Episode 245: How to Implement the Power of Zero Retirement Strategy

Step one of the Power of Zero strategy is to realize that due to unfunded obligations for Social Security, Medicare, and Medicaid and interest on the exploding national debt, tax rates in the future are going to be dramatically higher than they are today. Step two is to understand that in a rising tax rate environment there is an ideal amount of money to have in your taxable and tax-deferred buckets.  For your taxable bucket, that’s around six months of living expenses.  For your tax-deferred bucket, the amount should be low enough that your RMDs in retirement are equal to or less than your standard deduction and low enough that it doesn’t cause Social Security taxation. For married couples, that amount is around $350,000, and for single filers, it’s half that amount. If you have a sizable pension, the amount could be zero. Step three is to calculate how much time it will take to shift your balances to tax-free in order to achieve those balances. Preferably slow enough that you don’t r...