David McKnight discusses the allocation of $1M if he had it to invest in 2026.

David sees a taxable brokerage account as the least efficient investment account you could possibly own – since it's taxed every year and it's exposed to both short- and long-term capital gains.

While this type of account is liquid and can serve as an excellent emergency fund, it's the most tax-unfriendly of all the investment alternatives.

The goal, says David, isn't to grow wealth within this type of account, rather to use it as a funding source to systematically build multiple tax-free income streams for retirement.

Roth IRAs, which can be funded for a combined $17,200 per year (for your and your spouse's Roth IRA) is the first place David believes the money should go.

Next, you should aim at maxing out your Roth 401(k)s – which is $24,500 a person for people under 50 and $32,500 per person.

David explains how you can convert taxable money into tax-free money without triggering a massive taxable event and without disrupting your lifestyle.

70% total U.S. stock market index fund, 30% total international stock market index fund is the only allocation you'll ever need, says David.

Having to properly structure and fully fund an indexed universal life policy (IUL) is the most misunderstood piece of the strategy discussed by David.

The idea is to see an IUL as a way to grow a portion of the $1M portfolio safely and productively, and not to use it as an investment replacement or stock alternative…

Historically, IULs have grown 5-7% in net fees over time – with zero stock market risks.

The goal of day one of retirement is to have 3-5 years of living expenses sitting in your IUL's cash value, tax-free. This is your volatility buffer.

According to a recent Ernst & Young study, the strategy discussed in this episode provides far more income, a far greater likelihood that your money will last through life expectancy and far more money to the next generation compared to the investment-only approach.

Suze Orman recommends the exact same strategy but with a difference: Instead of using an IUL she suggests using a savings account that has rock bottom taxable rates of return.

However, an IUL is a more effective tool, as it grows far more productively as tax-free, protects your principal, and the death benefit can double as long-term care protection.

David's strategy doesn't include bonds as an IUL is safer: No sequence of returns risk early in retirement, not being forced to sell stocks in a down market.

"I generally don't ever recommend bonds. There are far better instruments that are safer, more productive, and more tax-efficient tools, with IUL being one of them", illustrates David.

Many experts expect tax rates to rise dramatically by 2035 to pay interest on the national debt, bail out Social Security, and bail out Medicare and Medicaid.

When that happens, you just don't want to be sitting on a massive taxable account..!

The goal is to shift as much as possible from the $1M portfolio into tax-free accounts before 2035 – you want to have them in your Roth IRAs, Roth 401(k)s, and IUL cash value.

Conversely, you only want about six months' worth of living expenses sitting in your taxable account.

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

Ernst & Young

Suze Orman

This episode of The Power of Zero Show sees David McKnight discussing the single most hated retirement strategy in America: annuities.

Interestingly enough, annuities are also one of the most powerful tools you can use to protect yourself from the biggest financial risk you face in retirement.

Longevity risk, a retirement danger most retirees never fully grasp, is the reason why this topic matters so much.

As David explains, "Longevity risk is the risk of living longer than you expected, running out of money before you run out of life."

While some people shrug longevity risk off as a good problem to have, it's actually the biggest risk in retirement (from a financial standpoint), as it is a risk amplifier.

In other words, it magnifies everything else that can go wrong – such as inflation, long-term care, withdrawal risk, and sequence of returns risk.

The reasons why many people hate annuities are legitimate, while others are propaganda.

For more than 20 years, Kenneth Fisher has led a massive anti-annuity crusade.

Remember: there's only one way to truly eliminate longevity risk from your retirement, and that's through a guaranteed lifetime stream of income in the form of an annuity.

Research on annuities – something that has been ongoing for the last four decades – has shown that people with a guaranteed lifetime income tend to spend more freely in retirement than people living solely off an investment portfolio.

David touches upon Richard Thaler's concept of the Annuity Puzzle.

Annuities solve a problem that no stock portfolio ever can: a portfolio can't guarantee lifetime income you cannot outlive.

With the American national debt exploding, which would probably lead to higher tax rates, an internal Roth conversion allows you to get ahead of that.

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

Kenneth "Ken" Fisher

Richard Thaler

David McKnight dissects Elon Musk's recent claims that, because of AI robotics and automation, the future will have such hyperabundance that ordinary people may no longer need to save for retirement.

In Musk's future, robots are going to do all the work, AI will create prosperity, and society will provide everything you need at a little or no – cost.

While David likes Musk's vision for the future, he doesn't agree with him on this one.

When examined through the lens of economics, government obligations, and retirement realities, Musk's idea of the future collapses.

David identifies five specific reasons why that will happen.

