Tax Free Income For Life with David McKnight
I have an amazing opportunity for you today. One of my great friends sat down with me to discuss a tax free income, his name is David McKnight and I wanted to share the conversation with you. Dave has had a big impact on my life. In fact, much of what I teach has come from concepts that he brought about.
David McKnight graduated from Brigham Young University with Honors in 1997. Over the past 22 years, David has helped put thousands of Americans on the road to a zero percent tax bracket. He’s made frequent appearances on many of the top radio shows on many of the top television shows, as well as in many of the top newspapers. His best selling book, the Power of Zero has sold over 250,000 copies and the updated and revised version was published by Penguin Random House in September of 2008. when it launched that year, it finished the week is the number two most sold business book in the world. In 2019. The Power of Zero is ranked as the number nine best selling financial resource in the country by Forbes magazine. The book was recently made into full length documentary film entitled The Power of Zero, The Tax Train is Coming. As the present of David McKnight and company, Dave mentors hundreds of financial advisors from across the country who specialize in the power of zero retirement approach. He and his wife, Elise, have seven children.
Dave Hall: You graduated from college back in 1997. And I assume from that point, you became a financial planner involved in the financial industry. Is that right?
David McKnight: Yeah. I got into the financial services industry in 1997. So we’re coming up on 23 years here. So it’s the only thing I’ve ever done. It literally was the first thing I did right after I graduated.
Dave Hall: Not many people can say that, especially in this day and age.
David McKnight: Right. In today’s world, where people switch jobs and even industries on average six or seven times over the course of their careers, it’s definitely something that’s unique.
Dave Hall: Let’s talk a little bit about the Power of Zero. When was the first time you realized that there was an issue called tax rate risk that wasn’t being addressed by many financial planners?
David McKnight: I got to know a guy named David Walker, probably around 2010. David Walker had just two years prior resigned as the Comptroller General of the US government, which means he was the CPA of the USA. He’d done it for 10 years under Bush and Clinton. He was sort of running around the country with his, with his hair on fire, talking about the national debt. He’s talking about how the national debt at that point was only about $10 trillion. We say only $10 trillion, because now we’re, you know, we’re coming up on 27 trillion, but it was only $10 trillion. He thought that it was so egregiously unsustainable that he wrote and directed a movie called I.O.U.S.A, which interviewed all of the major experts in the country on the national debt and the sustainability of it all. And I really started to warm up to David Walker’s story.
That’s when I realized that we are facing a crisis as a country. We’re essentially on an unsustainable fiscal course. Every year that goes by where Congress fails to right the ship, it means the fix on the back end is going to be just even more draconian, even more aggressive, and even more uncomfortable for Americans who are likely going to have to deal with the consequences of it, you know, come 2030 and beyond.
David Walker was the person that really oriented me to the fiscal issues facing our country. I started to really build my own story around the fiscal condition of our country and what, you know, the 78 million baby boomers can do to protect themselves from the impact of higher taxes that will invariably result from all of the debt that we’re in the process of accumulating.
Dave Hall: I probably talked to 25,000 CPAs, EAs, and other professionals myself in the various trainings that I’ve done, and as I do this training, most people are pretty on board with these concepts that you’re talking about. But what was it like back in 2010 when you first started?
David McKnight: It’s obvious there wasn’t as much urgency back then. You had to sort of use your imagination a bit. You had to extend these projections out over a period of years. You know, you have to sort of understand that Social Security, Medicare, and Medicaid. Even though back in 2010, you weren’t spending a lot of money on it as a percentage of the federal budget. As these baby boomers start to march out of retirement and onto the rolls of the entitlement programs, they are going to stop putting money into these programs, and they’re going to start taking money out. As they do, there’s going to come a day of reckoning, a point in time when the federal government cannot any longer sustain paying for these expensive, expensive programs without increasing dramatically. Revenue is a much more difficult story to illustrate, to tell back in 2010.
Now, people are seeing the impact of the federal government’s unwillingness to address the issue. We’re now accumulating debt, you know, when we don’t count the COVID-19 fiscal bailouts. We’re accumulating debt to the tune of a trillion dollars per year. By the end of the decade, it’ll be $2 trillion per year by 2035. It’ll be $3 trillion per year. The damage is just starting to snowball here. As people see that debt skyrocket, they’re going to start paying attention to it.
