The Power Of Zero Show

The whole Power of Zero paradigm is predicated on tax rates being much higher in the future than they are today. If you don’t believe that, the Power of Zero paradigm is not one you’re likely to warm up to. Step one is to recognize that taxes will be higher in the future than they are today. The fiscal gap is an estimated $239 trillion. That’s the difference between what we have promised and what we can deliver. Step number two is to recognize that in a rising tax rate environment, there is a perfect amount of money to have in your taxable and tax deferred buckets. The perfect amount for your taxable bucket is six months of basic living expenses. Any amount above and beyond that is costing you money. For the tax deferred bucket, the balance should be low enough that required minimum distributions are equal to or less than your standard deduction and also low enough that it doesn’t cause your Social Security to be taxed. Anything above and beyond those ideal amounts in the first two buckets should be systematically shifted to tax free. You should do it quickly enough to get the heavy lifting done before tax rates go up for good but slowly enough that you don’t rise too rapidly in your tax cylinder. Once you recognize your magic number (the amount of money you need to shift to tax-free in a given year), you have to recognize that that money is probably going to be allocated to three different places. The first is the IRS, you may not enjoy it but you have to pay the piper first. The second is the Roth conversion, and the third is the Life Insurance Retirement Plan. If you’re between the ages of 50 and 65, someone you know is likely dealing with a long-term care issue. People aren’t opposed to having long term care insurance, they’re just opposed to paying for it. The LIRP is a good option to protect yourself from a long-term care event while at the same time growing your money in a similar risk environment as your savings account. The average expense per year with the LIRP is 1.5%, but in exchange for that, you are getting a death benefit that doubles as long-term care. The LIRP covers the risk that 70% of Americans will be confronted with at some time in their retirement. You want a meaningful and impactful amount of long-term care insurance. That’s somewhere between $400k and $500k in coverage. If you have too little coverage, then the LIRP can be a little like rearranging the deck chairs on the Titanic. The four steps are: 1. recognizing that tax rates are going to be higher than they are today, 2. recognizing that in a rising tax rate environment there is a mathematically perfect amount of money to have in your taxable and tax deferred buckets, 3. repositioning the surplus balances and contributions into the tax free bucket, and 4. funneling the money into the appropriate places which may include Roth IRAs, Roth Conversions, Roth 401(k)’s and the LIRP.

Anyone can do a Roth conversion. You need to have money in an IRA. There are no income limitations. The question comes down to how much tax you want to pay. Do you feel like your tax bill will be lower or higher if you were to postpone the payment of that tax? Some opponents of Roth conversions will say that you won’t get the full amount of money in your IRA working for you. However, you have to remember that the IRS partners with you in that account and their portion of that money grows right along with yours. If you to convert that money to a Roth IRA, all of that money is growing to your benefit but the scenario stays basically the same. The key to the calculation is what happens if tax rates are much higher in the future. Once you get your money into a Roth IRA, you don’t have to worry about tax rates rising in the future. The rationale to Roth conversions is a bird in the hand is worth two in the bush. It all comes down to the tax rates and where you think they will be in the future. There is a sweet spot with Roth conversions. If you’re a high income earner it may not make sense to do a Roth conversion today. When you retire, you have to keep in mind what tax cylinder you will be in. If you’re in the 10% or 12% tax bracket, you should be converting the maximum amount to get to the top of that tax bracket. The real question becomes “how do we feel about the 22% and 24% tax brackets?” You don’t have to go very far back in history to find tax brackets much higher than today. In 1960 to 1963 the lowest tax bracket was about 22% and the highest went up to 89%. Larry Kalikov is predicting that tax rates will have to rise by 51% and spending would have to decline by 35%. If tax rates stayed level in the future, it would probably be a mistake to do a Roth conversion. It really comes down to whether we as a country can afford to be charging 10% to 12% on people’s distributions ten years from now. 24% is only 2% higher than the 22% tax bracket. For an extra 2% you can protect another $150,000 of your IRA conversion. We will look back on today ten years from now and think that was the deal of a lifetime. You have to feel like the tax rate that you will pay today will be lower than what you will pay in the future. If you are younger than 50, it’s a no brainer. It makes a lot of sense to pay taxes at today’s low tax rates. If your 401(k) distributions will fall in the 22% tax bracket once your retire, you should absolutely maximize the 22% and even the 24% tax bracket today. The very best way to insulate yourself from the impact of higher taxes is to get to the 0% tax bracket. David tells the story of his limo driver during a conference that David was speaking at. Even if you don’t believe that tax rates will be higher in the future, you should probably look at how long a widower will survive after you die. The minute you or your spouse dies, the cost of taking money out of your IRA or 401(k) pretty much doubles. If your kids inherit your IRA, it will almost certainly not be taxed at the 12% tax bracket since it will probably occur during the peak of their earning years. If you have money in a Roth IRA, your spouse or kids don’t have to worry about that income because you will have already paid the piper.

