In this episode of the Power of Zero Show, David McKnight looks at headlines, such as those from Vanguard, BlackRock or Morningstar, that have predicted a dismal forecast for stock market returns over the next decade.

Since such articles predict 4-5% annual growth for the next decade, many investors are pondering whether they should take some chips off the table.

Back in 2015, those same institutions and companies stressed that valuations were too high and that, since the markets had a great run, it couldn’t possibly continue anymore.

Vanguard forecasted 4-6% returns, BlackRock predicted 4.5-5% returns, while Research Affiliates predicted an anemic 1.5-2% returns.

However, from 2015 through 2024, the S&P 500 posted a Compound Annual Growth Rate (CAGR) of roughly 11.9% - proving those predictions wrong!

In fact, such forecasts by stock market research institutions turned out to be off by 5-6%. 

David believes that financial institutions making failed predictions about the future of the stock market isn’t just the exception, it’s the rule.

In the 2015-2024 timespan, we had a global pandemic that shut down entire economies, interest rates fell to zero, then spiked in record time, massive government stimulus, a tech boom, a crypto craze, and the rise of AI. - How many of those events could have been predicted in 2015?

David doesn’t recommend putting too much stock in long-term market forecasts by large financial institutions because, even if they might be well-researched, they’re still guesses.

For David, you shouldn’t let fear drive your investment behavior. Not only should you stay invested over the next 10 years, but you should focus on investing inside tax-free accounts.

Think about a balanced, comprehensive tax-fee approach that takes advantage of every nook and cranny in the IRS tax code. 

David refers to tools such as Roth IRAs, Roth 401(k)s, and some properly structured cash value life insurance policies like Indexed Universal Life.

What drives long-term stock market returns? “It isn’t predictions, emotions, or headlines, it’s innovation and productivity. If you look around, you can see that those things are accelerating, not slowing down,” says 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

Vanguard

BlackRock

Morningstar

Research Affiliates

S&P 500

Warren Buffett

The 2025 Social Security Trustees Report is out and the news is bleak. This episode of the Power of Zero Show looks at the potential repercussions if nothing changes by 2033.

If things don't improve, Social Security will face a cash flow deficit that triggers a 23% across-the-board benefit cut - and that's one year earlier than predicted.

But that's not all… in fact, it gets far worse, says host David McKnight.

The system is already $72.8 trillion in the red, an unfunded liability that's twice the size of the national debt and $10 trillion worse than 2024.

This is by no means a temporary funding glitch, it's a permanent structural crisis.

The first finding of the 2025 Social Security Trustees Report is that the Trust Fund goes insolvent a year earlier than anticipated in last year's report.

And there's no wiggle room: Absent intervention on the part of Congress, benefits will drop automatically by 23% for all recipients.

The next noteworthy aspect is the program's unfunded obligations, the present value of future benefits not covered by future taxes.

That gap is a staggering $72.8 trillion, which is $10 trillion more compared to 2024.

The cause for this $10 trillion jump? The removal of some pension offsets and benefit boosting by last year's Social Security Fairness Act…

The final revelation of the report  is that trustees chose to focus on the 75-year deficit and ignored the infinite horizon that is so relevant in a pay-as-you-go system.

The main tool to try to change the status quo and fix the issue is either cutting benefits, raising taxes, or some combination of the two.

David addresses all three scenarios. The first one revolves around Congress permanently okaying a 30% across-the-board cut starting today - alternatively, they could wait until 2033 and implement a 23% cut by default.

The second scenario sees an increase of the Social Security's FICA payroll tax from 12.4% to 17.6%.

Thirdly, a combination of smaller tax increases and moderate benefit cuts.

David touches upon the possible consequences of not addressing these issues immediately.

The 1983 Greenspan Commission only patched half of the long-term hole in Social Security, leading to the problem being 2.5 times bigger today and requiring even more aggressive solutions to create a permanent fix.

