Clark Howard Article With David McKnight

the power of zero

There is no retirement planning class based on the Power of Zero book, but there is one that David created. He’s taught it to hundreds of advisors across the country. The Power of Zero is not the basis of the class, but it may be a homework assignment.

The workshop conveys the idea that even in a rising tax rate environment, there is still a mathematically perfect amount of money you need in your taxable and tax-deferred buckets

LIRP’s are the same greatness as Roth IRA’s. As with all tools, they can be used inappropriately.

A LIRP is not a silver bullet, it’s just another tool you can use alongside all the other tools.

A LIRP is a bucket of money that gets treated differently from the other buckets we’ve already talked about.

You can’t talk about the LIRP without talking about one of the primary reasons for having a LIRP: it provides a death benefit.

You have to have a need for life insurance to be able to get the LIRP.

The companies that sponsor LIRP’s make it a little more attractive by allowing you to access your death benefits in the event that you require long-term care. As a result, many people are dropping their life insurance.

The fees over the life of the LIRP are, on average, about the same as your 401(k), they just tend to be front loaded. They are higher in the early years and lower in your later years.

Whatever road you take in life, somebody is making 1.5%. The question is “what are you getting in exchange for that 1.5%?”

$350,000 doesn’t correspond to any tax bracket and does make sense as a threshold of comparison.

Financial gurus tend to paint everything with a very broad brush. They are in the business of dispensing general financial advice and target people who make less than $75,000 a year.

You can’t get custom-tailored financial plans from financial gurus because that is not what they get paid to do.

You don’t get the LIRP unless you die.

If you quit after the first year, it will likely be the worst investment you’ve ever made. The longer you keep it the better your rate of return will be.

If it is structured properly, the LIRP will almost never run out of money.

Just because a salesperson makes a commission off the sale, doesn’t mean the product is bad. No one would have a car or many other things we highly value if this were the case.

There is always a mathematical basis for what David recommends.

It’s almost like the author fell asleep in 1985 with his ideas about Universal Life firmly decided.

There is nothing magic about a life insurance policy. When used as a compliment to your other tools, they can be an excellent contributor to getting you into the 0% tax bracket.

Guarantees cost money. They will also drag you cash value down.

If you have money in your bucket to sustain the drips that are coming out of your spigot, that’s what keeps the policy enforced.

The program is not a miracle worker, it simply performs a function that other investments can’t accomplish.

Everyone should have level-term life insurance, but you have to remember that the cost of admission to the LIRP is you have to be willing to pay for some life insurance.

If you’re paying for term insurance, you are already paying for the bucket. You’re just not putting anything in it.

Retirement classes are often held and sponsored by universities. They are purely educational experiences.

Failing to adopt some of these strategies could be the most expensive thing you do in your life. You could run out of money seven to ten years faster without them.

Most people make emotion-based investment decisions. When you are feeling an emotional impulse to buy low and sell high, will your robo-advisor give you a call?

Most of David’s clients are between the ages of 50 and 65 so robo-advisors would not be ideal for them.

There are no LIRP’s that are only fee-based. It’s hard to work with a LIRP when you are working with a fee-only financial planner.

Being optimistic doesn’t necessarily translate into being realistic. Let’s look at the financial landscape of our country, and figure out how things are trending.

You can be optimistic in nature and still believe that tax rates are going up so you should prepare accordingly.

If tax rates in the future are going to be even 1% higher than they are today, there is one right strategy which is to position your money to tax free.

The LIRP is one of many streams of tax free income and when used appropriately it can accomplish things that your other investments can’t.

Financial gurus will only get you so far, especially in a rising tax rate environment. Consulting with a qualified Power of Zero advisor can help lay out your roadmap and mathematically show you the best strategy for you.

Schedule your one-on-one strategy session today

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