The basic gist of the fiscal gap is that the publicly stated national debt is $20 trillion which is more than enough to cripple our economy, but that’s not the whole picture. The fiscal gap is the difference between everything that we’ve promised to pay over the next 70 years and what we can actually afford to pay. According to Allan Arback and Larry Collicof, the real number is closer to $222 trillion. When you figure in all the numbers, the fiscal gap is growing an additional $6 trillion each year. To get a true vision of the fiscal condition of our country, we need to express our national debt the same way that everybody else in the world is expressing it. If we were a private corporation, we would have to list every debt on the books, not just the debt that is actually owed. There are two kinds of debt, intragovernmental debt and debt borrowed from the public. The more responsible thing to do would be to express what we promised back but can’t afford to deliver. In the last week, the number has been revised to $239 trillion. This means that if nothing happens, there will come a day of reckoning. The government will have to raise taxes by 51% and cut spending 35%. This makes the Power of Zero more relevant than ever. If you are thinking about putting money into a 401(k) in order to get a deduction at today’s historically low tax rates you should reconsider it. Putting your money into a 401(k) is like going into a business relationship with the IRS and they get to vote each year to decide what percentage of the profits you get to keep. Politicians love to make promises. When they are telling us the national debt is $22 trillion but the real number is $239 trillion, they are making promises they can’t actually deliver on. If you are in a 10% or 12% tax bracket, even a 22% or 24% tax bracket, you should probably not be putting money into your IRA or 401(k), put it into a Roth 401(k) instead. The bad news is it’s much worse than we thought, the good news is you’re now armed with the knowledge of what you can do about it.

The question is “how can we take money out of our life insurance tax free?” Is it possible to take money out of your life insurance policy and have it feel like a distribution from your Roth IRA? Every life insurance policy allows you to take out tax-free distributions, but not all of them allow you to take out tax-free and cost-free distributions. With a traditional life insurance policy, anyone can take out whatever they’ve put in. This is referred to as your basis. The trick comes in taking out money above and beyond your basis, and the solution is by way of a loan. The first type of loan is the standard/preferred loan. A standard loan is typically for the first six ten years of your policy and is usually done in less than optimal circumstances. You should exhaust your other sources of emergency income first before doing this. A preferred loan typically starts in the first six to ten years of your policy but you are not taking a loan from your own policy. You’re not taking a distribution from your policy either. You’re taking a loan directly from the life insurance company. They will charge you a real rate of interest on the loan, and at the same time will take an equivalent amount of money from your growth account and assign it to a loan collateral account with an assigned rate of interest. If your collateral account is being credited at the same rate as the loan you received, all you know is you received the money from your account and didn’t have to report it as income. If the life insurance company has guaranteed the rate of interest remains the same on the loan and your loan collateral account, it doesn’t matter how big the loan gets. The rate at which they are crediting you and the rate at which they are charging you is the same. There are some possible issues with this strategy. Some companies will guarantee that rates won’t change but not under every circumstance. When it comes to loan provisions, the devil is in the details. If you have a spread on the interest rates between the loan and the credit, you will eventually run out of money. If you run out of money and you’re not dead yet, all the of those tax free distributions become taxable to you. Over the course of your life, a spread loan can crater your distributions. [ The additional interest you owe on your loan will come out of your cash value. This leads to geometric growth of the interest you own on the loan interest and it starts to take a toll. This can bankrupt your policy. [ You don’t buy a life insurance retirement plan simply because the guy across the table tells you it’s a good idea. That’s like getting married after the first date. [ You should have a list of things you want to have in your ideal life insurance retirement plan. A divorce from a wife can be painful, but a divorce from a life insurance plan can be likewise as painful. [ Having the wrong loan provision can really sink your ship. [ There is a second loan type called a Participating Loan that relates to a plan called Index Universal Life. It works similarly to a standard or preferred loan except the interest on your loan may be slightly higher and the interest on your loan collateral account is tied to the index within your universal life plan. The insurance company will give you the growth of that index up to a certain cap and in the event of a down year, they simply credit you a zero. [ Historically, the indexes grow at 7% to 7.5%. If you can get 7.5% growth without taking an more risk than you are used to taking, that’s a pretty safe and productive way to grow your assets. [ The way to look at this kind of loan is: will you have more positive arbitrage or more negative arbitrage over a period of time? The Monte Carlo simulations bear out the usefulness. [ You have to find a company that will guarantee that the rates will never go up over a certain number. [ The preferred loan is the conservative way to go. You don’t have arbitrage working for you but you won’t have the risks associated with it as well.

