Illustrate what happens year-by-year as the principal account is reduced. Illustrate the effects of the pay down by accelerating the reduction. |
Here you can see the results of the reducing tax strategy. If we accelerate the amount of the annual withdrawal, we can even further reduce the current tax liability. |
Clicking Documentation displays three worksheets. The top worksheet displays the taxable account (account 1). The withdrawals from the taxable account are deposited to the tax favored account 2. The middle spreadsheet displays account 2. The annual tax paid from lifestyle of the tax-favored account is always zero. This is because account 2 is either tax-free or tax deferred. The bottom worksheet displays the sum of the above two worksheets. Each cell in the bottom worksheet is the sum of the corresponding two cells in the top two worksheets. For example, adding the annual earnings for the first year in account 1 to the annual earnings for the first year in account 2 gives the amount displayed in the annual earnings for the first year in the bottom worksheet. |