User:Assumer/Sandbox

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Revision as of 17:07, 5 May 2013 by LadyGeek (talk | contribs) (Explained example table, wordsmithing.)
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Looking for opinions on adding this section to http://www.bogleheads.org/wiki/Principles_of_Tax-Efficient_Fund_Placement#Explanation_for_the_estimated_order

Advantages of tax deferment

It may not be clear why deferring taxes is a good idea, especially if you expect to be in the same tax bracket in the future. Refer to Table 1:

Table 1. Tax Deferment
Year Return Taxable   Tax-Deferred
Tax Rate Return Taxes Total Tax Rate Return Taxes Total
0 - - - - $10,000 - - - $10,000
1 6% 25% $600 $150 $10,450 - $600 - $10,600
2 6% 25% $627 $157 $10,920 - $636 - $11,236
3 6% 25% $655 $164 $11,412 - $674 - $11,910
4 6% 25% $685 $171 $11,925 - $715 - $12,625
5 6% 25% $716 $179 $12,462 25% (of total return) $757 $846 $12,537

Start with $10,000. After year 1, you will have $150 less total return after taxes (compared to the non-taxed amount of $10,600). Going into year 5, you will be starting with a higher amount ($12,625) if the taxes were deferred than not ($11,925). In year 5 (the year where the taxes have been deferred to) you will end up with a higher starting amount, which shows that deferring taxes is the best approach.

Editor's note: Did I do these calculations correctly? --Assumer 08:14, 26 March 2013 (CDT)

How do I put more of a "break" between the taxable and tax deferred columns? Like a double vertical bar? --Assumer 08:14, 26 March 2013 (CDT)

You can get a lot more complicated as shown here: wikipedia:Help:Table#Setting borders, but one simple approach is to insert a non-break space (&nbsp;) see wikipedia:List of XML and HTML character entity references. Tables usually ignore spaces, but non-break spaces force the insertion. Note the column spans the table. --LadyGeek 21:12, 26 March 2013 (CDT)