A recent landmark study from BlackRock caught David McKnight – he shares what it was all about and why you should care in this new episode of the Power of Zero Show.

For decades, Americans were told that if they simply contributed faithfully to their 401(k) and avoided emotional decisions during market downturns, they would have enough money in retirement.

According to the BlackRock study, retirees who incorporated guaranteed lifetime income in the form of an annuity into their retirement portfolio experienced an average increase of 22% in potential retirement spending.

That number became approximately a 25% increase for lower income retirees!

The increase came primarily from giving retirees greater confidence to spend money because a portion of their retirement income was guaranteed for life.

David explains that, while 30 or 40 years ago retirees could rely on company pensions that provided predictable monthly income for life, the modern retirement system has shifted enormous responsibility onto the shoulders of ordinary Americans.

Employers used to bear the responsibility for generating the income stream and ensuring that retirees did not outlive their money.

Today, however, pensions have all but disappeared, and most Americans now rely on 401(k) or other tax-qualified retirement plans.

One of the big problems is the fact that such tax-affirmed accounts can help you build wealth, but don't come with instructions on how to make sure your money lasts a full 30-year retirement.

The BlackRock study echoes something that David has stressed several times on the show: retirees spend more when at least a portion of their retirement income is guaranteed.

David clarifies that when he talks about guaranteed lifetime income, he does not suggest retirees place all of their assets into annuities or eliminate market exposure altogether.

David talks about 100% stock allocation and why you can be much more aggressive in your stock market allocation once you create an income floor in retirement.

The current status quo of the American fiscal system – and exploding national debt – appears to be painting a picture where future tax rates will be significantly higher than they are today.

David is a strong advocate for tax-free investment accounts in retirement.

In particular, he points to six different tax-free income streams: Roth IRAs, Roth 401(k)s, Roth conversions, RMDs up to standard deductions, certain types of cash value life insurance as a volatility shield in retirement and, if you can keep your provisional income low enough, your Social Security can be 100% tax-free.

David touches upon a strategy that can give you guaranteed tax-free income for life.

The old retirement model gave Americans confidence through company pensions. The modern model requires retirees to create their own personal private pension in the form of an annuity.

It's important to understand that retirement isn't just about accumulating wealth, but also about creating a stream of lifetime income that's guaranteed to last as long as you do.

David concludes by explaining what retirement planning should accomplish beyond merely maximizing account balances.

Mentioned in this episode:

David's new book: 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

BlackRock

BlackRock's paper Who Benefits From Guaranteed Lifetime Income?