David believes that life insurance in most cases is the best way to handle long- term care needs in retirement. Why do financial gurus say that you need long-term care insurance? 70% of us will need long-term care in our lives. Nobody wants to save money their whole life only to give it to a long-term care facility two years before they die. Typically a long-term care event lasts an average of 2.3 years and most people do not survive them. The idea behind long-term care insurance is to avoid blowing through all the money you saved up at the end of your life, but it’s also about protecting your spouse. You’re usually better off dying than experiencing a long-term care event. If you die, the life of your spouse from a financial perspective would go on relatively unchanged. But if you survive, all of your assets except for a small amount gets earmarked to the long-term care facility. If you have assets, the federal government isn’t going to pick up the tab unless you’ve really spent down your savings. There is a massive difference in care in a Medicaid funded facility versus a privately funded long-term care facility. Studies show that you will probably die much sooner in a government funded facility. According to the Wall Street Journal, fewer and fewer people are using traditional long-term care insurance. This is due to a number of reasons including it’s expensive and there’s no guarantee it won’t go higher. Traditional long-term care insurance is underwritten by morbidity criteria instead of mortality, which means you could have a condition that in no way affects the odds of you dying, but you may still be denied coverage. The biggest source of heartburn for people when it comes to traditional long-term care insurance is it’s a use-it-or-lose-it proposition. Nobody wants to pay for something for 30 years and not get what they paid for. Instead of long-term care insurance people are switching to a form of life insurance that has a long-term rider or a chronic illness rider. A life insurance policy can be thought of as a bucket of money that grows in a variety of ways. Money drips out of that bucket through a spigot that goes to pay for annually renewable term insurance. When you have a long-term care rider, you are basically paying more expenses along the way for the privilege of using your death benefit to cover your long-term care expenses. [ You are paying for something that you hope you never have to use. If you die peacefully in your sleep, you don’t get that money back, and that can be hard for some people to accept. [ The chronic illness rider gives you the same benefit of using your death benefit to pay for long-term care, but you don’t pay anything along the way. The difference is that the insurance company discounts your death benefit depending on your age when you access it. [ Other benefits of life insurance retirement plans are being able to touch the cash in the bucket prior to age 59½ with no penalty, not receiving 1099’s as your money grows, and if you take the money out in the right way, you can get it out tax-free. [ There are no contribution limits on how much you can put into the policy and there is no income limitations. [ Life insurance retirement plans may be immune from legislative risk. Any changes they have made in the past existing plans have been grandfathered in. [ Clients between 50 and 65 are looking towards the LIRP to cover their long-term care. If you are between 50 and 65 you are probably dealing with at least one person going through a long-term care event. [ People are asking themselves, “How do I avoid the financial carnage of a long-term care event?” [ There are two ways to approach the life insurance plan, you can pay upfront with a long-term care rider or discount the benefit at the end with a chronic illness rider. [ The Power of Zero movie will be released April 21, 2019.

