The Cash Flow Clock: For Retirees - Book - Page 34
The Cash Flow Clock
What matters is that as little of our hard-earned assets get paid to the
government as possible.
3. Tax-Free – These are assets that have been earned, taxed, and invested,
just like long-term capital gains assets. However, the growth in these
accounts is never taxed during our lifetime. Tax free assets include cash
value in a life insurance policy, Health Savings Accounts, 529 plans,
among a few others. But the most commonly used tax-free accounts are
Roth 401k and Roth IRA. Roth assets are tax free during our lifetime
and at our death. They are not subject to RMDs. Even better, if assets
are inherited in Roth accounts, they can continue to grow tax-free for up
to ten years. When they are withdrawn, they are completely tax-free.
Only the growth after the 10 years will be taxable. This makes Roth
accounts the absolute best way to pass assets to family or other
individuals.
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