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Their similarities: Roth IRAs and non-dividend-paying stocks offer potential tax advantages. With a Roth IRA, contributions are made with after-tax dollars, but earnings and withdrawals are tax-free. Similarly, non-dividend-paying stocks do not distribute income to shareholders, so you may avoid paying taxes on dividends. Both options also require a long-term investment horizon to achieve optimal results. For non-dividend-paying stocks, you can reap rewards from the compounding effect by reinvesting profits back into the company.

Their differences: Roth IRAs are retirement accounts that have contribution limits, while non-dividend-paying stocks are individual investments that can be purchased without limits. Further, Roth IRAs have penalties for early withdrawals, while non-dividend-paying stocks can be sold at any time without penalty.

Deployed together: Holding non-dividend paying stocks until death is the equivalent of having a Roth. However, the article warns of the risks of this strategy, including the possibility of the company paying dividends, and suggests that holding onto the assets until death is the only way to avoid capital gains tax. Additionally, the article explores the use of non-dividend paying stocks to reverse required minimum distributions from traditional 401(k)/IRAs.

Pay close attention to how you reinvest your RMDs and you could save a bundle on taxes for yourself, as well as your family.