The ultimate goal for retirement, according to David McKnight, should be achieving a 0% tax bracket. If you’re in this bracket, you’re unaffected by any future tax rate hikes. McKnight’s strategy revolves around shifting assets into tax-free vehicles, with an emphasis on early planning.

Step 1: Start Roth Conversions Early
Roth IRAs are central to building a tax-free retirement. If you currently hold tax-deferred savings, consider converting these into a Roth IRA. The converted amount is taxed in the year of conversion, but acting while tax rates are low can save significantly in the long run. To minimize the tax impact, McKnight recommends spreading these conversions over several years.

Step 2: Use Life Insurance as a Retirement Tool
Life Insurance Retirement Plans (LIRPs), particularly indexed universal life (IUL) policies, allow for tax-free growth and distributions. These plans can serve as an additional stream of tax-free income during retirement. Publications like Kiplinger suggest that LIRPs are often underutilized despite their tax benefits and flexibility.

Step 3: Maximize Contributions to Tax-Free Accounts
Max out contributions to Roth IRAs or Roth 401(k)s if you qualify. Contributions are made with after-tax dollars, but they provide tax-free growth and withdrawals, offering substantial long-term advantages. Health Savings Accounts (HSAs) are also valuable tools, offering a tax-deductible contribution and tax-free withdrawals for medical expenses.

Key Takeaway: Achieving a 0% tax bracket requires early planning and a strategic shift into tax-free accounts. By utilizing Roth conversions, LIRPs, and maximizing contributions, you can build a retirement plan that withstands rising taxes and secures long-term financial stability.