The first reason, and perhaps the biggest flaw in Musk's argument, is that AI productivity doesn't automatically translate into personal wealth.

David points out that, during major technological revolutions, productivity increases faster than wages, capital investors capture most of the gains, and wealth becomes more concentrated at the top.

In the most optimistic AI scenarios, economists say that it takes decades for productivity gains to spread to the entire population; if they ever do.

The second reason why Musk's predictions won't probably come true has to do with the fact that AI won't fix the U.S. national debt or entitlement crisis.

The U.S. has $40 trillion in national debt, which is projected to grow $2 trillion per year over the next 10 years (with annual interest payments already over $1 trillion per year).

Furthermore, the Social Security Trust Fund is forecasted to run out in 2033, while the Medicare Trust Fund in 2031, and 10,000 baby boomers retire every day. Yet, no rapid explosion of AI innovation will change any of this.

The third pet peeve David has with Elon Musk's predictions is that AI has no built-in mechanism for sharing wealth.

"Musk's argument hinges on the idea that AI abundance will automatically be shared, but it won't. Here's how this will likely go down: the profits of AI companies will flow to shareholders, and governments will collect very little from that activity", says David.

The fourth reason why David disagrees with Musk's views for the future is that universal basic income is NOT a retirement plan.

The final reason why Musk is wrong about the need to save for retirement is that AI increases lifespans which, in turn, increases retirement costs.

Any major economist studying debt trajectories seems to agree: tax rates in the future are likely to be much higher than they are today.

The current status quo is where the power of your retirement strategy becomes indispensable.

Remember: if tax rates in the future are higher than they are today, then every dollar you withdraw from a taxable 401(k) or IRA is going to be worth a lot less than you ever thought possible.

David's solution consists of, over time, repositioning your money into tax-free vehicles – primarily Roth IRAs and Roth 401(k)s.

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

Elon Musk

Moonshots with Peter Diamandis

Daron Acemoglu

Erik Brynjolfsson

Organization for Economic Co-Operation and Development (OECD)

Brookings Institution

The Congressional Budget Office

Sam Altman

Andrew Yang

Social Security Trustees

Committee for a Responsible Federal Budget

David McKnight explores one of the most fascinating and misunderstood topics: Retirement planning annuities.

In the article Annuitization Puzzles, Economics Nobel Prize winner Richard Thaler tries to answer a deceptively simple question: If annuities are so good at protecting retirees from outliving their money, why don't more people buy them?

Thaler, one of the founding fathers of behavioral economics, coined the phrase "the annuity puzzle" to describe a striking contradiction between theory and real life.

According to traditional economic models, the rational choice would be for retirees to annuitize at least some portion of their wealth – yet, only very few Americans go out and buy a pure life annuity.

The answers to this contradiction are almost entirely psychological.

Loss aversion, loss of control, complexity and distrust, fear of disinheriting errors, underestimating longevity risks are the key reasons why that happens.

David points out that most retirees believe they won't live as long as they actually will;they underestimate the probability of living into their 90s.

"The Annuity Puzzle exists because economics assumes we're rational, while real retirees behave like human beings. They're driven by emotions, fears, and biases, not economic data," says David.

Remember not all annuities are created equal.

David touches upon the key differences between immediate and fixed index annuities.

Did you know that, while they aren't stock market replacements, fixed index annuities (FIAs) make for excellent bond alternatives?

Furthermore, FIAs do resolve the flexibility and liquidity concerns many retirees face.

In his book Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement, David discusses what he considers the most powerful innovation in the annuity space today – he shares more about it in this episode.

What he discusses isn't the old single premium immediate annuity you may be familiar with… rather, he illustrates a modern retirement income engine that blends the science of risk pooling with the tax-free advantages of Roth planning.

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

Annuitization Puzzles by Richard Thaler, Shlomo Benartzi, and Alessandro Previtero

S&P 500

Penguin Random House

David McKnight discusses the three assets he believes you really need for a stable, predictable tax-efficient retirement.

Getting them right will dramatically reduce the risks that derail most retirements: Market risks, sequence of returns risks, longevity risks, tax risks, and long-term care risks.

Stock market investments, with a 70% total US stock market index and a 30% total international stock market index, are the first thing David recommends.

He defines them as "Your growth engine, the one that pays for your discretionary expenses in retirement."

David goes over aspirational and shock expenses.

A Fixed Index Annuity (or FIA) is the second asset you'll need in retirement.

A FIA is the one asset that eliminates the longevity risk, the risk of living so long that you deplete all your other assets.

Then there's Index Universal Life Policy (or IUL).

A recent Ernst & Young study found that retirement plans that included IULs, as well as FIAs, provided more income in retirement, a higher likelihood of money lasting through life expectancy, and more money to heirs over the investment-only approach to retirement."

