The Cash Flow Clock: For Retirees - Book - Page 78
The Cash Flow Clock
we can sell them, take a tax deductible loss, and
reinvest in something better. This is known as tax
loss harvesting.
But this is not an option for most investors. The
point of having assets is to use them. This makes
non-qualified assets tricky. Assets that are relied on
for short-term income and emergency funds should
be in Lazy investments. This is especially true for
younger investors who cannot access their qualified
accounts if they need to.
The Cash Flow Clock will help us to determine
when/if we will need to liquidate non-qualified assets
for income. If we do, we need a plan to liquidate
when it is most tax efficient. If not, then we can
afford to take pure risk to get the highest growth so
that our estate can take advantage of the tax-free step
up in cost basis.
Tax deferred assets are taxed when they are
withdrawn. There is no step up on cost basis when
we die. Someone is going to pay tax on these assets.
The only question is when. When taxes are paid
determines how much tax is paid.
Because there is no way to get out of the taxation on
tax deferred accounts, these assets should be the first
73
