    At the beginning of his video, Andrew says that he will explain why the IUL is far superior to the Roth IRA.

    David believes that the choice should never be between a Roth IRA and an IUL or between a Roth 401(k) and an IUL.

    Remember: your tax-free strategy can incorporate as many as SIX DIFFERENT STREAMS of tax-free income, not just the IUL…

    And every one of these tax-free income strategies has unique qualities that set them apart from all the others.

    Don’t forget about what your #1 goal should be: to take advantage of every tax-free nook and cranny in the IRS tax code.

    David lists the qualities that tools such as Roth IRAs, Roth 401(k)s and Roth conversions have and that IULs do not have.

    One of the unique things about IULs is that they give you a death benefit that doubles as long-term care and helps grow your money safely and productively.

    David touches upon what he considers “wild claims” featured in Doug Andrew’s video.

    An example of inaccurate or untrue information shared by Andrew is that the IUL’s expenses will be paid out of the money that would have otherwise gone to pay a tax… which is wrong!

    Contributions to Roth IRAs and IULs are both made with after-tax dollars.

    “If anyone ever debases a Roth IRA or a Roth 401(k) in an attempt to sell you an IUL, you should run – not walk – the other way,” concludes David.



    Mentioned in this episode:

    David’s national bestselling book: The Guru Gap: How America’s Financial Gurus Are Leading You Astray, and How to Get Back on Track

    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

    Doug Andrew

    Doug’s video - Why You Should Never Use a Roth IRA Again (6 Reasons Why)
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    12 m
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Thank you so much for making this podcast available to listen to on Audible.

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David speaks clearly and is very helpful and entertaining. Small facts and helpful hints on retirement planning.

Clear communication amd knowledge

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