The Power Of Zero Show The #1 Most Hated Retirement Strategy (That Actually Works)
This episode of The Power of Zero Show sees David McKnight discussing the single most hated retirement strategy in America: annuities.
Interestingly enough, annuities are also one of the most powerful tools you can use to protect yourself from the biggest financial risk you face in retirement.
Longevity risk, a retirement danger most retirees never fully grasp, is the reason why this topic matters so much.
As David explains, "Longevity risk is the risk of living longer than you expected, running out of money before you run out of life."
While some people shrug longevity risk off as a good problem to have, it's actually the biggest risk in retirement (from a financial standpoint), as it is a risk amplifier.
In other words, it magnifies everything else that can go wrong – such as inflation, long-term care, withdrawal risk, and sequence of returns risk.
The reasons why many people hate annuities are legitimate, while others are propaganda.
For more than 20 years, Kenneth Fisher has led a massive anti-annuity crusade.
Remember: there's only one way to truly eliminate longevity risk from your retirement, and that's through a guaranteed lifetime stream of income in the form of an annuity.
Research on annuities – something that has been ongoing for the last four decades – has shown that people with a guaranteed lifetime income tend to spend more freely in retirement than people living solely off an investment portfolio.
David touches upon Richard Thaler's concept of the Annuity Puzzle.
Annuities solve a problem that no stock portfolio ever can: a portfolio can't guarantee lifetime income you cannot outlive.
With the American national debt exploding, which would probably lead to higher tax rates, an internal Roth conversion allows you to get ahead of that.
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
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