David explains that, if you count all the government's off-the-book promises, Medicare, defense, debt service, the fiscal gap is around 7% of GDP.

That translates to the country having a fiscal shortfall year in and year out of 7% of GDP FOREVER.

How bad is the situation? "You'd have to fire every federal employee, cancel every NASA mission, basically shut everything down… and you still wouldn't plug in the hole in our long-term fiscal outlook," says David.

David is very clear on what's needed: Major structural reform to healthcare entitlements, taxes and benefits.

David shares two things to consider before you decide to draw your Social Security benefits early.

A quote by Dr. Larry Kotlikoff highlights the fact that taking benefits early won't protect you from reduced benefits later, and that the reduction could indeed be less for those who waited in order to provide equity with those who collected early.

David recommends saving as much as you can so that you can compensate for any future cuts to Social Security, as well as modeling multiple scenarios (drawing now vs. drawing later), keeping an eye on Congress and the news, and to focus on other risks your retirement may face - think longevity risk and tax rate risk, for instance.

In conclusion: notwithstanding all that bad news from an actuarial standpoint, it still makes sense to push off Social Security just as long as you can.

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

1983 Greenspan Commission

2025 Social Security Trustees Report

Dr. Laurence “Larry” Kotlikoff 

Ernst & Young recently came out with a new updated study, which is likely to scandalize mainstream financial experts like they did with their 2021 study.

Back then, they asked the question, “Is the stock market-only retirement approach really the strategy that gives you the highest levels of income and the best outcomes over a 30-year retirement?”

In their new study, on the other hand, they substituted Indexed Universal Life for Whole Life, and Fixed Index Annuities for Deferred Income Annuities – a move that led to unexpected and spectacular results. 

Host David McKnight explains that by going beyond the investment-only playbook and by integrating tools like Whole Life and Deferred Income Annuities into your retirement strategy, you get higher levels of income and a higher likelihood of your money lasting through life expectancy and beyond.

For years, Indexed Universal Life and Fixed Index Annuities have been misrepresented by many (inexperienced) insurance agents, have been vilified by media personalities using a “one-size-fits-all” approach, and have been ignored by investment-only advisors.

In the latest iteration of their study, Ernst & Young ran three case studies: one featuring a 35-year-old couple just starting their financial journey, one involving a 45-year-old couple, and the last one looking at a 65-year-old couple on the doorstep of retirement.

David asks why, if the E&Y case studies show that IULs and FIAs can dramatically improve income levels and the likelihood of money lasting through life expectancy and wealth to heirs, they have been so frequently demonized?

David touches upon three distinct reasons why he believes the critiques occur.

“Together, the IUL and FIA act as the stabilizers on your retirement journey,” says David.

Utilized in conjunction with your investment portfolio, IUL and FIA increase your income, the likelihood your money lasts through life expectancy, and they increase the money that gets passed on to your heirs.

For David, data proves that cash value life insurance and annuities work whether you’re just getting started or are stepping into retirement.

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

Ernst & Young

Dave Ramsey

Suze Orman

S&P 500

President Trump’s proposed Big Beautiful Bill (BBB), which has been getting everyone’s attention of late, is the topic of this episode of The Power of Zero Show. 

Host David McKnight points out that the “crown jewel” of the BBB is the extension of the 2017 Trump tax cuts.

The 2017 Tax Cuts and Jobs Act (TCGA) brought about cuts to individual income taxes, corporate taxes, and a dramatic expansion of the estate tax exemption.

While corporate tax cuts were made permanent – going from 35% to 21% – the tax cuts for individuals and estates had an expiration date.

If the status quo stays unchanged, those tax rates will revert back to their 2017 levels on January 1st, 2026.

David goes over how Republicans could make the tax cuts permanents through some outside the box accounting techniques.

Since Republicans don’t have a supermajority in the House or Senate, they would have to rely on a special Senate process known as Budget Reconciliation. 

