Illustrate the principal in account 1 remains constant. Illustrate the taxes generated from account 1 remain constant. Illustrate the interest removed from account 1 each year growing in a tax-favored position. |
Account 1 (the taxable account) is level or constant which in turn levels or flattens the taxes due each year. The interest earned is then moved to account 2 where it can grow in a tax-favored environment. |
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. |