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URL:  http://boards.fool.com/venture123-below-is-an-illustration-of-what-i-14495929.aspx

Subject:  Re: Keogh makes No sense for S&P Index?? Date:  3/7/2001  4:07 PM
Author:  bhirs Number:  90 of 294

Venture123, below is an illustration of what I believe is the correct calculation. This assumes that all of your assumptions about tax rates and capital gains rates are correct and hold.

Scenario 1 - With the Keough:

I'm in the 33% tax bracket and, over, say a 25 year period, I put $200,000 into my Keogh, and invest it completely in S&P and Total Market Index Funds. Now lets assume that by the time I retire 25 years later, and pull the money out, it has tripled to $600,000. If I'm still in the 33% bracket, (and there is no reason to believe I'll be in a lesser bracket when I retire), then my tax bill will be around $198,000.

Good enough, so far.

Scenario 2 - Taxable Account

The $200,000 that I earned over the years would get taxed at 33%, assuming I don't go into a higher bracket, and this would amount to 66,000.

So far, so good

So I would hold it for 25 years or so and, lets say it triples to $600,000

Here's where you have a problem.

You assume that your base with whic