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

In today's episode, David McKnight breaks down the creditor protection rules for Roth IRAs and Roth 401(k)s, as well as why more and more Americans are turning to tax-free accounts to insulate themselves from creditors… and the Government itself.

In theory, under Federal Law, all IRAs traditional or Roths receive a certain level of bankruptcy protection under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

However, that protection is specifically tied to bankruptcy proceedings. If you're sued in civil court, the Federal bankruptcy statute doesn't automatically apply, state law takes over…

By pointing out differences between states like Texas, Arizona and Florida on one end, and California and Montana on the other, David explains that whether your Roth IRA survives a potential lawsuit intact depends largely on the state in which you reside.

Roth 401(k)s play by a different set of rules, as they fall under the 1974 Employee Retirement Income Security Act (ERISA).

David notes that "ERISA is the big Federal law that governs most employer-sponsored retirement plans, and it comes with some of the strongest creditor protection available anywhere in the financial world."

According to David, it's not hard to see why the Federal Government is going to need huge infusions of new revenue in the very near future.

Wondering how they will be raising that capital? By targeting the nearly $45 trillion in tax-deferred retirement accounts like IRAs and 401(k).

In other words, while your retirement accounts may indeed be largely immune to lawsuits, they're entirely exposed to the impact of rising tax rates.

David points out that contributing to 401(k)s or IRAs 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.

Remember: a well-planned Roth strategy doesn't just shield you from tomorrow's higher tax rates, it can also serve as a fortress protecting your wealth from outside claims.

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

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

Employee Retirement Income Security Act of 1974 (ERISA)

This episode features David McKnight sharing the top five reasons why a Roth 401(k) is far superior to a traditional 401(k).

Something important to keep in mind: the decision you make today will determine how much of your retirement money your future self actually gets to keep.

David touches upon the fact that choosing the wrong 401(k) could cost you hundreds of thousands of dollars in unnecessary taxes in retirement.

Tax rate risk is the first big reason why you should consider investing in a Roth 401(k) over a traditional 401(k).

David lists a series of key questions people who invest in a traditional 401(k) often fail to ask themselves.

The second reason to consider a Roth 401(k) over a traditional 401(k) is Social Security taxation.

Most people believe that Social Security is tax-free…but it's not.

50% of your Social Security, plus wages, pensions, and interest, as well as all withdrawals from traditional IRAs and traditional 401(k)s, are what the IRS counts as provisional income.

The third reason for choosing a Roth 401(k) and not a traditional 401(k) has to do with something that most retirees never plan for: Income-Related Monthly Adjustment Amount (IRMAA).

Remember: "When you control your taxable income, you control your Medicare costs."

Required Minimum Distributions (or RMDs) are the fourth reason for opting for a Roth 401(k).

The fifth reason for going for a Roth 401(k) instead of a traditional 401(k) has to do with your heirs. When they inherit a traditional 401(k), it becomes a tax bomb.

So, why choose a Roth 401(k) over a traditional 401(k)? Because a Roth 401(k) helps you eliminate tax rate risk, avoid Social Security taxation traps, prevent Medicare premium explosions, stay in control of withdrawals, and leave tax-free income to your heirs.

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 sees David McKnight look at Suze Orman, who, despite being one of the most widely recognized financial voices in America, shares what appears to be incomplete advice.

David believes that Orman has done a lot of good for a lot of people thanks to her financial discipline-centered approach (in addition to being a big proponent of Roth IRAs).

He agrees with Orman: "Roth IRAs are powerful, no doubt about it. You contribute after tax dollars, your money grows tax-free, and, provided you meet the requirements, you can withdraw those funds in retirement 100% tax-free".

The U.S. is currently at historically low income tax rates and, thanks to the One Big Beautiful Bill Act, they have been permanently extended.

However, David shares that, when it comes to the IRS tax code, there's no such thing as a permanent extension.

David's pet peeve with Orman: getting money into Roth IRAs now (while tax rates are low) isn't something that will truly protect you from rising tax rates in retirement.

That's because a Roth IRA by itself isn't enough.

In his book The Power of Zero, David advocates for a balanced, comprehensive approach to tax-free retirement that draws from six different streams of tax-free income.

David goes through the six strategies and explains why you need each and every one of them if you want to land in the 0% tax bracket in 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

Suze Orman

OBBBA (One Big Beautiful Bill Act)

David McKnight addresses three key questions you must be able to answer before executing a single Roth conversion.

Too many people go for Roth conversions without a game plan – this is something that can lead to overpaying taxes and running out of money sooner than anticipated.

David points out that if you can't answer the three key questions, you should stop and reevaluate because guessing here can cost you big.

"What's the total amount I should convert from my IRA or 401(k) to tax-free?" is the first and most critical of the three questions.

Remember, the goal of a Roth conversion isn't to get your tax-deferred bucket to zero at all costs. It's to get to the right amount of tax-deferred dollars shifted to tax-free, the amount that allows you to stay in the 0% tax bracket in retirement.

"How much should I convert each year?" is the second question and is about pacing your conversion so as to avoid unnecessary exposure to higher tax brackets.

The goal is to convert to Roth slowly enough that you don't rise into a tax bracket that gives you heartburn.

"Over what time frame should I complete my Roth conversions?" is the third question you should address before executing a Roth conversion.

Addressing each of the three questions helps you shift from Roth conversion guesswork to Roth conversion strategy.

Be careful. Most financial gurus will say "Roth conversions are great, just pay the tax and move on!"

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

OBBBA (One Big Beautiful Bill Act)

Donald Trump

David Walker

David McKnight busts some of the most common Roth conversion myths that are costing retirees hundreds of thousands – if not millions – of dollars over the course of retirement.

The "Don't worry about Roth conversion, you'll be in a lower tax bracket when you retire" myth is based on two flawed assumptions.

The first one is that your lifestyle will drop significantly in retirement, while the second is the one related to future tax rates being the same or lower than they are today.

David points out that, in retirement, people want to maintain their lifestyle. In some cases, they even spend more in early retirement (think travels, healthcare and helping with kids or grandkids).

Let's remember that the U.S. national debt is projected to hit $63 trillion by 2035.

The country has unfunded obligations in Social Security, Medicare, and Medicaid that total over $200 trillion, and interest on the debt is going to crowd out most of the national budget items by the mid 2030s…

The primary value of a Roth conversion is that it pre-pays taxes at historically low rates to avoid paying them later when rates are likely to be higher.

Roth conversions not being binary, and the fact that you can get massive tax benefits without having to convert your entire IRA is another big myth David debunks.

David explains why you should voluntarily pay taxes instead of delaying that decision.

Ever heard of "If you don't have cash to pay the tax, you shouldn't convert"? It's another myth David addresses in this episode.

For the millions of Americans who have most of their savings in tax-affirmed accounts, strategic conversions are one of the best ways to insulate yourself from the tax freight train bearing down on America.

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