Dave Hall: It’s amazing to me how quick that it’s going up. I know I started following it pretty actively back at the end of 2019. And we were about 22 trillion when I started doing some of my first webinars. Now I think when I looked the other day, we’re just over $26.5 trillion, so $4.5 trillion dollar increase in about eight months?
David McKnight: Yes. I remember making a Facebook post, where I said, “Hey, we just blew past 24 trillion,” and then a month passed, and I noticed that we were at 25 trillion.So, two months passed. It went from 24 trillion to 26 trillion. We accumulated $2 trillion of debt in two months. It usually takes us two years to pull that off. This whole thing is accelerating at breakneck speed. Certainly COVID-19 is not helping matters. It’s just accelerating that tax freight train that’s bearing down on America. It’s starting to take on more and more urgency. The average American is starting to pay attention, which means that it’s much easier to tell this story about the fiscal unsustainability of our country’s path. And it’s easier for people who are watching my movie or reading my books to have that message really resonate.
Dave Hall: When you look at the mainstream financial planners, many of those that people would know from television, from the radio that they listen to, I know that they’ve really never talked about these concepts historically. Did you ever get pushback from many of these people in the beginning when you started talking about these concepts?
David McKnight: Yes, I’ll tell you a quick story, which you might find amusing. There’s an emergency room physician out of Salt Lake City, Utah, who sort of found himself you know, with this knack for financial planning, and so he found more and more doctors and dentists were coming to him for financial planning advice. He is a very bright guy, and I actually agree with a lot of things that he says. He calls himself the white coat investor. He wrote a critique of my book, The Power of Zero.
In The Power of Zero, I talked about the importance of Roth conversions and paying taxes while they’re on sale to avoid potentially a doubling of tax rates over time. And he wrote this very brutal critique on my book because he just didn’t believe that tax rates are going up. He felt like it was a mistake to pay taxes on an IRA. For example, just postpone the payment of those taxes because we’ve all been told that you’re going to be in a lower tax bracket in retirement.
Well, just about four months ago, he was reviewing the Joe Biden tax plan. On Twitter, he was making a tweet, basically saying, “Hey, look, if Joe Biden becomes president,” he says, “I’m gonna have to convert all of my IRAs to Roth IRAs all in one year.” So, I decided that that was a good time for me to chime in. So I tweeted, “hey, look, I’m glad to see that you’re coming around,” and he blocked me.
I think what this tells you is that even the most skeptical of the financial gurus out there are starting to see the handwriting on the wall. They’re starting to see that the fiscal sustainability of our core, of our nation, is very much in question. Tax rates will have to rise dramatically, even by 2030 to keep our country solvent, and that should inform the discussion with our clients about when they should be doing Roth conversions and in what amounts. Every year that goes by, our message becomes more and more relevant and more and more people are starting to jump on the bandwagon.
Dave Hall: As I go back to least 2014—maybe you can tell me it started before then— I’ve watched webinars that you did clear back in 2014. I mean, that’s six years ago now. And it’s the same message. The message has not changed one bit from that webinar that I watched that was produced six years ago.
David McKnight: The only thing that I think changes is when I think that the day of reckoning is going to be. My day of reckoning has changed over time. I think that tax rates are going to go up in 2026. I really think that I’ve got a number of very smart people who agree with me on this. That all this perfect storm is all going to come to a head in 2030. That was really before the COVID-19 stimulus happened, and they’re going to be adding $4 trillion total by the end of the year of new debt. So I think that the day of reckoning is going to be 2029, maybe even 2028.
Look, if people don’t get their house in order, they don’t get their highly taxable tax deferred assets, reposition to tax free by the time that 2028 to 2030 corridor hits, they’re going to look back at 2020 and say: Why did I not take advantage of tax rates while they were historically low? Because look, the tax, nobody likes paying taxes, but tax rates today are good deals of historic proportions, and I honestly believe that people will look back 10 years from now, 8 to 10 years from now, and say man, we really missed out on the tax sale of a lifetime.
Dave Hall: I would completely agree with that. One of the other things that I’ve noticed is that one of the main products that is used is our life insurance products. Why are life insurance products so good at helping eliminate tax rate risk in the future?
