This episode of the Power of Zero Show sees host David McKnight address Dave Ramsey’s advice – inviting a member of his audience to fire his tax advisor for recommending a 401(k).

The problem with “financial gurus” like Dave Ramsey and the call-in shows they host is that they provide one-size-fits-all prescriptions that are delivered in very stark black and white terms.

While David is an advocate for accumulating money in tax-free retirement vehicles, he also recognizes the importance of nuance with these types of recommendations.

David explains that contributing to a Roth 401(k) is a good avenue to explore if you believe that your tax bracket in retirement is going to be higher than it is today.

David believes that taxes will rise dramatically over the next 10 years.

Following one-size-fits-all advice shared by financial gurus puts you at risk of running out of money faster because you may pay a tax along the way that you didn’t necessarily have to pay…

David discusses when you should go for a traditional 401(k) and when it would be wiser to opt for a Roth 401(k) instead.

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 financial collapse of the country.

David goes over a couple of strategies that could help your money last five to seven years longer.

The fact that there are huge benefits to investing in tax-free accounts shouldn’t necessarily translate into you reflexively pouring all your retirement contributions into your Roth 401(k), says David.

David shares his thoughts on when it may be a good idea to listen to Dave Ramsey and when it isn’t a clever move to follow his advice.

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

Dave Ramsey

David Walker

Penn Wharton

USA Today

David McKnight takes a closer look at Suze Orman’s take on annuities – and at why she recommends her audience avoid them at all costs.

Suze Orman labels the 5.4% compounded annual rate of growth one of her audience members (Janet) has had over the last six years as “horrific in today’s market.”

David believes that the main issue with Suze Orman’s approach is that it engages in a classic case of apples to oranges comparison.

According to David, index annuities are a bond alternative and were never meant to be a stock market replacement.

David makes the case for index annuities performing far better than bonds – with a lot less risk.

The average return on corporate bonds is between 4% and 5%, the one for treasury return is 3-4%, while the average return on municipal bonds is 2.12%.

In David’s opinion, Janet should only feel bad about her 5.4% return over the 6 year time frame if the advisor who sold it to her sold it as a stock market alternative.

Suze Orman’s audience member Janet purchased a so-called non-qualified indexed annuity, which tends to get a “last in, first out” treatment for tax purposes.

David isn’t big on non-qualified annuities for the fact that a person purchasing them will have to pay tax on the growth before they’re able to access the principal tax-free.

Another flaw in Orman’s assessment: she doesn’t tell you that you can hold an annuity in an IRA and pay ordinary income, or you can hold an annuity in your Roth IRA and pay no taxes at all…

Something financial gurus like Suze Orman have in common: they DON’T have the luxury of nuance.

Dollars earmarked to retirement accounts generally have a 10% penalty when you access them pre-59 and a half.

David points out how Suze has wittingly demonized all forms of annuities – even the IRA and the Roth variety.

While Suze is right saying that most annuities have surrender charges, she misses the entire point of why people usually get annuities: to get a guaranteed stream of income they can never outlive.

401(k) has a surrender charge that’s far more punitive than any annuity David has ever seen.

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

Suze Orman

Standard & Poor’s 500 Index

USA Today

In this episode, host David McKnight tackles a question about the tax bracket at which you should stop contributing to the Roth IRA and start contributing to the traditional IRA.

The inspiration for this episode was a recent episode of The Money Guy Show.

David believes that advice such as that shared on The Money Guy Show doesn’t consider most of the people asking questions like the one addressed in the episode.

Those are people whose combined marginal tax rates fall between 25% and 30%.

Generally, David likes the idea of having a rule of thumb tax bracket that helps you determine whether or not you should go Roth or traditional.

However, he warns against providing advice that ends up confusing a huge swath of investors.

In fact, David sees the particular rule of thumb like the one shared on The Money Guy Show as something that isn’t going to be all that helpful to many Americans.

David breaks down the power of zero rule of thumb when it comes to deciding between Roth or traditional.

Your state tax in retirement is likely to be very similar to what your state tax is now.

David’s rule of thumb: if you’re in the 24% federal tax bracket or lower, then go Roth all day.

That’s because your current 24% bracket is still lower than the future version of the 22%, which is 25%...

Remember: if you’re in the 24% or lower in the federal marginal tax bracket, go Roth. If you’re in the 32% bracket or higher, then go tax deferred.

Generally, David DOESN’T recommend filling up your entire tax-free bucket and ignoring tax deferred altogether if you decide to go Roth.

Simply allocating your match to the tax deferred portion of your 401(k) is a great way to accumulate the required amount in your tax deferred bucket.

