Protect your retirement savings from the impact of rising taxes.
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The follow-up to the bestselling The Power of Zero, providing a blueprint to build a guaranteed, tax-free income stream that lasts for the long run. Preorder the hardback today and download Chapter 1 instantly.
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 the zero percent tax bracket. He has made frequent appearances in Forbes, USA Today, New York Times, Fox Business, CBS Radio, Bloomberg Radio, Huffington Post, Reuters, CNBC, Yahoo Finance, Nasdaq.com, Investor’s Business Daily, Kiplinger’s, MarketWatch and numerous other national publications. His bestselling book The Power of Zero has sold over 250,000 copies and the updated and revised version was published by Penguin Random House. When it was launched in September of 2018, it finished the week as the #2 most-sold business book in the world. In 2019 The Power of Zero was ranked as the #9 best financial resource in the country by Forbes Magazine. This book was recently made into a full-length documentary film entitled The Power of Zero: The Tax Train Is Coming. As the President of David McKnight & Company, he mentors hundreds of financial advisors from across the country who specialize in the Power of Zero retirement approach. He and his wife Felice have seven children.
Tax rates 10 years from now are likely to be much higher than they are today. Is your retirement plan ready? Learn how to avoid the coming tax freight train and maximize your retirement dollars.
This is an apolitical podcast. The goal is to call out fiscal irresponsibility no matter what side of the aisle it’s on. It’s less about politics and more about math.
Joe Biden recently came up with a proposal to reform capital gains taxes. The increased revenue that is thought to come from this reform is earmarked to pay for childcare, universal pre-kindergarten education, and paid leave for workers.
The state of capital gains taxes currently is that if you are in the 10% or 12% tax bracket you don’t pay any capital gains taxes. It currently sits at 20% for people above those brackets and for people making more than $250,000 per year there is an additional surtax of 3.8%. This puts the baseline for wealthy Americans at 23.8%.
When it comes to capital gains tax, there are four different taxes that may come into play. The first is at the federal level, then there are also state capital gains taxes and local capital gains taxes in some parts of the country, and finally the Obamacare surtax.
The Biden proposal basically says that anyone who makes more than a million dollars per year would see their federal capital gains tax go from 20% to 39.6%.
If you lived in New York City and included the other governmental layers of capital gains taxes, this would result in a total capital gains tax of 58.2%. Residents of Portland, Oregon would be looking at a capital gains tax of 57.3%.
This doubling of the federal capital gains tax rate would generate roughly $1 trillion in additional revenue.
This proposal will not likely pass through the usual route and would likely have to come through budget reconciliation. In its current form, the proposal will not likely pass because there are Democrats who believe that the tax is too high.
Most people see the bill as the initial salvo in the negotiation process and the end result will be somewhere in the middle.
Compared to other countries, this proposal would put America at the top of the list for capital gains taxes.
If you make more than a million dollars per year, this proposal will likely affect you quite a bit. If you make less than that, you won’t have to worry about it. If you’re concerned about capital gains tax rates, you need to stop accumulating huge amounts of money in your taxable bucket.
Raising capital gains taxes is not going to solve our country’s problems. We need to see broad base increases in taxes across the board and dramatic reductions in spending.
If you want to protect yourself from the inevitability of higher capital gains taxes, you need to stop accumulating money in your taxable bucket and take advantage of all the tax havens that are available to you. The Roth IRA and Roth 401(k) are great options and allow you to put a lot of money into tax-free vehicles.
There are unlimited amounts of money that can be converted to the tax-free bucket with Roth conversions.
The LIRP is the great antidote to taxation in the taxable bucket. Someone is going to get your money, you might as well get something useful in exchange for it. There are no income limitations or contribution limits with the LIRP.
Whether you make a million dollars a year or not, there are a number of alternatives to situate assets to grow tax-free wealth without having to worry about what’s coming down the pipe with regards to taxes.
One of the fundamental issues with these tax raises is that they are always earmarked for some new initiative and never aimed at restructuring or fixing the entitlement programs that are driving the fiscal problems in our country.