David McKnight:. For people who have read The Power of Zero, they know that I recommend life insurance as a tax-free stream of income in concert with all of the other tax free streams of income that are out there—your Roth IRAs, your Roth 401Ks, Roth conversions, taking money out of your IRA up to your standard deductions. Then if you can keep your provisional income levels low enough, then your Social Security can be tax free. But life insurance can do something that nothing else can do. And that’s number one, it can provide a death benefit, and that’s sort of the foundation of every life insurance policy, but also, it allows you to, from a long-term care perspective, to receive, should somewhere down the road you can no longer feed yourself, bathe yourself, transfer yourself what have you. You can find one doctor, write one letter to that effect, and they will allow you to get 25% of your death benefit per year, every year for four years for the purpose of paying for long-term care.
This whole idea that you have to take advantage of this traditional Long-term Care Policy, which is a use it or lose it proposition. If you die peacefully in your sleep 30 years from now, never having used it, you don’t get any of your money back at the end. That paradigm is all flipped on its ear. Now with these life insurance policies, you have the ability to receive your death benefit in advance of your death, for the purpose of paying for long-term care, and should you die peacefully in your sleep 30 years from now, never having needed long-term care, someone’s still getting a death benefit, probably your kids, so there isn’t that sensation of having paid for something you hope you never have to use. So that’s that’s a really, really important utilization of life insurance.
The other thing is, there is no limit on how much you can put into some of these life insurance policies. We have clients that do 50 bucks a month; we have clients that do $200,000 per year. Once the money is in that bucket, it grows 100% tax free, and you can take it out 100% tax free as well.
Ed Slott—USA Today calls him the nation’s top experts on IRA. So he’s a very celebrated expert in this arena. He says life insurance is the single greatest tax benefit in the US tax code. Why? Because there are no limits on how much you can put into it. You can grow that money tax free, you can take it out tax free, and you can structure it so that it feels like a Roth IRA. It’s not a Roth IRA, but it can build up tax free wealth and distribute tax free wealth in a very similar way, as does a Roth IRA.
Dave Hall: It’s interesting for me as I talked to thousands of people, and we talked about this topic of how important this becomes as you look at the overall plan. I mean, most people, 95% of Americans, have all their money in the tax deferred or taxable bucket. They’ve got all these assets out there, that at some point, they’re going to have to pay substantial tax on. You’ve got to move them to different areas.
One of those, as we mentioned, is the life insurance retirement plan. You’ve obviously got the Roth, Roth 401K, Roth IRAs, all these benefits, but it really is an important part of the overall plan. But Dave, I don’t want to spend a ton of time talking about planning, but I appreciate you talking about that topic, because it is something that often people ask about. Let’s talk a little bit now about your movie. So you wrote the book, The Power of Zero, and we talked about how popular it was. You’ve sold so many copies, but then you converted that into a full length movie. Can you talk a little bit about that process and why you did the movie?
David McKnight: Well, one of the reasons why… Let’s be honest. There are some people who just don’t read books, and we wanted to have an avenue to reach people that would, when given the choice, watch a movie over reading a book. There was an audience out there that we felt like we had to reach. Frankly, there’s a lot of people that read my book or hear me speak, and they’re just still not convinced the tax rates in the future are going to be dramatically higher than they are today. So what we did was interview the experts.
So we interviewed all of the most important experts in academia. We interviewed chairs of economic departments at Northwestern, University at Berkeley, at some of the most prestigious universities all across the country. We interviewed people in government think tanks. We interviewed politicians. We interviewed Tom McClintock, who is a congressman out of California who speaks probably more eloquently than any politician I’ve seen on the future fiscal unsustainability of our country.
We interviewed former Secretary of State George Shultz. He was the Secretary of State under Reagan, and he’s still alive. He’s like 97. And he speaks very eloquently on the unsustainability of our, he says, “crisis”. We’re in a crisis right now. He says the debt is getting so big that the interest alone, the cost of paying for the money, for renting the money that we’ve already spent is going to crowd out all of the other line items in the budget. He says, “We are in a crisis right now.” He said this two years ago when we made the film.
We interviewed Larry Kotlikoff, who was the foremost expert on what we call fiscal gap accounting at Boston University. He says the true national debt is not 26 trillion; it’s much closer to 239 trillion when you add in all of the unfunded obligations—things that we promised to pay for, Social Security, Medicare, Medicaid, that we can’t afford to deliver on based on today’s tax rates.
