Account Types
Every investment account in a FinZot plan is one of two kinds. A taxable account is a brokerage account. The UI calls it “Taxable / Brokerage”, and these docs also say “after-tax”. A retirement account has one of twelve tax-advantaged types. Every account has a single owner, either the primary person or the spouse. There are no joint accounts, and the owner’s age drives every age-based rule. The account type decides how withdrawals are taxed, whether penalties and RMDs apply, and what happens to the distributions its holdings pay.
The catalog
Section titled “The catalog”| Account type | Tax treatment | Early-withdrawal penalty | Lifetime RMDs | Can be inherited |
|---|---|---|---|---|
| Taxable / Brokerage | Taxable | Never | Never | No |
| IRA, 401(k), 403(b) | Pre-tax | Based on age | Yes | Yes |
| Governmental 457(b) | Pre-tax | Never, by law | Yes | Yes |
| Roth IRA, Roth 401(k), Roth 403(b) | Roth | Based on age and the 5-year rule | Not while owned | Yes |
| Roth 457(b) | Roth | Never, by law | Not while owned | Yes |
| HSA | HSA | Its own penalty rules | No | No |
| 529 | 529 | Its own penalty rules | No | Yes |
| NQDC (409A) | Pre-tax | Never, by law | Never | No |
| Top Hat 457(b) | Pre-tax | Never, by law | Yes | No |
FinZot models each of these as written in the law. Both kinds of 457(b) and NQDC plans sit outside the early-withdrawal penalty statute, so their withdrawals are never penalized at any age. Every other retirement type gets its penalty decided each year from the owner’s age and whether the withdrawal is qualified (contributions). IRA withdrawals are reported separately from employer plan withdrawals, so state tax exclusions can treat them differently.
A taxable account can be marked as an Employer stock plan account. It holds a company stock, such as shares kept from RSU vests (stock compensation). When cash runs short, FinZot draws on it after your other brokerage accounts. A company stock can be held in shares in any taxable or retirement account, not only this one.
NQDC (409A) and Top Hat 457(b) accounts accept money only as a starting balance. No contribution can target them, and they cannot be the source of a Roth conversion. FinZot does not model their elections, vesting, or forfeiture.
What the tax treatment decides
Section titled “What the tax treatment decides”| Treatment | What happens when money comes out |
|---|---|
| Taxable | The withdrawal itself is not taxed. Each sale realizes a capital gain or loss per lot, and distributions are taxed every year (allocation, lots, and selling). |
| Pre-tax | Withdrawals are ordinary income. |
| Roth | Qualified withdrawals are tax-free. Otherwise the contributions-first rules apply (contributions). |
| HSA | Qualified medical spending is tax-free. Non-medical withdrawals are taxable. From the year after the owner turns 65, they are taxed like a traditional IRA withdrawal. |
| 529 | Qualified education spending is tax-free. A non-qualified withdrawal is taxed on its share of earnings. |
Holdings and distributions
Section titled “Holdings and distributions”Only taxable accounts track cost basis. Their holdings are tax lots, each with its own basis and purchase year. Every other type holds a simple balance with no basis, because withdrawals are taxed on the amount, never on the gain per lot. Roth and 529 accounts track one contribution balance for the whole account instead (contributions).
Each year a holding pays its asset’s distributions: dividends, interest, and fund capital gain payouts. In a taxable account they are taxed by type. In every other account they are reinvested untaxed (returns and distributions). As a result, account reports show investment income only for taxable accounts.
You can disable an account. This sets its starting balance to zero but keeps everything else. Its contributions, RMDs, and growth all build from zero. Use it to ask “what if I did not have this money at the start?”
Inherited accounts
Section titled “Inherited accounts”Marking a retirement account as an Inherited Account changes three things. The tax code forces money out on a schedule you choose. The account can never receive new money. And withdrawals get the beneficiary’s penalty waiver instead of the owner-age rules. Taxable, HSA, NQDC, and Top Hat 457(b) accounts cannot be inherited. An inherited account takes three inputs: Inherited At, the Original Owner’s Birth Year, and a distribution rule. Inherited At is the year the original owner died, entered like any other date in the plan: a calendar year, an age, or a life event, but not a milestone that fires on the plan’s own numbers, because a death is not something the portfolio triggers.
The two years decide whether the owner died after their required beginning date. A death two or more years after the year they reached RMD age counts as after it, and a death in that year or earlier as before. The year between counts as after unless Inherited At carries a month before April; the account form takes a year only. RMD age is 72, 73, or 75 by the owner’s birth cohort, as for your own accounts. A Roth owner has no required beginning date. The year of death itself forces nothing: any RMD the owner owed for that year is taken as already satisfied, so enter the balance net of it, and the beneficiary’s own schedule starts the year after. FinZot does not model the still-working exception or a successor beneficiary of an account that was already inherited.
Inherited At may be in the future. Until that year the account is dormant. Its holdings are entered at today’s balance and grow with the market like every other holding, and the balance shows on the account’s own line, but it counts toward nothing: not net worth, not the solvency tests, not the withdrawal order, and no forced distribution, withdrawal, or charitable gift can come out of it. In the year it lands the household holds it and a timeline event marks the arrival; the beneficiary’s own schedule starts the year after. A formula that reads the account’s balance sees the dormant balance, since the balance is real; only the household totals leave it out. FinZot does not model the original owner’s own withdrawals before then, so the projected balance is gross of whatever they spend; enter the balance you expect at the death if that matters.
- Ten Year Rule. FinZot follows the SECURE Act as written. The account is emptied by the end of the tenth year after inheritance. If that window ended before the plan starts, the account is emptied in the first projection year. In the years before the deadline, a pre-tax account whose original owner died after their required beginning date takes a single-life-table distribution each year, on the same factor convention as the lifetime stretch below. Otherwise nothing is forced. Nothing is ever forced from a Roth or 529 before the deadline.
- Lifetime Stretch. A single-life-table distribution every year. The amount is the start-of-year balance divided by the beneficiary’s factor from IRS Publication 590-B Table I, set at their age in the year after the death and reduced by one each year after. Choosing this says the beneficiary qualifies as an eligible designated beneficiary. The account form proposes it when the beneficiary was born within ten years of the owner and otherwise leaves the choice to you; FinZot does not check it. Real tax law forces nothing out of an inherited 529, but FinZot applies the chosen rule to it anyway.
Forced distributions work like RMDs. They are sized on the start-of-year balance, and the proceeds join the year’s cash. They reduce the shortfall the year still has to cover. A forced distribution from an inherited pre-tax account also counts toward the Traditional group’s share of that selling. A fixed or tax-targeted withdrawal from the same account sells its full amount on top of the forced distribution. This works the same way it does for an RMD, covered in roth conversions and withdrawals. Forced distributions can never be delayed.
Withdrawals from inherited accounts are penalty-free at any age, under the death exception in the tax code. Pre-tax withdrawals are ordinary income. Inherited Roth withdrawals are treated as fully qualified and tax-free. FinZot has no input for the year the original owner first contributed, so it assumes the 5-year rule is met. A non-education withdrawal from an inherited 529 is still taxed on its earnings share and penalized. Because penalty-free money is spent first, the default shortfall sequence drains an inherited pre-tax account before the beneficiary’s own accounts that would still be penalized (how a year works). An inherited account cannot be the source of a Roth conversion. To draw it down the same way, use a pre-tax withdrawal sized to a tax bracket or a MAGI threshold. The conversion and withdrawal optimizer can choose that threshold for you.