A few fiscal conservatives such as Representative Thomas Massie and David Schweikert, as well as Senator Susan Collins and Rand Paul may not be on board with such an approach…

Their main concern? The fact that making these tax cuts permanent would add between 4.6 and 5.5 trillion dollars to the national debt over the next 10 years.

David addresses the single greatest obstacle preventing Republicans from making the Trump tax cuts permanent: the Bird Roll.

The Bird Roll states that budget reconciliation bills cannot increase the federal deficit beyond the budget window, which is typically 10 years.

In other words, to make the tax cuts permanent, Republicans would have to find a way to pay for them.

Cuts to Medicaid and the Supplemental Nutrition Assistance Program (SNAP, formerly known as the Food Stamps Program), as well as tariffs on imports are how Republicans are trying to go about things.

Some Republicans suggest that the tax cuts won’t increase the national debt over the next decade and beyond, for the fact that they’ll actually spark economic growth.

According to the Congressional Budget Office, the cost of the 2017 tax cuts was $1.9 trillion over an eight-year period, while the tax cuts themselves only increased revenue by about $400 billion.

As David stresses, “The Tax Cuts and Jobs Act of 2017 ended up increasing the debt by about $1.5 trillion, meaning that the tax cuts were in no way self-financing.”

If Trump tax cuts were to be made permanent, it will almost certainly increase the likelihood that taxes will have to skyrocket by the year 2035.

According to a Penn Wharton study, when the country’s debt-to-GDP reaches 200%, we’ve passed the point of no return.

If that were to happen, no combination of raising taxes or reducing spending would arrest the financial collapse of the nation.

Former Comptroller General of the Federal Government, David M. Walker, has even suggested that tax rates could have to double to keep the U.S. solvent.

This means that even if Republicans make the tax cuts permanent, they will have to raise taxes eventually…

For David, this may lead to Congress being forced to raise taxes in dramatic fashion in 2035 in an effort to avoid a financial apocalypse in 2040.

David believes that, if you have the lion’s share of your retirement savings swirling away in tax-deferred accounts like 401(k)s and IRAs, you should take advantage of what’s likely going to be 8 to 10 years more of historically low tax rates.

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

Donald Trump

Tax Cuts and Jobs Act

Representative Thomas Massie

Representative David Schweikert

Senator Susan Collins

Senator Rand Paul

Congressional Budget Office

Penn Wharton

David M. Walker

David McKnight addresses Doug Andrew’s recommendation of turning your IRA into an IUL.

David agrees with some of Andrew’s views, including his objection to rolling a 401(k) into an IRA, and then leaving it there until you die.

Given the exploding national debt, most experts predict that taxes 10 years from now will have to rise dramatically to keep the U.S. solvent…

Doug Andrew lists Indexed Universal Life as his “favorite financial vehicle because of liquidity, safety, predictable rates of return, and tax-free growth”.

David is skeptical of advice that denigrates every tax-free alternative within the IRS tax code in an attempt to glorify the IUL – which happens to be the product Andrew sells.

While David recognizes some admirable qualities that are unique to IUL (and that no other financial tool has), he doesn’t recommend having an IUL as the only prong in your tax-free strategy.

David’s preference is for you to opt for an approach that takes advantage of every tax-free nook and cranny within the IRS tax code.

Many gurus are “married” to and recommend only one strategy. David, on the other hand, prefers “multiple streams of tax-free income, none of which show up on the IRS’ radar, that contribute to you being in the 0% tax bracket.”

David lists the unique qualities of financial tools such as Roth IRAs, Roth 401(k)s, Roth Conversions, and IULs.

If you’re someone who’s looking for advice, David recommends being careful whenever someone recommends you liquidate a retirement account you’ve been saving into your entire life and move it wholesale into an IUL!

Your ideal goal should be to have multiple tax-free income streams that will land you in or near the 0% tax bracket in retirement.

