Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement

by David McKnight

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.

American retirees face a looming crisis. We are living longer than ever before, and most experts predict a dramatic rise in tax rates within the next ten years. The hard truth is that no matter how much you save, you are likely to outlive your money or watch it be taxed into oblivion. But when traditional retirement distribution strategies won't provide sufficient income in the face of higher taxes, what can you do?

Tax-Free Income for Life lays out a comprehensive, step-by-step roadmap for a secure retirement. McKnight shows how the combination of guaranteed, inflation-adjusted lifetime income and a proactive asset-shifting strategy can shield you from longevity risk and the cascade of unintended consequences that result from higher taxes. It's an innovative and proven strategy that maximizes return while effectively neutralizing the two biggest risks to retirement savings.

If ever there were a solution for the American retiree, it's guaranteed tax-free income for life.

Genres: Finance, Personal Finance, Business, Nonfiction, Money, Audiobook

160 pages, Hardcover

Published November 17, 2020

Reviews

[Shawn · Rating 2 out of 5]

McKnight starts right off the bat with both the insurance pitch and by trying to negate what most experts are saying because the status quo and general logic they provide are detrimental to McKnights used car/pyramid scheme like sales pitch.

McNight does have some good points, however, the information in this book that would be useful to some is often poorly presented or is missing key information.

Issues
1) Calls the 4% withdrawal standard that most of us use, the 3% rule to scare people into high cost and high commissioned life insurance and annuities (SPIA & FIA & LIPR) AND THEN uses the renamed "3% rule" that to compare with a fixed annuity that will give you "confirmed lifetime income" of 6%". First of all immediate annuities in similar investments are not paying anywhere near that...and then you tack on the high cost of this investment...
UGH.. McKnight actually says and I quote "that's it, end of story... an SPIA can give you the same amount of income, with an ironclad guarantee...without all of the shortcomings of the 3% rule, for half of the initial outlay."

If this was true, that is what most experts would be saying to buy... However, instead, the warnings to stay away from the same high-cost investment vehicles McNight is selling are loud and clear... Then you start to notice more and more just how faulty and misleading the information presented is!

Just one example, McKnight is comparing apples and oranges. For example, he fails to tell you (seems deliberately misleading to me) that the 4% withdrawal rate is adjusted every year for inflation while most of these annuities (especially one paying "6%" ha) do NOT adjust for inflation.

The current rate of inflation (12/21) is 6.8% while this is high. Failing to adjust your withdraws from inflation at this rate would mean in just 10.5 years your money will be worth HALF what it is now (rule of 72) by 2032.

Ugh.. I just read the next section...the next section is another sales pitch. Why if the SPIA is the perfect God-sent answer to your prayers don't people buy it... then the sales pitch on why not (with their reasons) and how this is false. Again leaving out the real reasons... UGH

I am not going to list the other issues... there are too many.. and it would take too much time. There are times to get an annuity (there are actually a few good ones out there... but there are a lot of bad ones out there too)..however, when someone leaves off information and works to deceive.. as they say, buyer beware.

This book reads like a primer for used car salesman type "advisors" and insurance agents who are going to withhold key information you need to know and use scare tactics to get you to buy high commission products that benefit them, not you.

Here is what Clark Howard says about Annuities: https://clark.com/personal-finance-cr...

If you are thinking of buying an annuity. There is some decent information in the book. Information on the annuities discussed
1) Life insurance retirement plan (LIPR) with the right plan can help with long-term care - death benefit in advance of your death. Complicated. To get this you need to qualify, give blood and urine tests and give them access to your medical records so they can predict when you will die. (underwriting process). For Long term care, you will need at least $400,000.
2) SPIA
3) Fixed Indexed Annuities (FIA) - LIfe insurance product. Death benefit with some liquidity and inflation protection. Lower

Interesting points and one to consider from McKnight
1) Income taxes may increase, look into Roth IRA and converting traditional IRA monies to Roth IRAs to have tax-free income later.

[Karla Huebner]

This was interesting and became clearer to me after I read the preceding book, The Power of Zero. Basically the author recommends that those of us close to retirement (or in the early retirement years) take advantage of current low taxation to move money out of tax-deferred accounts such as traditional IRAs and into Roth, before 2026 when taxes are likely to rise. His whole thing is that while we owe tax and must pay it at some point, it's smart to pay the tax during these low-taxation years and move our savings from tax-deferred accounts into Roths to continue to grow tax-free. This way, in retirement one's tax bracket could be zero or at least much lower than it might otherwise be (for those who have been diligently socking away money into traditional IRAs and 401(k)/403(b) accounts, anyway). He has some other tips on being low-tax in retirement, but the main idea is that we don't necessarily realize how much tax we may owe on those tax-deferred accounts once we start to withdraw from them, and that it's important to have a plan.

