The Power Of Zero Show

This episode revolves around President Donald Trump's claim that, due to the massive tsunami of tariff revenue that's flowing into the U.S. coffers, Americans won't have to pay income tax in 2026. David McKnight looks at the 2025 fiscal year: the Federal Government spent about $7 trillion and brought in about $5 and a quarter trillion in revenue. While breaking down the math related to the 2025 fiscal year, David points out that "Revenue from income taxes is the single largest source of Federal revenue", while "Tariffs, by contrast, are one of the smallest." Even Trump's own economic team, including Treasury Secretary Scott Bessent, has said that in an extremely optimistic scenario, tariff revenue might someday reach $500 billion a year – which is only about ⅕ of what gets collected in income taxes. By looking at the numbers, it's clear that the proposed tariff-funded $2,000 check for each of the 340 million Americans wouldn't work: it would cost roughly $680 billion against a tariff revenue that only amounts to $195 billion… David clarifies a key point about tariffs. They're not paid by foreign governments, they're paid by U.S. importers. In other words, tariffs are simply a tax on consumers. There's an additional problem that shouldn't be overlooked. Not only do tariffs not generate enough revenue, but they can also lead to retaliation by other countries imposing their own tariffs on American exports. This means that an American effort to try to raise trillions of dollars through tariffs could end up costing heavily on its own people. David is crystal clear: While these types of claims make for great sound bites, the federal budget still has to obey the mathematical laws of the universe, and the math makes it clear: There's no world in which tariffs could ever eliminate the need for an income tax. By the look of things, the U.S. is marching into a future where the federal government will soon need huge infusions of cash just to pay the interest on its exploding national debt. To forestall this, the U.S. government will have to double federal income taxes in or around 2035. That's why, David says, having a dialed-in strategy to get your retirement savings shifted from 401(k)s and IRAs to Roths is more important than ever. 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 President Donald Trump Treasury Secretary Scott Bessent Wharton School of the University of Pennsylvania

David McKnight addresses a brand new proposal that could transform the way Americans use Roth IRAs and Roth 401(k) – and that could have serious implications for your retirement flexibility, liquidity, and long-term tax strategy. With the current status quo, if a person has money in a 401(k) or even a Roth 401(k), they can usually roll it out into an IRA when they retire or leave their job. However, money can't roll the other direction: you can't take a Roth IRA and move it into a Roth 401(k)... A new bipartisan bill introduced by Republican Representative Darin LaHood and Democrat Representative Linda Sánchez aims to change that. Under this proposal, you could roll your Roth IRA into an employer-sponsored Roth account like a Roth 401(k), a Roth 403(b) or even a Roth 457 plan. This change could mean less paperwork, potentially lower fees, and a simpler investment picture. David cites simplicity, cost and protection as a few of the reasons why lawmakers may want this bill to pass. One of the incentives for Washington may have to do with the fact that encouraging people to use Roth accounts – which are taxed up front – can generate more short-term tax revenue for the government. Everything isn't as good as it seems, though. David lists a few of the trade-offs involved with this potential change. Firstly, loss of control. When your money is in a Roth IRA, you can invest it wherever you want: Index funds, EFTs, individual stocks, and more. With an employer plan, your investment menu would be limited by the options the plan administrator offers. The so-called Five-Year Rule is another aspect worth considering. Typically, every Roth account has to be open for at least five years or until 59 ½, whichever is later, before earnings can be withdrawn tax-free. Here's the tricky part: Each different kind of Roth account has its own five-year clock. This could turn into a logistical nightmare for plan administrators. David shares some final considerations regarding who would benefit and who may get negatively affected by the proposed bill and points out that "Not all Roths are created equal." 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 Darin LaHood Linda Sánchez Employment Retirement Income Security Act (ERISA)