David tends to like the Money Guy Show, but he feels that, in this instance, they should simply ignore state taxes in the Roth vs. traditional calculus and draw a red line at the 24% tax bracket.

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

David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code

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

Brian Preston

Bo Hanson

The Money Guy Show

David McKnight looks at a recent study on retirees that seems to tell a different story compared to what many people in the U.S. tend to believe.

Americans often view guaranteed lifetime income annuities skeptically – they’re perceived as a drag on the growth of their stock market portfolio.

According to the study by retirement researchers David Blanchett and Michael Finke, retirees with guaranteed lifetime income spend about twice as much as their counterparts who rely on stocks and bonds alone for income in retirement.

Those who rely purely on investments alone in retirement end up spending less because they fear running out of money in advance of life expectancy.

David explains that “retirees with annuities spend more, not because they are wealthier, but because they have a form of wealth – a guaranteed income – that encourages them to spend.”

Comparing two couples, a risk-averse couple with a risk-tolerant couple, Blanchett and Finke’s study found a 1.1% difference in them taking an annual withdrawal rate from their portfolio.

David couldn’t have been any clearer: “If you want to spend more in retirement, taking an investment-only approach is usually the worst way of going about it.”

Mentioned in this episode:

David’s upcoming book: The Guru Gap: How America’s Financial Gurus Are Leading You Astray, and How to Get Back on Track

David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code

DavidMcKnight.com

DavidMcKnightBooks.com

PowerOfZero.com (free 3-part video series)

@mcknightandco on Twitter

@davidcmcknight on Instagram

David McKnight on YouTube

Get David's Tax-free Tool Kit at taxfreetoolkit.com

David Blanchett

Michael Finke

The episode explores whether the proposed Department of Government Efficiency (DOGE) will move the needle when it comes to the U.S. debt crisis.

Some people see DOGE as the bold move America needs to solve its looming debt crisis.

Elon Musk believes that DOGE can rip out at least $2 trillion out of the $6.5 trillion Biden-Harris budget – however, David McKnight disagrees.

David gives a breakdown of the federal budget, including the so-called non-discretionary spending.

Former U.S. Comptroller General David Walker shares his thoughts on what he sees as the potential impact of DOGE on the federal deficit.

David explains that, unless actions are taken right away, Social Security, Medicare, and Medicaid will eventually bankrupt America.

Moreover, the more time passes with the Federal Government failing to dramatically scale back such programs, the more onerous and draconian the fix will be on the back end.

Does David see DOGE as being able to move the needle on solving the national debt crisis? “Probably not,” he says.

Mentioned in this episode:

David’s upcoming book: The Guru Gap: How America’s Financial Gurus Are Leading You Astray, and How to Get Back on Track

David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code

DavidMcKnight.com

DavidMcKnightBooks.com

PowerOfZero.com (free 3-part video series)

@mcknightandco on Twitter

@davidcmcknight on Instagram

David McKnight on YouTube

Get David's Tax-free Tool Kit at taxfreetoolkit.com

DOGE

Donald Trump

Elon Musk

Vivek Ramaswamy

David M. Walker

Committee for a Responsible Federal Budget

The episode kicks off with David McKnight sharing his view of the guru’s approach: “to go about half an inch deep and ten miles wide.”

David discusses a sort of clash that financial planning gurus are creating by trying to attract — or even 'steal' — clients from financial planners who already have them.

The goal of financial planners should be to provide a bridge between the advice clients get from financial gurus and their ultimate objective of ensuring that their money lasts as long as they do.

David categorizes Dave Ramsey’s advice as “good for bad investors but bad for good investors.”

David explains the so-called “Dave Ramsey’s circle of poverty.”

According to Wade Pfau, who wrote the foreword for David’s new book The Guru Gap, adopting Ramsey’s approach will lead people to run out of money in advance of actuarial life expectancy 63% of the time.”

David shares that nobody he has ever talked to actually agrees with Dave Ramsey’s retirement advice.

Running out of money before running out of life is the #1 fear most Americans have.

David sees instilling hope as the main reason why Dave Ramsey’s approach tends to exacerbate the #1 fear Americans have — instead of removing that fear.

Mentioned in this episode:

David’s upcoming book: The Guru Gap: How America’s Financial Gurus Are Leading You Astray, and How to Get Back on Track

David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code

DavidMcKnight.com

DavidMcKnightBooks.com

PowerOfZero.com (free 3-part video series)

@mcknightandco on Twitter

@davidcmcknight on Instagram

David McKnight on YouTube

Get David's Tax-free Tool Kit at taxfreetoolkit.com

Dave Ramsey

Wade Pfau