We interviewed all these people. They’re all reading the same music, and they’re all singing the same song. Dave, they’re saying, look, if we continue down this road, within the next 10 years, tax rates will have to rise dramatically, or we go broke as a country. Some of them even use the D word as it relates to the future of tax rates. Tax rates will have to double or we go broke as a country.
We just wanted to get some real intellectual hats behind everything that we are. The bottom line is you don’t have to believe me. You don’t have to believe what I’ve written in my book. But take a listen to what these very, very smart people that have been studying this issue for a very long time have to say about it. And then, you know, about two thirds of the way through the movie, we offer solutions on how to insulate your retirement accounts from the impact of higher taxes. The idea of the movie is just not to scare you and really put you in a bad mood, but it’s to help people understand what the issues are, that there is a tax rate train bearing down on them and what they can do to protect themselves.
Dave Hall: To me, that’s the important part is what you said there. I know many people see it as a fear tactic. They think that we say all of these negative things, or what many people perceive as negative, but it really is just education. It means we get to understand these things better. What we find is that we’re able to make better decisions—we’re able to realize that yes, we’re in a really cool time right now, where we can make drastic changes in our own financial planning that will affect us for maybe 30-40 years in the future, depending on what our ages are currently.
David McKnight: Yeah, I’m thinking back to when we interviewed David Walker, former Comptroller General, the federal government. We interviewed him for the movie. We actually went to his house and sat in his living room and interviewed him. He said, “Look, when we did that tax cut in 2018, we had the dessert before we had the spinach.” Every economist out there was saying we need to reduce spending and raise revenue. What did we do with that tax cut? We reduced revenue, and we increased spending by a trillion and a half dollars over the next eight years to pull it off. We did exactly the opposite of what all the really, really smart people are saying we should have done.
We really have six years Dave, during which to take advantage of historically low tax rates. Tax rates are artificially low right now. We lowered them when we probably shouldn’t have lowered them, and we increased a lot of debt along the way to pull it off. What does that mean for the average every day baby boomer or Americans who are getting ready for retirement. It means that you should strongly consider repositioning your tax deferred assets to tax free systematically over the next six years so that by the time tax rates go up and 2026, you’ve done all the heavy lifting, and you can then take those dollars out tax free.
Dave Hall: In regards to the movie, where can people get access to this if they’re wanting to watch the movie itself?
David McKnight: You can pretty much find it anywhere movies are streamed. You can get it on Amazon,iTunes, and onYouTube. I think it costs you $2.99 or $3.99, practically nothing. Just google The Power of Zero: The Tax Train Is Coming, and it’ll come right up.
Dave Hall: Let’s talk a little bit about some of your other books. You have two other books you’ve written, and I know you’ve got a new one coming. One of the books that you’ve written previously is called Look Before You LIRP. How about taking a minute and talking about this book and why you wrote it.
David McKnight: Yeah, I think The Power Zero is designed to convince people that tax rates are likely to be higher in the future than they are today and getting to the zero percent tax bracket is the best way to insulate yourself from higher taxes. For people who, and I really do tease the idea of this LIRP or life insurance retirement plan. I basically make the case that look, not all LIRPS are created equal. You probably didn’t get married on the first date. You probably had a laundry list of things you were looking for in a spouse. You probably wanted to make sure that your spouse didn’t have any skeletons in their closet before you tied the knot. Life insurance policies are very much the same type of proposition. They only really work if they’re enforced when you die.
I basically say if life insurance policies are till death do you part, you should probably have a laundry list of things that you’re looking for in a life insurance policy, so I basically say, hey, look, if you’re convinced that the LIRP should be part of a balanced, comprehensive approach to tax-free retirement, and I make the case that it should be, then there should be a laundry list of things that you’re looking for in that life insurance retirement plan.
I lay out eight or 10, different stipulations and characteristics and attributes that the LIRP should have because the last thing you want to do is get 10 years into your LRP and realize that it’s got some sort of ticking time bomb inside, and had you known about it, you probably wouldn’t have chosen that LIRP to begin with. So I basically say the Power of Zero is a good idea to get to the zero percent tax bracket. And then LIRP may be something that helps you accomplish that. If you’re convinced that the LIRP should be part of your plan, these are some things that you should be looking for.