In today's episode, David McKnight breaks down the creditor protection rules for Roth IRAs and Roth 401(k)s, as well as why more and more Americans are turning to tax-free accounts to insulate themselves from creditors… and the Government itself. In theory, under Federal Law, all IRAs traditional or Roths receive a certain level of bankruptcy protection under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. However, that protection is specifically tied to bankruptcy proceedings. If you're sued in civil court, the Federal bankruptcy statute doesn't automatically apply, state law takes over… By pointing out differences between states like Texas, Arizona and Florida on one end, and California and Montana on the other, David explains that whether your Roth IRA survives a potential lawsuit intact depends largely on the state in which you reside. Roth 401(k)s play by a different set of rules, as they fall under the 1974 Employee Retirement Income Security Act (ERISA). David notes that "ERISA is the big Federal law that governs most employer-sponsored retirement plans, and it comes with some of the strongest creditor protection available anywhere in the financial world." According to David, it's not hard to see why the Federal Government is going to need huge infusions of new revenue in the very near future. Wondering how they will be raising that capital? By targeting the nearly $45 trillion in tax-deferred retirement accounts like IRAs and 401(k). In other words, while your retirement accounts may indeed be largely immune to lawsuits, they're entirely exposed to the impact of rising tax rates. David points out that contributing to 401(k)s or IRAs 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. Remember: a well-planned Roth strategy doesn't just shield you from tomorrow's higher tax rates, it can also serve as a fortress protecting your wealth from outside claims. 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 Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 Employee Retirement Income Security Act of 1974 (ERISA)

This episode features David McKnight sharing the top five reasons why a Roth 401(k) is far superior to a traditional 401(k). Something important to keep in mind: the decision you make today will determine how much of your retirement money your future self actually gets to keep. David touches upon the fact that choosing the wrong 401(k) could cost you hundreds of thousands of dollars in unnecessary taxes in retirement. Tax rate risk is the first big reason why you should consider investing in a Roth 401(k) over a traditional 401(k). David lists a series of key questions people who invest in a traditional 401(k) often fail to ask themselves. The second reason to consider a Roth 401(k) over a traditional 401(k) is Social Security taxation. Most people believe that Social Security is tax-free…but it's not. 50% of your Social Security, plus wages, pensions, and interest, as well as all withdrawals from traditional IRAs and traditional 401(k)s, are what the IRS counts as provisional income. The third reason for choosing a Roth 401(k) and not a traditional 401(k) has to do with something that most retirees never plan for: Income-Related Monthly Adjustment Amount (IRMAA). Remember: "When you control your taxable income, you control your Medicare costs." Required Minimum Distributions (or RMDs) are the fourth reason for opting for a Roth 401(k). The fifth reason for going for a Roth 401(k) instead of a traditional 401(k) has to do with your heirs. When they inherit a traditional 401(k), it becomes a tax bomb. So, why choose a Roth 401(k) over a traditional 401(k)? Because a Roth 401(k) helps you eliminate tax rate risk, avoid Social Security taxation traps, prevent Medicare premium explosions, stay in control of withdrawals, and leave tax-free income to your heirs. 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

This episode sees David McKnight look at Suze Orman, who, despite being one of the most widely recognized financial voices in America, shares what appears to be incomplete advice. David believes that Orman has done a lot of good for a lot of people thanks to her financial discipline-centered approach (in addition to being a big proponent of Roth IRAs). He agrees with Orman: "Roth IRAs are powerful, no doubt about it. You contribute after tax dollars, your money grows tax-free, and, provided you meet the requirements, you can withdraw those funds in retirement 100% tax-free". The U.S. is currently at historically low income tax rates and, thanks to the One Big Beautiful Bill Act, they have been permanently extended. However, David shares that, when it comes to the IRS tax code, there's no such thing as a permanent extension. David's pet peeve with Orman: getting money into Roth IRAs now (while tax rates are low) isn't something that will truly protect you from rising tax rates in retirement. That's because a Roth IRA by itself isn't enough. In his book The Power of Zero, David advocates for a balanced, comprehensive approach to tax-free retirement that draws from six different streams of tax-free income. David goes through the six strategies and explains why you need each and every one of them if you want to land in 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 Suze Orman OBBBA (One Big Beautiful Bill Act)

