This presentation conveys how taxable accounts work and two approaches to paying the taxes. The presentation assumes an account generates ordinary income subject to annual income taxation. |
Next, let’s look at two ways most families pay the taxes due on this account. Taxes can be paid from the account itself. This will reduce the balance of the account and impact future growth. If the account is compounding interest, the withdrawal to pay taxes will slow the growth. Taxes can be paid from current lifestyle. Paying taxes from current lifestyle will reduce your standard of living. This approach will not impact the account balance and allow it to grow uninterrupted. |
No math presented on this screen. |