How to be a “0 Percenter” in Retirement

Updated on January 19, 2022
Kyle O'Dell

By Kyle O’Dell

We know about the “1 Percent” – the super-rich. But what about the “0 Percent”? 

They’re retirees in the 0% tax bracket, and you want to be in this group!

Today, our tax dollars are concentrated in a few areas and being spent at an alarming pace. Nearly 80% of every tax dollar goes towards Social Security, Medicare/Medicaid and national debt interest. By 2020, it’s expected to be 90%, leaving little for defense, infrastructure, education and more.

And if you think taxes are high, they’re actually historically low. Today’s top rate is 39.6%, whereas in the 1970’s it was 70%. Taxes must increase, it’s nearly inevitable. 

So to keep your nest egg and be a “0 Percenter,” optimize your “bucket strategy.”

Financial Buckets

In terms of taxes, all our money falls into three buckets.

  • Bucket 1: Taxable
  • Bucket 2: Tax-deferred
  • Bucket 3: Tax-free

The first bucket includes after-tax earned income. For most, it’s their paychecks, but also rental income, CDs, bonds and so on.

The tax-deferred bucket contains money not yet taxed – often balances from traditional IRAs, 401(k) plans and other retirement accounts. When withdrawn, it’s taxed as income.

The third bucket houses tax-free money, including Roth accounts, municipal bonds and cash values of life insurance policies.

Joining the “0 Percent”

Usually, people have too much in the taxable bucket, WAY too much in the tax-deferred bucket, and not enough in the tax-free bucket, which Uncle Sam loves.


Your taxable bucket should be for emergencies, like a job loss. The ideal scenario is to have three to six months of income here.


We’ve been told to fill the tax-deferred bucket as much as possible. It’s vital to save for retirement, but the conventional thinking is flawed and susceptible to tax policy.

One of the biggest myths people believe is they’ll be in a lower tax bracket in retirement. They’re not working, so they’ll pay less taxes.

In reality, this money is what many retirees live on. In tax terms, it’s income. And once you’re over 70, the IRS forces withdrawals, known as required minimum distributions (RMD). That’s troublesome when your retirement funds have accumulated substantially.

Now most of us itemize our tax deductions – like mortgage interest, child credits and charitable donations. But in retirement, we usually take the standard deduction because it’s greater since we’ve paid off the house, kids are gone and so on.

If this bucket is too full, you’ll withdrawal more than necessary between RMD and what’s actually needed. And any amount above the standard deduction is taxable.

Say a retired couple takes $100,000 annually from this bucket. Their standard deduction is $25,000, so their taxable income is $75,000! Annual withdrawals from this bucket should equal the standard deduction.

The above couple needs $25,000. To find their ideal balance, divide $25,000 by the RMD rate (3.65% in first year, increasing 3% yearly). So their goal should be to have about $685,000 in this bucket.

You want this bucket full, but not overflowing.

To do that, contribute up to your company’s match and that’s it. Any more means withdrawals greater than the standard deduction, which feeds Uncle Sam. Plus, this scenario can lower your Social Security benefit because more is taxed.


You can amass a lot of tax-free money using Roth plans (IRA and 401(k)) and life insurance policies. Municipal bonds also apply, but low yields and stipulations make them unattractive.

Roth vehicles accept after-tax money, which is then withdrawn tax-free in retirement. However, if you earn too much, you can’t invest in one. Also, there are contribution limits. But for most people, Roth vehicles are vital. And you can convert traditional accounts to a Roth if desired.

A properly-structured life insurance policy can sidestep the Roth limitations. I advise clients to purchase traditional whole life or indexed universal life (IUL) policies. They can be complex, but the right policy gives you tax-free withdrawals, market appreciation and protection from losses.

Most buy life insurance for the death benefit, but the value is in the living benefit. Focus on liquidity, control, tax-free access and returns that outpace inflation (typically 5-7%).

Maximize this bucket to keep Uncle Sam at bay!

Winning Strategy

Here’s a (simplified) bucket strategy for retirees wanting $60,000 annually:

  • $30,000 – Social Security
  • $24,000 – Traditional IRA
  • $6,000 – Roth IRA and/or IUL

Here, the traditional IRA is a wash because of the standard tax deduction, and the Roth/IUL money is excluded from taxes. The Social Security is on the tax return, but typically that liability is negligible or zero, so even if taxes double, exposure is minimal.

Almost anyone can be a “0 percenter,” or come close, by working with a trustworthy, qualified planner. It maximizes your retirement, and the earlier you start, the easier it is!

Kyle has been helping individuals and families accumulate and preserve wealth for retirement for nearly 20 years. He is an Investment Advisor Representative and is also life insurance licensed. This IAR designation confirms his expanded knowledge of pre-retirement and post-retirement planning strategies which includes topics related to retirement income planning, employer-sponsored retirement plans, risk management, asset management and more.

Today Kyle specializes in working with Doctors and clientele that have the need for developing and executing financial plans at a high level. Visit him at

The Editorial Team at Healthcare Business Today is made up of skilled healthcare writers and experts, led by our managing editor, Daniel Casciato, who has over 25 years of experience in healthcare writing. Since 1998, we have produced compelling and informative content for numerous publications, establishing ourselves as a trusted resource for health and wellness information. We offer readers access to fresh health, medicine, science, and technology developments and the latest in patient news, emphasizing how these developments affect our lives.