David McKnight addresses three key questions you must be able to answer before executing a single Roth conversion. Too many people go for Roth conversions without a game plan – this is something that can lead to overpaying taxes and running out of money sooner than anticipated. David points out that if you can't answer the three key questions, you should stop and reevaluate because guessing here can cost you big. "What's the total amount I should convert from my IRA or 401(k) to tax-free?" is the first and most critical of the three questions. Remember, the goal of a Roth conversion isn't to get your tax-deferred bucket to zero at all costs. It's to get to the right amount of tax-deferred dollars shifted to tax-free, the amount that allows you to stay in the 0% tax bracket in retirement. "How much should I convert each year?" is the second question and is about pacing your conversion so as to avoid unnecessary exposure to higher tax brackets. The goal is to convert to Roth slowly enough that you don't rise into a tax bracket that gives you heartburn. "Over what time frame should I complete my Roth conversions?" is the third question you should address before executing a Roth conversion. Addressing each of the three questions helps you shift from Roth conversion guesswork to Roth conversion strategy. Be careful. Most financial gurus will say "Roth conversions are great, just pay the tax and move on!" 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 OBBBA (One Big Beautiful Bill Act) Donald Trump David Walker

David McKnight busts some of the most common Roth conversion myths that are costing retirees hundreds of thousands – if not millions – of dollars over the course of retirement. The "Don't worry about Roth conversion, you'll be in a lower tax bracket when you retire" myth is based on two flawed assumptions. The first one is that your lifestyle will drop significantly in retirement, while the second is the one related to future tax rates being the same or lower than they are today. David points out that, in retirement, people want to maintain their lifestyle. In some cases, they even spend more in early retirement (think travels, healthcare and helping with kids or grandkids). Let's remember that the U.S. national debt is projected to hit $63 trillion by 2035. The country has unfunded obligations in Social Security, Medicare, and Medicaid that total over $200 trillion, and interest on the debt is going to crowd out most of the national budget items by the mid 2030s… The primary value of a Roth conversion is that it pre-pays taxes at historically low rates to avoid paying them later when rates are likely to be higher. Roth conversions not being binary, and the fact that you can get massive tax benefits without having to convert your entire IRA is another big myth David debunks. David explains why you should voluntarily pay taxes instead of delaying that decision. Ever heard of "If you don't have cash to pay the tax, you shouldn't convert"? It's another myth David addresses in this episode. For the millions of Americans who have most of their savings in tax-affirmed accounts, strategic conversions are one of the best ways to insulate yourself from the tax freight train bearing down on America. 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 revolves around one of the biggest financial debates among pre-retirees and retirees: When should you take Social Security? Host David McKnight touches upon the recent debate of two of the smartest voices in the field – Dr. Laurence "Larry" Kotlikoff and Dr. Derek Tharp – on this exact question. Dr. Tharp, out of the University of Southern Maine, notes that economists commonly recommend delaying social security benefits until age 70. Boston University's Dr. Kotlikoff agrees and explains that delaying can give you a 76% higher monthly benefit compared to taking it at age 62. Since Social Security is inflation-adjusted and guaranteed for life, it acts as longevity insurance. Hence, Dr. Kotlikoff thinks that waiting doesn't only help you but your loved ones too. Dr. Tharp isn't convinced: he points out that only about 10% of workers actually wait until age 70 to claim benefits. Overall, he sees studies that recommend delaying rely on overly conservative assumptions – they assume that retirees earn returns similar to Treasury inflation-protected securities. With this line of thinking, if your portfolio is earning 5% real returns instead of 2%, then delaying your benefits might not look as attractive mathematically… Dr. Kotlikoff cites Menahem Yaari's 1965 paper, which suggests looking at delaying social security like buying insurance. It protects you from the catastrophic risk of living too long and running out of money. The debate continues with Dr. Tharp talking about the sequence of return risk. If the market drops early in retirement and you're forced to withdraw more from your investments to delay Social Security, you can permanently damage your "nest egg". Even though he acknowledges Dr. Tharp's point, Dr. Kotlikoff points out that most retirees have options, such as continuing to work longer, cutting spending, downsizing, or borrowing temporarily instead of taking benefits early. Plus, he adds, the people most affected by sequence of returns risk are, generally, wealthier households… Dr. Tharp concludes the debate by citing a study showing that retirees tend to spend about 80% of predictable income streams like Social Security or pensions, but only about 50% of portfolio income. He also brings up Bill Perkins' book Die With Zero into the conversation. Perkins believes that Americans often focus too much on lifespan and not enough on health span. Dr. Kotlikoff responds by stressing that some people underspend, while others overspend… and that's exactly why there's a need for good planning software. For David, both Dr. Kotlikoff and Dr. Tharp make valid points, and it all boils down to a key question: how long are you going to live? If you're likely to die at 63, then you should probably take Social Security at 62. If you're going to live to age 100, it makes sense to wait until you're 70. While there's no accurate way to determine that, there's currently a group of people who are in the business of figuring that out: life insurance actuaries. David shares two reasons why you may want to consider the additional benefits of life insurance, especially Indexed Universal Life (IUL). 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 looks at what happened when NASCAR legend Kyle Busch reportedly lost $8+ million in what was supposed to be a tax-free retirement plan. The plan Busch relied on was built around an indexed universal life insurance policy. According to Kyle and Samantha Busch's lawsuit, they paid more than $10.4M into several IUL policies issued by Pacific Life Insurance between 2018 and 2022. While these policies were pitched as a safe, self-funding, tax-free retirement plan, things didn't go as promised… Poor design, unrealistic expectations, a delayed 1035 exchange, and poor oversight are the key reasons why the Busch's retirement plan ended up belly up. "If you're going to do a 1035 exchange, make sure you do it at the start of the policy, not years into it", warns David. David goes over the lessons that can be drawn from the Busch's case. For instance, you should never enter into a contract that you don't understand, nor should you do an IUL if you can't overfund it from day one. David believes that you shouldn't rely on the IUL alone… In his opinion, the Busch case is a cautionary tale about what happens when one strategy is positioned as a silver bullet retirement solution. In a balanced, comprehensive approach to tax-free retirement, which includes Roth IRAs, Roth 401(k)s, and Roth conversions, the IUL's purpose is not to carry the whole load, but rather to act as a shock absorber. A recent Ernst & Young study demonstrated that a retirement income strategy that incorporates IUL provides far more income than a strategy that calls for investments alone. David shares a few tips on how to avoid the IUL trap that the Busches unfortunately fell into. 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 NASCAR Kyle Busch Samantha Busch Pacific Life Insurance Ernst & Young