When David speaks to his clients or the public, he’s often talking about the nation’s fiscal crisis, the national debt, and unfunded obligations. There are really only four ways to resolve our fiscal crisis. You decide what you think the most likely solution will be. The first thing we could do to prevent our country from going over a fiscal cliff is to cut expenses. We know that the real gushers in the fiscal budget are things that Congress doesn’t even have control over. Congress controls around 30% of the national budget. These are things that they wouldn’t have to pass a law to change. The remaining 70%, things like interest on the national debt, Medicare, Medicaid, and Social Security, are laws. Congress would have to pass a law to make any changes at all which is pretty unlikely given they would need to control the House and the Presidency. The real issue is Medicare, which is growing at least 6% per year. Much of the expense for that program is not on our radar yet. We would have to find a way to pass a law that requires people who already can’t afford retirement to find a way to pay for their own healthcare later in life. The second option is to borrow more money. This also presupposes that there are countries that are willing to loan us money. We are on a path where we will get to a point where all of the money flowing into the US Treasury will go to pay only for the interest on all of our debt. If we can only pay the interest on our debt, other countries will not likely be willing to loan us money. This is what is known as a sovereign debt crisis. The third option is to print more money. David’s critics believe that we will just start printing and return to 70’s era inflation. They forget that Social Security is pegged to the CPI, which means that as inflation rises so does Social Security. Medicare is affected by inflation as well. You can’t fix Medicare by inflating your way out of this. David Walker says that we will have to double tax rates in order to keep our country solvent. There is currently ground swell support for higher tax rates. For those that thought that we would never return to the tax rates of the past, you have to understand that these programs have to be paid for somehow. We know that the tax rate has been somewhat of a slush fund for Congress in the past. When there’s a war or extraordinary circumstances, they raise taxes. As the highest marginal tax bracket goes up, all of the other tax brackets tend to ratchet up right along with it. You have to basically understand that there are really only four options: you can cut back on expenses, borrow more money, print more money, or raise taxes. It’s much easier to raise taxes than it is to get rid of a government program.

The story David tells at the beginning of the book is a tale about David Walker, the former Comptroller General for the federal government. Back in 2008 he appeared on a radio show and told them that tax rates have to double. The math says that the country is going to go bankrupt unless tax rates go up dramatically in the next ten years. Most of us are putting money into tax-deferred plans hoping that taxes will be lower in the future than they are now. Back in the 70’s and 80’s the tax-deferred strategy actually made sense, but the Trump era tax cuts have changed the math. We are now at a point where taxes haven’t been this low in a long time yet we continue to pile money into 401(k)’s and IRA’s. A good analogy would be an American family that makes $50,000 a year but their expenses are over $100,000 and they just keep piling debt onto the credit card. At the same time all their neighbours are getting their financial houses in order. We’re in a game with the IRS where they’re our opponent, but they can change the rules on us at any time. When you put money into an IRA it’s a little bit like going into a business partnership with the IRS, and every year the IRS gets to vote on the percentage of profits they get to keep. It makes it really hard to plan for retirement when you don’t know how much money you actually have. The first bucket is the taxable bucket which is typically used for emergency funds, roughly six months of living expenses. The taxable bucket is the least efficient bucket. The second bucket is the tax deferred bucket, where you pay tax on the back end. The first problem with this bucket is you don’t know what the tax rates are going to be when you take the money out. The second problem is when you do take money out, it counts as provisional income which the IRS keeps track of to determine whether they are going to tax your Social Security. If as a married couple you have more than $44,000 of provisional income, up to 85% of your Social Security becomes taxable at your highest marginal tax bracket. For a lot of David’s clients, this can cause them to run out of money 5 to 7 years faster than people who don’t have their Social Security taxed. It’s not bad to have money in the tax deferred bucket, you should just have the prescribed amounts. Annuities within your tax deferred bucket can trigger the same issues of Social Security taxation. The tax-free bucket is everybody’s favorite bucket. In this bucket you pay the tax on the front end and never pay those taxes again. When you take money out of a true tax-free investment it does not count as provisional income. The government may change the rules around Roth IRA’s but you have to look at whole picture. There is $21 trillion in the cumulative IRA’s and 401(k)’s in America and only about $800 billion in Roth IRA’s. They could change the rules and break their promises but that would end with people getting voted out of office. It’s easier to get the math done but raising taxes on the tax-deferred bucket. The Roth IRA is David’s favorite tax-free investment, but it’s not just the Roth IRA it’s also the Roth Conversion. Not enough Americans are paying attention to those investments. January 1, 2018 is the date that tax rates went on sale. Every year that goes by where we fail to take advantage of these historically low tax rates is potentially a year beyond January 1, 2026 where we may be forced to pay the highest tax rates we’ll see in our lifetime. We now know the year and the day when tax rates will go up. If we let this tax sale go by without taking advantage of it we will have really missed an opportunity. If David Walker is right, we will look back at today and ask ourselves why we didn’t take advantage of these historically low tax rates. You don’t have to like life insurance or life insurance companies. You just have to like them a little more than the IRS, because in the end someone is getting your money. The tax benefit for life insurance is the single biggest benefit in the entire tax code but many people don’t take advantage of it because life insurance has a stigma of being expensive. When structured properly, life insurance will cost you about the same as your 401(k) per year over the life of the program, and comes with a few other benefits as well. There is a documentary coming out also called the Power of Zero. David found that the number one thing that prevents people from making the switch from tax-deferred to tax-free is that tax that they have to pay. They are not convinced that taxes will be higher in the future. All the experts David interviewed said the same thing, taxes will have to go up in the next ten years. The official debt-to-GDP ratio is 100% but our actual debt-to-GDP ratio is 1000%. We are the only country in the world where our debt-to-GDP ratio is getting worse and worse.   