Dave Hall: I read the book many times, and I just love the knowledge that comes from it. As I do presentations, same thing. Amazing how many people misunderstand the policies they have. And I think that’s what, for many people, causes people to get negative feelings towards life insurance because they didn’t do their homework. Their advisor didn’t educate them correctly. So as a result, they ended up getting married to the wrong product, the wrong policy. When, if they would have done their homework, as you lay out in the book, they could have made a different choice, and the book’s a simple read.I think, what less than 150 pages?
David McKnight: I make it a point to have all my books be generally less than 100 pages. So it’s a very quick read. And I’ll tell you a quick story Dave, about Look Before You LIRP. There’s an advisor, who had never read Look Before you LIRP, but sort of used my concepts in introducing a LIRP to their client.
They use the wrong company. They use a company that didn’t abide by any of the concepts that I lay out in Look Before You LIRP, and they actually went and researched me online. They found the book Look Before You LIRP, and they went through it with a fine tooth comb, and then they went through the life insurance contract that had been implemented on them by the adviser. Then they did a 22 page PDF, where they did a side by side comparison of statements from my book, and then statements from the life insurance contract that they had been sold. And there were like 22 inconsistencies there. They were quite upset because they realized that that life insurance policy didn’t align with any of the concepts that I said that you absolutely have to have.
That’s the great part is that it powers your advisors who abide by the concepts and utilize the companies that align with the concepts in the book, Look Before You LIRP, you don’t have to worry about any blowback from your clients.
Dave Hall: What blew me away when I looked at it initially is how many top tier companies, name brand companies that many people would know where their policies are not meeting the requirements that you lay out so clearly inside the book.
David McKnight: Yeah, there are only a couple companies that really align 100% with everything I have in that book, and it’s a shame. And I’ve actually seen some interesting developments, Dave. Over time, I’ve actually seen companies that have changed some of the provisions in their policies based on what I wrote in that book. So hopefully that continues to happen.
Dave Hall: Another book you have out there is called The Volatility Shield. It’s written a little different than the other two books that you have. Talk a little bit about that book and what the purpose of that book is.
David McKnight: The Volatility Shield is a financial novella. I’d written two boring business books. I like writing novels in my spare time. So I said, I’m gonna write a little, 100 page novella that within which is couched a financial principle. And the basic premise of the book, the principle that I was trying to illustrate in the book is basically the following.
We’ve all heard of the 4% rule. The 4% rule says that if you don’t want to run out of money before you die, if you want your money to last your entire retirement, you should never take out more than 4% in a given year. And that goes back to Monte Carlo theory, and Monte Carlo simulations basically say given this wide array of returns that you can receive over a 30 to 40 year timeframe, if you take out more than 4%, you’re likely to run out of money before you die, and that’s every retiree’s number one fear is running out of money before they die.
Well, when you really analyze why that 4% number is as low as it is, it’s because what happens over retirement is if you’re living out of your stock market portfolio, invariably there will come a time in those first 10 years of retirement when you have to take money out during a down year. Typically two to three of the first 10 years of your retirement are down years. When you take money to fund your lifestyle needs out of your stock market portfolio during those tout down years, what happens is you’re sort of kicking your portfolio while it’s down. Not only are you taking money out, but you’re taking money out during the year when that portfolio has suffered a loss. And so the combination of the loss in the market and the distribution to fund your lifestyle needs is really what historically has prevented that 4% number from being any higher than it is. And the case that I make in the book is that if between now and when you retire, you can accumulate just three years worth of lifestyle needs and a bucket of money that’s growing safely and productively. And I make the case in the book.
You’ll find out by the end of the book what type of account you can accumulate money and safely and productively and the idea is that if you have three or even four years worth of lifestyle needs accumulated in the safe and productive account that during those two to three down years in the first 10 years of retirement, instead of taking money out of your stock market portfolio, you take it out of this safe and productive account.
What that does is it actually extends the life of all your other investments. In fact, that 4% rule disappears altogether, when you run the numbers, you actually find that if you can cover those two to three down years in the first 10 years out of this safe and productive tax free account, then you can actually take a much higher distribution rate from your stock market portfolio. We’ve seen in some cases, that distribution rate goes as high as 8 to 10%.
