An alternative approach to after-tax valuation
DOI:
https://doi.org/10.61190/fsr.v16i3.4888Keywords:
Withdrawals, 401(k), IRA, Estate planning, Tax planning, Retirement planningAbstract
Reichenstein (2001, 2007) argues that the type of savings account in which an asset is held affects the after-tax return received by and after-tax risk borne by investors. He uses this powerful insight to develop the notion of after-tax asset values that are predicated on an asset’s current after-tax consumption value. This paper builds on the risk-sharing insight and approaches after-tax asset valuation from an investment perspective based on future benefits. It also extends the model to accommodate a broader array of more realistic taxation environments. Examples of after-tax optimi- zation indicate that the recommended asset disposition depends heavily on the model chosen.
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