David McKnight focuses on three of the biggest names in personal finance – Dave Ramsey, Suze Orman, and Ken Fisher – and why you should be careful with following their advice. David emphasizes that anyone trying to wring the most efficiency out of their retirement savings should focus on advice that's backed by math… not soundbites. While David Ramsey is the right person for people who are making less than they are spending, the same can't be said for his retirement planning advice. For instance, he claims that 100% of cash value life insurance sucks 100% of the time. For David, whenever someone gives you advice that claims it should be applied 100% of the time, you should run the other way! Remember: there's no financial strategy that works for everyone all the time. According to an Ernst & Young study, by contributing 30% of your retirement savings to an IUL, you'll dramatically increase your income in retirement over a stock market investing alone. Citing E&Y, David explains an approach that shields you from the sequence of returns risk and that has a 95% chance of your money lasting as long as you do. David points out that most Americans don't have thousands of dollars lying around in savings accounts just to pay the taxes on a Roth conversion… David sees Dave Ramsey as someone who gives basic advice for people with basic problems and whose advice could potentially be catastrophic if you want to shield your retirement from higher taxes. When it comes to Suze Orman, David looks at her recent advice of keeping 3-5 years worth of living expenses in an emergency fund in retirement. While Orman is trying to safeguard against sequence of returns risk, she seems to be forgetting about inflation eating away at your purchasing power. As David shares his dislike of Orman's advice, he touches upon a resource that can double your sustainable withdrawal rate from 4 to as high as 8%. Ken Fisher, on the other hand, has become the face of the "anti-annuity crusade". The problem with Fisher's approach? He's primarily referring to variable annuities, completely disregarding fixed indexed annuities (which are a totally different animal). David discusses how replacing bonds with fixed annuities "can increase your returns, lower your risks, and give you a better outcome over time." Beware of financial gurus saying "I hate annuities", "100% of life insurance sucks 100% of the time", or "never pay taxes from your IRA"! In his latest book The Guru Gap, David takes a deep dive into the flawed logic of financial gurus, and gives the full story with the math, the context, and the strategies they conveniently leave out in their content and speeches. 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 Suze Orman Ken Fisher Ernst & Young