Retirement plans including traditional 401(k)s and deductible IRAs, grow tax-deferred. In addition, there are certain investments which earn income that is not currently taxable, such as Series EE and Series I Savings Bonds, certain tax favored education plans, annuities, and cash value life insurance. And, if the Series EE and Series I savings bonds and education plans are used for college, you may never pay tax on the income.

Roth 401(k)s, Roth 403(b)s, and Roth IRAs are considered tax-free investment accounts. Provided you adhere to the holding period requirements established by the IRS, qualified withdrawals from this type of IRA are never taxed.

SUGGESTION: The monies in your retirement plans are growing on a tax-deferred basis (tax-free in a Roth 401(k), Roth 403(b), and Roth IRA); that is, the earnings are not being taxed while they are in the retirement plan. Since you're already getting a tax-deferred benefit, don't invest any of your funds in tax-exempt investments within a retirement account. It may be prudent to consider investing in higher yield taxable investments.