Why is that so important? Because even if tax rates were to double, two times zero is still ZERO.

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

This episode of The Power of Zero Show revolves around a recent Ray Dalio video in which he issued warnings about the U.S. debt crisis.

In the clip, Dalio appears to be giving America three years to get their act together and to right the fiscal ship of state.

Dalio mentions the draft of his new book that goes through the mechanics of the debt – and highlights the supply-demand problem he believes will occur if the deficit doesn’t go from the current 7.2% of GDP to about 3% of GDP.

Dalio touches upon what people should do when there isn’t an adequate supply-demand balance.

He believes that looking back at history will show you that the current problems are the results of history repeating itself.

A recession isn’t the one thing Dalio is afraid of… the breakdown of the monetary order is! 

Host David McKnight talks about the bid other countries may have on the U.S. fiscal debt, as well as the related crisis of confidence of sorts.

According to a recent Penn Wharton study, if the U.S. doesn't right their fiscal ship of state by 2040, no combination of raising taxes and/or reducing spending will arrest the financial collapse of the nation.

David believes that in the next 10 to 15 years, the U.S. is likely to need huge infusions of capital to avoid a financial collapse, the likes of which we haven’t seen since the Great Depression.

What should you do? If you have the lion’s share of your Retirement Savings, IRAs or 401(k)s, you need to act now while tax rates are historically low.

Since we’re on the cusp of Trump extending his tax cuts for another 8 years, it’s important to know that, if you count 2025, we’ll have historically-low tax rates for another 9 years.

David is in favor of taking action before tax rates increase, also because he believes that, come 2034, tax rates aren't going to simply revert back to what they were in 2017.

If the American fiscal ship doesn’t get right on time, we could go back to seeing high tax rates that were part of the past – such as 94% in the last two years of World War II, or 89% as it was throughout the entire decade of the 70s.

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

Ray Dalio

Penn Wharton

David McKnight looks at why many people wait until the fourth quarter to do a Roth conversion, the potential penalties, and what can be done to avoid having to pay underpayment penalties to the IRS.

David begins the episode by highlighting the fact that a lot of investors wait until Q4 before they do a Roth conversion – and they prefer to pay taxes on it in cash instead of simply having the taxes withheld by the IRS.

From a mathematical standpoint, it’s the correct thing to do because it allows you to get 100% of the converted dollars into your tax-free account.

However, if you didn’t pay quarterly taxes on that income evenly throughout the year, the IRS can charge you an underpayment penalty!

The IRS’ safe harbor rules can spare you from any underpayment penalty for a Q4 Roth conversion, if certain requirements are met…

David goes over two scenarios in which you wouldn’t have to pay an  underpayment penalty, as well as when, and why, you may need to file Form 2210 A1.

Make sure to familiarize yourself with Form 2210 A1 because, as David puts it, it will “become your best friend if you’re hoping to avoid underpayment penalties on a fourth quarter Roth conversion.”

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

Form 2210

In today’s episode, David McKnight focuses on whether you should do a Roth conversion, how much you should convert per year, and whether it’s possible to over-convert to Roth.

David explains that an effective tax rate is the actual percentage of your income that you pay in taxes after accounting for deductions, exemptions, and credits.

For David, the only reason you should do a Roth conversion is if you believe that your effective tax rate in retirement will be higher than your marginal tax rate today.

David touches upon a couple of reasons why your effective tax rate in retirement could be higher than your marginal tax rate today.

Remember: the national debt is projected to be $57 trillion by 2035. If Trump extends his tax cuts, you can layer another $5 trillion right on top of that…

According to a recent Penn Wharton study, if the U.S. doesn't right its fiscal ship of state by 2040, no combination of raising taxes or reducing spending will arrest the nation’s financial collapse.

Before undertaking your Roth conversion strategy, you have to remember that in retirement, absent any other deduction, the IRS will give you a deduction called standard deduction.

