Valuation of assets in taxable accounts and annuities
DOI:
https://doi.org/10.61190/fsr.v17i3.4918Keywords:
tax-deferred growth, after-tax asset valuations, after-tax asset allocation, asset allocationAbstract
Horan and Robinson (2008) and I agree on several issues including how to calculate the after-tax value of assets held in tax-deferred accounts like a 401(k) and tax-exempt accounts like a Roth IRA. We agree that an asset's after-tax value is its after-tax future value when discounted back to the present by dividing by one plus the risk-appropriate discount rate. However, we disagree about the risk appropriate discount rate for and, therefore, after-tax value of (1) assets held in taxable accounts and (2) assets that earn tax-deferred returns, where the latter include assets held in non-qualified annuities and passively-held stocks in taxable accounts. This study explains my arguments for calculating the after-tax values of these assets.
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