Message Font: Serif | Sans-Serif

No. of Recommendations: 0
>> The taxable event in the TIRA occurred in year 20 for a tax bill of \$73,219 with an account value of \$466,096, leaving a balance of \$392,877. <<

This I agree with.

>> The taxable event in the TIRA occurred in year 20 for a tax bill of \$73,219 with an account value of \$466,096, leaving a balance of \$392,877. The first tax bill in the taxable account is \$14,985 paid in year 11. The second tax bill is \$30,257 paid in year 20. The account value in year 20 is \$401,615, leaving a balance of \$371,358. So although the total tax bill is lower in the taxable account by about \$28K, the compounded returns on the first tax bill amount of \$14,985 over 10 years result in \$21,500 more after-tax cash in the TIRA. <<

When I do this, I show that \$100K becomes \$215,892 after 10 years. Of this \$115,892 is taxed at 15%. After 10 years, the tax paid is \$17,384 and the after-tax balance is \$198,509.

Compounding \$198,509 at 8% for 10 years, you end up with \$428,565. Of that, \$230,056 is taxable (\$428,565 - \$198,509 already taxed). The tax on this is 15% of \$230,056, or about \$34,508. Subtract this from your original \$428,565 balance and you get about \$394,057. By my calculations in Excel, the taxable account with one taxable event after Year 10 and another taxable event after Year 20 comes out \$1,180 ahead.

Note that my original statement which you took issue with is pretty close to a boundary case.

#29

### Announcements

The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.