So imagine this, you have a million dollar portfolio, you have to abide by the 4% rule, and you can only take $40,000 out per year. But if you have a safe and productive account, that’s paying for those two to three down years in the first 10 years of retirement, you can now take maybe $80,000, maybe $100,000 out per year, without fear of running out of money before you die. So I created a story that has a really cool M Night Shyamalan twist ending at the end that sort of couches that principle, and I’ve really been surprised at how much it’s resonated with people who have read it.
Dave Hall: Great story. I love the number of times I read it as well. I don’t know what it is about your books, but I re-read them, which is not something I traditionally do. I guess it’s because I talk about this stuff so much, and it resonates so well with me, as I go through there, and it relates so much to the clients and the individuals that we work with.
You have a new book coming out, I believe in November 2020 called Tax Free Income for Life. Let’s talk a little bit about that.
David McKnight: In my viewpoint, there are two major major risks that every retiree or pre-retiree has to account for. The first one is tax rate risk. I really sort of cover all those bases in The Power of Zero. But the second one is the longevity risk. This is the idea that you’re going to run out of money before you run out of life. And that really is the number one fear that most retirees and pre-retirees have. In our industry, the way that a lot of people or at least a lot of advisors have helped mitigate that risk is by implementing an annuity that has a guaranteed lifetime income feature which basically says you need to figure out how much money you need to cover your lifestyle needs that when coupled with your Social Security basically covers your your total lifestyle, need, and retirement. Maybe you need $40,000 in addition to your Social Security to cover your lifestyle needs. So you might give a chunk of money to an annuity company and then in return, they will give you a stream of income that guarantees that you will have your lifestyle needs covered every year until you die.
That’s sort of historically the generic way that a lot of financial advisors go about doing this. I bring up in my story that there are two fundamental flaws with this approach. Number one is that if you implement an annuity within the tax deferred bucket, and that annuity is designed to meet your lifestyle needs, what happens when tax rates go up? What happens when tax rates double? Well, now all of a sudden, you have a big hole in that guaranteed lifetime income. This was income that was supposed to be guaranteed to cover your lifestyle expenses. Now tax rates have gone up. Now you are no longer able to cover your lifestyle expenses. What do you do? Well, you’re probably going to take money out of the rest of your non-annuity assets or your stock market portfolio to cover the difference and to plug that hole in your income, which means you’re going to spend all those other assets down that much faster.
The other problem that happens as a result of this type of planning is when you take money out of your tax deferred bucket, it counts as provisional income,which is the income that the IRS tracks to determine if they’re going to tax your Social Security. A lot of Americans will give up between $5-6,000 of tax, and others have a five to $6,000 hole in their Social Security because of their high levels of provisional income. How do most Americans go about plugging that hole? By taking more money out of their remaining IRAs and 401ks. So what we found is that, because of this traditional approach that financial advisors take, they can run out of money 10 to 12 years faster than people who do not take that approach.
My solution that I like to talk about is to find an annuity. I feel like the annuity is a sound approach to mitigating this risk. But let’s find a company that allows us to do what I call a piecemeal, internal Roth conversion. In other words, it allows you to say over the next six years before tax rates go up, go up for good, systematically reposition the money within that annuity to a Roth IRA, so that by the time tax rates go up, and by the time your Roth conversion period is over, you can now take that money out 100% tax free.
So you now have guaranteed tax free income, guaranteed to last for the rest of your life that is guaranteed to not cause Social Security taxation because you’re now insulated from those two risks. You will not have to spend down all of your other assets to compensate, which means you’ll have more money to cover discretionary expenses over the life of your retirement. So these are important issues that nobody is talking about. And it’s something that I felt like I really needed to write a book about to address.
Dave Hall: I’ve had the chance to read the book because I got a pre-copy because of our friendship. Obviously others have not had that chance. Currently, I believe there’s a pre-release available. Is that correct? That if they sign up for the book now, then get chapter one?
David McKNight: Yes. If you go to Amazon right now, and actually you can go anywhere and buy it, not just Amazon. Penguin Random House, who published the book, wants to make sure that Amazon doesn’t get all the sales, but if you go wherever you like to buy books, and you then go to www.davidMcKnight.com and I think you click redeem free chapters, something like that. You can input your name and email and receipt number into that field. You will be able to download chapter one instantly. So the book itself doesn’t come out till November 17. But if you want to download chapter one instantly, you can do so right away.