[Malinda · Rating 4 out of 5]

A lot of information in this little book on how to use Roth IRA/401k/conversions and a Life Insurance Retirement Plan to fund your retirement tax free or at least reduce what taxes you pay as much as possible if you goof something up. A few highlights I wrote down:
1) Postpone collecting Social Security
2) Provisional income lowers SS & impacts taxes owed
3) If converting, complete the year before retiring and based conversions needed start this 2-10 years prior. Goal to convert at values that don’t impact your tax bracket and support access aligned with the 5 year rule
4) LIRPs have a vesting schedule and best to wait 10 years to access to support its growth
5) I need a financial advisor! Ha!

[Pratistha Maharjan · Rating 1 out of 5]

The book does not take into account of Roth 401k. Also, a lot of life insurance pitch.

[Barrie · Rating 2 out of 5]

For a book that kept saying over and over, "I'll be with you every step of the way explaining thing" I felt it didn't quite live up to the promise. Some ideas were interesting (doing a LIRP, converting now before 2026 when tax rates go up greatly), but overall I found this short read to be a bit too complex and clearly a book that advisors are buying to then give away so that their clients buy into some insurance plan the advisors are likely selling. Felt a bit pyramid scheme-y to me.

[Mari McR · Rating 2 out of 5]

I was hoping that "Step by Step" would set me on the path for adjusting and transferring my nest egg's value in pre-tax v. post-tax v. insurance buckets without soliciting the assistance of an FA. Not to be. The insurance element (FIA vs SPIA) was not well explained sufficiently; consequently, I chased down various FAs -- one who preaches the tenets of "Power of Zero") -- while the other two were hailed from large, more traditional brokerage firms. I am NOT convinced that I should NOT wait to convert the pre-tax to ROTH before full retirement age. The Power of Zero FA is pushing the LIRP unabashedly. I get a sense this is their pot of gold, but it may not be mine. It feels similarly to dealing with car salesmen. My pot of gold may be meeting an FA who wants the best for the client rather than focusing on their myriad sources of commission.

[J Chad · Rating 2 out of 5]

Bad comparisons and biased writing fill this book. Do the math yourself, actually applying the outlined risks to each approach the author advocates and you’ll find that his idea, in addition to being both complicated and dependent on current tax-rates, isn’t necessarily advantageous. The idea he wants to promote MAY be useful for some individuals/couples, but it definitely will not be helpful for all. This book may be worth some of your time to determine whether his approach could help you, but, again, do the math yourself and don’t trust this monograph.

[Ruby Escalona · Rating 2 out of 5]

A lot of the book is mostly about the author trying to sell annuities to readers.

While the lessons are sound, like the traditional ira to roth conversion ladder, and how to avoid taxes on social security earnings, feel free to skip the part on annuities and concentrate on bucketing your retirement savings: taxable, tax advantaged (roths) and tax deferred (traditional 401ks and iras). Then calculate how much you will need to retire using the 3% rule and implement the Roth conversion ladder if you're too traditional heavy.

[Kanabar · Rating 3 out of 5]

Not sure what to think.
For sure this book gives food for thoughts about retirement: How much will be the tax rate going forward, how long will we live, will we outrun our money, etc.
Then it is a strong proponent of annuity products, but reading other reviews here and some literature online I find a lot of arguments against such products, so I'm a bit at a loss.
Just keeping this in mind as an option for retirement for now...

[Oliver · Rating 4 out of 5]

Tax-Free Income for Life: A Step-by-Step Plan for a Secure Retirement is a comprehensive and insightful guide aimed at helping individuals secure a comfortable, tax-free retirement income. Written in an accessible, step-by-step format, the book provides readers with clear strategies for structuring their retirement plans to minimize tax burdens. It covers various investment options, including tax-advantaged accounts and other financial instruments, ensuring that retirees can achieve long-term financial security without the stress of high tax rates. Additionally, the guide highlights the importance of resources such as online registration bir, which can play a key role in optimizing your financial planning. The book's practical advice is backed by expert knowledge, making it an invaluable resource for anyone looking to optimize their retirement savings and live with peace of mind in their later years. Whether you're just beginning to plan for retirement or looking for ways to maximize your current savings, this guide offers actionable steps and clear explanations that can lead to a prosperous, tax-efficient future.

[Marcia Chocinsky · Rating 3 out of 5]

Interesting concepts, but if you can earn more on your money, you are probably better off staying invested. I can see moving some of our regular IRA $$ into our Roth’s. The Roth’s came out too late for us and rules prohibited you from contributing to your Roth if you could contribute to an IRA or 401k. I don’t remember the details, just that if we could have contributed to the Roth we would have done so.
The book mentions nothing about your Medicare costs increasing at some point as your income from taxable IRA’s goes up which would contribute to the tax bleeding for some people.
I do agree that taxes will be going up at some point due to the major debt facing our country and the combo of additional debt plus resulting inflation due to Covid. The future does not look pretty right now no matter how you slice it.
I will read his other books Power of Zero and LIRP just to see if I can learn something new that’s beneficial.