The best financial decision that David has ever made was to acknowledge that taxes are going to be dramatically higher in the future than they are today. David is a husband and father of seven and has been in the financial services industry since day one. He was selling insurance policies at the beginning of his career and became an independent financial advisor in 2001. David mainly deals with clients who are retiring or in retirement and focuses in particular on the tax outlook. He aims to maximize the amount of money his clients can take out in retirement. David’s organization has about 160 advisors across the country. He self published The Power of Zero four years ago and sold around 150,000 copies, since then this lead to this movement around the concepts in the book. There are now quite a few advisors teaching courses to retirees all over the US. David describes the current environment as a tax sale. You’re going to have to pay taxes sooner or later, so why not pay them before they go up. It takes an act of Congress to prevent a sunset clause from happening. In order for that to happen, the same party has to control the Senate, the House, and the Presidency. $0.76 of every tax dollar that the government brings in is spent on four things: Social Security, Medicare, Medicaid, and the national debt. We are going to have to keep borrowing money to pay for Medicare. The cost for servicing all that debt will squeeze out all the other items in the budget. George Schultz says we are already at the crisis point. We haven’t had taxes this low in the last 80 years. You can’t pay attention to just the number, you have to look at the income parameters that go with it. The real question for 75 million Baby Boomers is “will they take advantage of this tax sale?” Every year that goes by where they don’t consider shifting money to a tax free investment, they are missing an opportunity that will never come back.  The IRS says that if you make too much money, you can put after tax dollars into an IRA and in the same breath convert it into a Roth IRA. Since you have to pay the tax on the conversion relative to your other investments it can feel like a double tax. If you have money in other IRA’s it may not be a great idea to do the Back Door IRA.  The rich man’s Roth is also known as the Life Insurance Retirement Plan. You buy as little insurance as the IRS requires of you and stuff as much money in it as the IRS allows to mimic the tax free benefits of the Roth IRA.  Most Baby Boomers are dealing with a parent that is having a long term care event. There are a lot of long term care benefits that can make the Life Insurance Retirement Plan attractive to the right person.  You can make your 401(k) tax free if you only take out your standard deduction. The best investment you can make is making the balance low enough so that your Required Minimum Distributions are low enough so that your they are equal to or lower than your standard deduction.  The holy grail of financial planning is to find an investment that gives you a deduction on the front end, grows your money tax deferred, and you take it out tax free. If you have an IRA that’s so big that your required minimum distributions are dramatically higher than $24,000, you’re going to be in a tax bracket and it’s not going to be 0%.  According to David Walker tax rates are going to have to double in order to keep our country solid. If that’s true, the best tax bracket to be in is the 0% tax bracket. If tax rates double, two times zero is still zero.  Everyone recognizes that tax rates are going up in the future, the question is “why are we still putting money hand over fist into 401(k)’s and IRA’s?” The reason is we are addicted to the tax deduction.  The true purpose of a retirement account is not to get a tax deduction. It’s to maximize cash flow at a period in your life when you can least afford to pay the taxes. That’s the real value of a retirement account.  If you feel like your tax rate is going to be higher than it is now, you should stretch your tax liability out over 8 years. You want to shift the money quickly enough to do all the heavy lifting before the tax freight train hits but slowly enough that you don’t rise into a tax bracket that makes you uncomfortable.  If you are in a position to manipulate revenue and be okay with your living standard, at the very least you should be maxing out your 10% and 12% tax bracket.  You may not think that tax rates will double, but if your spouse dies your tax bracket doubles anyway.  David’s clients will take advantage of these tax rates but ultimately, the tax breaks were irresponsible to make. Every other country in the world is getting their fiscal house in order other than the US.  David’s worst financial decision was to buy a nice car, move to Puerto Rico, and then selling it only one year later. Cars typically make lousy investments.

