Illustrate the taxes increasing right along with the investment returns. |
On the left you will notice the account growing at the given interest rate and the taxes growing at the current tax bracket as well. The numbers at the bottom of the screen give a year-by-year description of what is happening - illustrating the net account value after the taxes have been paid. Remember that most people are paying these tax dollars from their current lifestyle rather than taking the tax due from the investment account. |
The calculation is performed in a worksheet defined as follows: Column 1: Account balance at the beginning of the year. Column 2: Annual interest earned: (Column 1 * Taxable Account 1 ROR). Column 3: Account balance at the end of the year: (Column 1 + Column 2). Column 4: Annual taxes paid: (Column 2 * Ordinary Tax Bracket). Column 5: Cumulative taxes paid: (cumulative sum of Column 4). Column 6: Net Growth: (Column 3 - Column 5). |