This is part 3 of my buckets of money and how I plan on investing the funds in them. Although the funds are already invested, it’s become clear that I need to re-think how I’m investing funds in each account.
Tax FREE Bucket
My third bucket is the “tax FREE” bucket. This is a bucket that holds my retirement funds that I’ve contributed to in my Roth IRA, Roth 401k, and HSA.
Taxes on Roth IRA
There are no taxes on Roth IRA withdrawals after you reach retirement age of 59½ and more importantly this income doesn’t count against your IRMAA so it’s taxvantageous™ to fill this bucket up as much as possible.
Taxes on Roth 401k
Like the Roth IRA, the tax on money inside Roth 401k’s is zero as long as you reach retirement age. And like Roth IRA’s, this income doesn’t count against your IRMAA either.
Taxes on Health Savings Accounts (HSA)
There are no taxes on HSA withdrawals as long as they are used to pay for qualified expenses such as healthcare (doctors, surgeries, prescriptions, etc).
Filling The Bucket
I’m filling my tax FREE bucket with growth, value and dividend stocks as well as some US Treasuries to make sure that this bucket of money grows in a stable and reliable way.
Read about my taxable bucket or tax deferred bucket.