The 4% rule says there is a percentage that you can withdraw from your assets once you hit retirement, and still have a reasonable expectation that your money will not run out before you die. The industry runs Monte Carlo scenarios where they look at your stock allocations and run simulations, to see the likelihood of your money outlasting you. They have determined that if you have a 60% stock allocation, you have an 85% chance that your money will last through your retirement, as long as you stay around the 4% withdrawal number. If you are constrained by the 4% rule, you have to save a lot more money than someone constrained by a 5% or 6% rule. Let’s say you want to live on $100,000 a year in retirement, and you don’t want the money to run out before you die. You need to have $2.5 million accumulated before you hit retirement. If you’re not on track to hit your number, you basically have five options: save more, spend less, work longer, die sooner or take more risk in the stock market. The biggest factor in the 4% rule is something called ”sequence of return risk.” In the first ten years of your retirement, you will experience 2-4 down years. If you are relying on your stock market portfolio to fund your lifestyle, taking money out in the down years is brutal for your portfolio. You are removing the worker dollars that are funding your retirement from your portfolio completely. Studies show that if you take out too much money during those down years, you can run out of money 15 to 20 years faster than someone who didn’t experience those down years. Without the 4% rule, you can send your portfolio into a death spiral from which it will never recover. If you can only take out 4%, you can weather those down years during the first ten years and still have a high chance of your money outlasting you. The basic premise behind the volatility buffer is you take money during your working years that would have gone into the stock market, and you set it aside and earmark it for those down years in early retirement. If you can get three or four years accumulated, you can dramatically raise the withdrawal rate that you can take out of your stock market portfolio. The Volatility Buffer has to have a couple of attributes. You can’t just take four years of lifestyle money out your stock market portfolio and stick it into a savings account. Your Volatility buffer has to be safe. If it’s correlated to the stock market, you haven’t really fixed the problem. It also has to be productive because there will be a massive opportunity cost of not allowing that money to grow in your stock market portfolio. It also has to be tax-free. You won’t be able to fund two to four years of lifestyle if you have to give 50% of the money to the IRS. The Volatility Buffer has to be in place before you hit retirement. You have to pack your bags before you go on vacation! In a perfect world you have unlimited contributions you can make and no income limitations. Avoid things like the Roth IRA because they could be constrained by how much you can put in. The Life Insurance Retirement Plan is a good fit.

About half of the people that David sees have pensions. The younger you are the less likely you are to have a pension. The burning question these people always have once they believe that tax rates are going to be higher in the future is “what can I do if I have a pension?” Have you elected the income option on the pension? Once you set that in motion, there is no way to unwind it. If you haven’t made your payment option yet, your company may offer a Lump Sum Distribution Alternative where you can roll the lump sum into an IRA. This makes it easy to get that money into the tax free bucket and the 0% tax bracket. There is a dark underbelly of the pension world. When you receive a pension, it’s going to be on the IRS’s radar forever. It will come out of your taxable bucket and you will be exposed to the ebb and flow of tax rates over time. Pensions also count as provisional income. If your pension is big enough, when coupled with your social security, it will almost certainly push you over the threshold where your social security will be taxed. The only thing you can do is worry about the things you can control. The upside is at least you will have a consistent stream of income until you die. The reality of pensions is you may never be in the 0% tax bracket. The most you will ever own of your IRA or 401(k) is 78% because the IRS is a 22% stakeholder, and it will only get worse from here on out. You have to take a strong look at what your tax bracket is today during your working years. If you’re in a 22% tax bracket today and will be in your retirement, don’t let a year go by without maximizing your tax bracket through Roth Conversions. [ Why would you not, at the very least, convert your IRA’s during your working years? The 24% tax bracket is only 2% worse but it lets you protect an additional $150,000 by shifting it to the tax free bucket by way of the Roth Conversion. We will look back 10 years from now at the 22% and 24% tax brackets and say “that was the deal of the century.” Even if you don’t think that tax rates will be dramatically higher than they are today, we know that come Jan 1, 2026 the 22% tax bracket becomes the 25% tax bracket and the 24% tax bracket becomes the 28% tax bracket. The huge upside of having a pension is having way more certainty in terms of what your tax bracket is today versus what it will be in the future and you have more certainty that you won’t have buyer’s remorse.  Don’t let a year go by where you aren’t maxing out the 22% tax bracket.  If you have already begun taking your pension, it makes a ton of sense to be shifting as much money as you can and maxing out your current tax bracket