[Dave Heberer · Rating 3 out of 5]

I am not familiar with the author but I'm guessing he is paid by insurance companies or was for a long time. I think annuities do have a time and place as part of your total plan but this dude sells it pretty hard. I give this pitch and the first portion of the book making that pitch like zero stars.

The second half of the book walks through fairly detailed planning of converting a traditional 401k into a Roth IRA this part of the book I think is well thought out and well laid out. All the stars in my rating come from this portion of the book.

I might be too hard on annuities but I feel like if you've gotten into social security then you already have some form of annuity built into your retirement program. I don't know if they're cool enough to double down on. I do kind of like the idea of a life insurance vehicle that will pay for long-term care and provide a death benefit if you don't use it I'll have to look into it.

[Fetcher · Rating 2 out of 5]

I don’t often give 2 star reviews. This means I finished the book and really did not like it. (1 star means DNF)

Nothing more than a sales pitch for insurance and annuities. If you have no fiscal discipline and do not want to be responsible to manage investments, then this may be a good book for you. Otherwise, run away and do not read this book.

Annuities have a place and some may wish to bolster their retirement with an annuity, but generally, you will lose by buying an annuity. Insurance companies stack the deck so they make money.

Book discounts 4% rule to 3% rule and basically says, you can possible save enough or be competent enough to manage your money by your self so buy insurance instead.

[Brycep · Rating 3 out of 5]

Really a rehash of The Power of Zero. Solid concepts that I've already heard mostly on David's Podcast. His 5 Portfolio strategy is a bit complex to execute without a Financial Planners help, but still good stuff. I'll spend some time on his site that he recommends and then leave it in the hands of my financial advisor so I don't screw it up.

I have zero faith in my Government to do anything but steal my hard earned retirement money due to their irresponsible spending and political self-serving interests. I will be executing these strategies to protect myself from those wolves.

[Paula · Rating 5 out of 5]

You need to read this now. Forget that you may be 15-20 years away from retiring. The time is now. If you’re 10 years out or less then you definitely need to read it. The author does a great job of explaining the strategies in a way that anyone can understand. I can’t wait to get started and make sure that I take advantage of these strategies!

[K Connolly · Rating 4 out of 5]

Great follow-up book to The Power of Zero which I have also recently read. This latest book provides more details on how to reduce your taxes when retired. I especially liked the detailed case study at the end of the book and plan laid out with details and explanations. There is also a short Q&A section on questions related to the book content and tax saving ideas proposed by the author.

[Luciano Elementi · Rating 3 out of 5]

Same calculations, and get insurance. Roth IRA, if you have extras now, and plan ahead, then you can enjoy. Don't start too late. Oh, yeah, you may live longer with less to worry about: that is good advice and something to *really* ponder about

[Marv Mcfly · Rating 3 out of 5]

It's a lot of information, seems great. I also believe you have to have a lot of financial literacy to fully understand it. I will re-visit this book again at the end of the year to see if I can understand it better. It's a relatively short read, enjoy

[Brent Gardner · Rating 5 out of 5]

I've read many, if not most, of the books on this topic. This one is arguably one of the best, for both consumers and financial services professionals.

If one of your goals is to minimize your income tax burden during retirement, this is a "must-read" book.

[Chuck · Rating 4 out of 5]

Very nice look at the world of living tax free. Good steps and do's/don'ts

[Jennifer Lednicky · Rating 4 out of 5]

easy to read; I did in in a night. Need to read the preceding book, The Power of Zero. things to think about but looks complicated to implement.

[Laura Aldrich · Rating 5 out of 5]

Good job

Clear and to the point. Good examples of what needs to be done to reach out goals. Nice read! Thanks

[Lexi VerVelde · Rating 1 out of 5]

Bias insurance pitch

[Shauna · Rating 3 out of 5]

Long winded and complicated.

[Carolyn · Rating 2 out of 5]

The best advice in this book is to find a trusted, licensed & practicing personal financial adviser. I was shocked by how many flaws/omissions were in this author's "research"... too many to list.

[Greg Kozak · Rating 5 out of 5]

Great practical advice that you can act on in life rather than just read about.

[Jeff Brimhall]

Audiobook: Annuity salesman…. As expected.

[Brett Chaffins · Rating 5 out of 5]

Very concise actionable information. Something could be applied from every chapter.

[Henry]

Good info here on using insurance for retirement planning.

Listened to the audio book

[Jill Casero · Rating 5 out of 5]

He does a good job explaining some retirement strategies beyond the mainstream. Most people are educated and he breaks down some options to help people make better choices