The standard deduction is $30,000 if you retired today as a married couple and $15,000 as a single filer.

David illustrates a scenario that can lead you to fall into the Roth IRA over-conversion trap.

Your goal should be to keep your balance in your IRA or 401(k) low enough that required minimum distributions in retirement are equal to or less than your standard deduction, but also low enough that they don’t cause Social Security taxation.

David has done the math: if you don’t have a pension or other residual taxable income, you want to keep between $300,00 and $400,000 in your 401(k) or IRA in retirement.

Got a sizable pension or another significant source of taxable income? Then, your ideal balance would be much closer to zero.

It’s crucial that, when converting your money, you do it slowly enough that you don’t rise into a tax bracket that gives you heartburn, but quickly enough that you get all the heavy lifting done before tax rates go up for good.

If Trump ends up extending his tax cuts, they’ll expire at the end of 2033. That means that somewhere between 2034 and 2040 tax rates will likely rise in dramatic fashion.

By including the 2025 tax year, that gives you nine full years during which you can execute your Roth conversion strategy.

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

Donald Trump

Penn Wharton

David McKnight looks at Target Date Funds (TDFs) and why their set-it-and-forget-it approach to investing is NOT something you should rely on.

David kicks things off by explaining how TDFs work, including why they tend to be a popular option for novice investors.

While it sounds like an excellent approach, David points out two major flaws.

“A lot of the problems with TDFs come down to sustainable withdrawal rates in retirement,” says David.

The 4% Rule consists of you being able to withdraw 4% of your day one balance in retirement, adjusted every year thereafter for inflation.

Unfortunately, a TDF is fundamentally incompatible with the 4% Rule.

Since the 4% Rule is the most expensive way to ensure that you don’t run out of money in retirement, David suggests doing something else. 

He recommends figuring out what your retirement shortfall is and then buying a Guaranteed Lifetime Income Annuity to help bridge your income gap. 

While being on a glide path or relying on a set-it-and-forget-it approach may sound like a good idea, it actually isn’t conducive to evaluating the strategies that will help you reap the most efficiency from your retirement savings.

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

In this episode of the Power of Zero Show, host David McKnight discusses the scenario in which you have maxed out your 401(k) and are wondering where you should invest the rest of your money.

The episode kicks off with David addressing the type of 401(k)s you should be investing in first.

There are two types of 401(k)s: the traditional pre-tax 401(k) and the Roth 401(k).

Should you go for a traditional 401(k) or a Roth 401(k)? It all depends on whether you think your tax bracket is likely to be lower or higher in retirement…

With the national debt set to hit $62 trillion by the year 2035, David believes that, “There isn’t any way the Federal Government can service that type of debt without increasing taxes.” 

Planning on retiring past 2035 and you’re currently in the 24% tax bracket? Then, David recommends opting for a Roth 401(k).

This year, you can put $23,500 into your Roth 401(k) if you’re younger than 50, and $31,000 if you’re over the age of 50.

David talks about what to do if you’re married and have maxed out your Roth 401(k), as well as what you can do if your modified adjusted gross income is less than $246,000 as a married couple, or $161,000 as a single filer.

David illustrates the scenario in which relying on a LIRP (Life Insurance Retirement Plan) would make sense.

According to a recent Ernst & Young study, if you can save between 3 and 5 years worth of living expenses in your LIRP by day 1 of retirement, you can increase the sustainable withdrawal rate of your stock portfolio from 4% to as high as 8%.

David points out that there’s no limit on how much you can put into your LIRP and, unlike with what happens with Roth contributions, you are not constrained by your modified adjusted gross income level.

Another point in favor of opting for a LIRP is the fact that it grows safely and productively – the growth of the money in your LIRP is linked to the upward movement of a stock market index.

Whatever that index does in any given year, you get to keep up to a cap that’s typically between 10% and 12%. Index going down? Then, you’re simply credited a zero.

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

Ernst & Young