Remember: If you withdraw money from your stock portfolio in a down market, you lock in losses and your portfolio has a much harder time recovering.

In other words, the IUL acts as your retirement shock absorber.

Did you know that, because of its safe and productive growth, the IUL can serve as what we call a "volatility buffer" in retirement?

And there's more! In fact, an IUL can also serve as a bond alternative during the accumulation years – but without the interest rate risk or bond price volatility.

David sees IULs as the most dynamic asset of them all – it's your volatility buffer, your bond alternative, and your long-term care safety net.

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

Ken Fisher

Ernst & Young

David McKnight explores the five biggest retirement mistakes people make.

When it comes to retirement "traps", the obvious things such as picking the wrong stock, missing the next bull market or retiring at the wrong time are what typically comes to mind…

The first mistake people tend to make when it comes to their retirement is believing that tax diversification is good enough.

"Having the bulk of your wealth in tax-deferred accounts 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. Not a very good business partnership, if you ask me," says David.

The next mistake is one of the most subtle and expensive mistakes retirees make: ignoring the standard deduction when doing Roth conversions.

The third big retirement mistake people make is trying to time the market instead of timing the tax code.

Remember: "Markets move up and down, but when a country is in a debt crisis, tax rates only move in one direction: Up!"

Are you using bonds as safe money in retirement? That's what the fourth retirement planning mistake David has encountered often in his busy work schedule.

David suggests to time the tax code, instead of timing the market…

Replacing your bonds with annuities that have a guaranteed lifetime income feature is something you should consider.

The fifth and final mistake to stay away from is not taking enough risk in retirement.

David explains that your annuities can provide income in the year after a down year in your stock portfolio. That gives your stocks a chance to recover before you take further distributions.

Don't forget, the stock portion of the portfolio has one job and one job only: Make sure your money lasts a full 30-year 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

Tom Hegna

The focus of this episode is on what Dave Ramsey refers to as the only three investments he owns.

"I have three investments: my business, paid-for real estate with no mortgages, and mutual funds," says Ramsey.

He goes on to emphasize that he doesn't play single stock, doesn't screw around with gold or Bitcoin, and that he doesn't need your stock tip from your "broke golfing buddy with an opinion."

Host David McKnight wonders whether Ramsey's investment model actually works in principle, and if parts of it can be replicated by everyday investors…

Ramsey's business functions in two powerful ways: it provides current cash flow so he doesn't have to draw down investments, and it represents a large future liquidity event – this alone dramatically reduces the pressure on the rest of his portfolio.

David highlights the fact that Ramsey doesn't pick individual stocks. Instead, he spreads his money across the entire global stock market using mutual funds.

Ramsey famously advocates an even split: 25% in growth and income funds, 25% in aggressive growth funds, and 25% in international funds.

David's recommendation is to "Invest 70% in a total U.S. stock market index, 30% in a total international stock market index, and 0% in bonds."

By doing that, you'll own the entire market instead of trying to outsmart it.

It is possible to adopt a 100% stock portfolio even if you don't own a business or don't have a paid off real estate throwing off residual income – David explains how.

You could have a guaranteed lifetime income annuity have the same role played by real estate in Dave Ramsey's approach.

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

David McKnight addresses a myth floating around the financial world: "For a Roth conversion to make sense, you need many years for the Roth to grow so you can recoup the taxes you paid to the conversion."

David stresses why this way of thinking is fundamentally wrong – it's built on the wrong assumption that all the money in your IRA belongs to you… when it actually doesn't.

Remember: your IRA isn't one pile of money but two piles sitting in the same account. One pile belongs to you, while the other to the IRS.

What's unknown is how big the IRS' pile is going to be when you eventually take the money out of the account.

David goes on to explain what happens as both piles grow and required minimum distributions kick in.

You may end up with the IRS' pile being not just larger but taxed at a much higher rate too.

With a Roth conversion, on the other hand, your conversion translates into you carving out the IRS' portion and handing it to them today – settling the bill while the balance is smaller and the rate may be lower.

There's a key question David invites you to keep in mind when it comes to Roth conversions: "Is your tax rate lower today than it will be when you take the money out?"

The exploding national debt of over $200 trillion dollars in unfunded obligations for Social Security, Medicare, and Medicaid are going to require spending cuts, higher taxes, or some combination of the two.

Beware: the problem with most retirement plans is that they assume that tax rates will stay low forever!

David points out that Roth conversions aren't about timing the market but about timing the tax code.

In other words, they're about timing the advantage of known measurable tax rates today instead of gambling on unknown ones tomorrow.

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 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)