Dave Hall: I’m very excited for people to be able to get access to this book, not only if I read it, I’ve also done a webinar. I do a webinar on the platform we use to educate CPAs CPAAcademy.org, where I talk about the concepts of the book, and it’s been highly well-received. One of the biggest questions people ask is if there is a book I can read more, and it’s so hard as I get to the end of the webinar I have to tell them that there is. But you’re going to have to wait until November before it’s out. And luckily, November is quickly approaching, where people are able to get access to all this great information because Prosperity Nation, you’ve got to understand you are going into such a long period of unemployment because of life expectancy, and an environment where taxes are going so high. It’s really critical that you start planning now and preparing yourself for that period of time. Or as Dave mentioned, you’re going to wish you had as you look back because once you get to age 80, or 90 and run out of money, it’s too late. There’s no way to go back and start saving; there’s no way to take advantage of low tax rates. So you had 20 years ago, all these things have come and gone.
David McKnight: There is a window of opportunity, and that window of opportunity is rapidly closing. So you can’t wait until 2026, 2028, 2030 or beyond and say, “Now I’m ready to implement these strategies.” These strategies are going to be good until tax rates go up. Once tax rates double, that window will be closed. And so there’s some urgency here.
And if people aren’t convinced, watch the movie, read the books, continue to listen to Dave Hall, who’s one of the top advisors on these types of concepts. I’m pretty sure you’ll be convinced of the wisdom of paying taxes while they’re on sale versus waiting until the sale is over.
Dave Hall: Dave I have been a CPA for 25 years now. During that period of time, I’ve dealt with thousands of people. I’ve gone through the tax code multiple times for various scenarios that people have had multiple opportunities for people to save money through strategies or other things. I’ve never seen a window like this. I’ve never seen a period of time where we have a window that we know is five to six years at this point, that we can take advantage of most strategies that are out there and most things I’ve dealt with, you usually have a one to two year window, where you’re trying to scramble and get everything done. But unfortunately, what I fear is that because we’ve got such a big window, people are going to think they can wait. And if they are trying to make conversions during a one or two year period of time on top of any other income you have, it’s going to turn into a disaster.
David McKnight: It used to be that people would ask when tax rates are going up, and I’d say, yeah, you know, in some distant, unknowable future, maybe 10 or 12 years from now, tax rates are likely to go higher. Well, guess what? We now know the year and the day when tax rates will go up. We know that on January 1, 2026, tax rates will revert right back to what they were in 2017. We know that they are going to. They’re almost certain to be good to go higher, even higher after that. So you know, we’ve got this window of opportunity every year that goes by where you fail to take advantage of historically low tax rates is potentially a year beyond 2026, where you could be forced to pay the highest tax rates you’re likely to see in your lifetime. There’s the rapidly closing window ,and once clients and prospects are made aware of the urgency and what they’re likely to pay, should they postpone action? You know, it’s not hard to get their feet moving on this.
Dave Hall: One of the kickbacks I often get when I give presentations on this topic is people kick back saying that if administration’s change or other things happen, it could be sooner. And I don’t know if they think somehow that’s supposed to be justifying not to do it. What they really do is justify why we need to get started earlier. There’s no reason to wait, that you need to get going sooner than later. It’s not a risk of extending out. It is a risk if there was any of that period of time being shortened.
David McKnight: I do think I did a podcast on this recently. Joe Biden, should he get elected has said that he will not raise taxes on people that are making; I think it was less than $400,000. I think that’s sort of his definition of rich. So, you know, taxes are going to have to go up no matter what. I think they’re going to go up probably faster under Democrats than they are under Republicans. But in either scenario, they’re going up. So it’s better to pay taxes while they’re on sale.
Dave Hall: Well, you look at some of those middle brackets. I mean, if you’re in a 24% bracket right now, you may be in a 33% overnight. I mean, it’s a 9% increase depending on where your income falls just with the changes that are going to go back into place, January 1, 2026. How can our listeners learn more about you?
David McKnight: They can go to davidMcKnight.com. I’ve got a podcast, Power of Zero show. You can find it on iTunes or pretty much wherever you listen to podcasts. Certainly watch the movie and read the books. Those are all good ways to learn about what we’re doing here at the Power of Zero.