David starts the conversation by pointing out that more and more financial experts are convinced that tax rates will rise dramatically to pay for unfunded obligations in the future.
One way to protect yourself against rising tax rates is to do a Roth Conversion. Taxes will be on sale for another 4 years before they go back to the 2017 highs. If you are serious about retirement planning, David believes you would be wise to take advantage of what he calls “The Tax Sale of a Lifetime.”
The second way would be to contribute to your Roth 401K. It may make sense for you to stop contributing to your 401K and direct those contributions to a Roth 401K because now is arguably the best time in the history of the US to be making contributions to tax-free accounts.
The third point would be to max out on your Roth IRA. As of 2022, you are allowed to contribute $20,500 per year to a Roth IRA and an additional $6500 for catchup if you are above age 50.
Point number four is taking advantage of a Health Saving Account. A Health Savings Account allows you to set aside pre-tax dollars to pay for qualified healthcare expenses. Contributions are tax-deductible, grow tax-deferred, and can be distributed tax-free.
Last but not least is making contributions to a cash-value life insurance. David explains that Dave Ramsey and Suze Orman may preach against permanent life insurance, but the more experienced financial experts are all for it.
A great example is America’s IRA Expert, Ed Slott, CPA, who went on live television to declare permanent life insurance as the single most valuable benefit in the IRS tax code.
David agrees with Ed Slott that making money from investments is harder than it ever was. The last thing you’d want to do is share your hard-earned gains with the government.
Mentioned in this episode:
David’s books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube