What Is Your Money Really Making—After Taxes and Inflation?

Your account statement might say you earned 10%, but is that really what you get to keep? Not exactly. Once taxes and inflation step onto the scene, the picture changes—sometimes drastically.

For example, let’s say your tax rate is 40% and inflation is 3%. That 10% return suddenly shrinks to an after-tax, real return of just 2.9%.¹

OUCH.

Now imagine you’re playing it “safe” and keeping your money in money markets or other interest-bearing accounts earning 4.5%. After the same 40% tax bite and 3% inflation, your real return isn’t positive at all—it’s -0.29%.²

DOUBLE OUCH.

And here’s the kicker: many families that we work with face even higher tax rates than this. Even if your tax rate is lower, say 20%, the math isn’t all that comforting. On a 10% gross return, your real return is 4.86%. On 4.5%, it’s only 0.58%.³

The lesson?
👉 You cannot ignore taxes or inflation.

A Golf Course Analogy

Think of investing like a round of golf. The tougher the course, the more clubs you need in your bag. Right now, we’re all playing one of the toughest financial courses in history:

• Tax rates are still near historic lows, but with a growing federal deficit, the odds of higher rates ahead are high.
• Inflation risk is real and could erode your returns faster than you think.
• The length of the course matters too—how many years does your money need to keep working to cover your cost of living?
• This course isn’t easy. And if you’re only carrying one or two “clubs” (investment strategies), you’re setting yourself up for trouble.

What You Shouldn’t Do

The worst move is to throw up your hands and assume nothing can be done. That’s simply not true.

Instead, you may need to:

• Add new strategies (more “clubs” in the bag).
• Retire old ones that aren’t working.
• Bring in a trusted guide (your financial “caddy”) to help navigate the hazards ahead.

Bottom Line

Taxes and inflation are not side issues—they’re core factors that can make or break your long-term financial success. Ignoring them is like golfing blindfolded.

The good news? With the right plan, you can adjust, prepare, and keep your money working for you.

Don’t ignore taxes or inflation. Plan for them today.

Calculations:

1. 0.10x(1-.4)=0.06%, then(1+.06)/(1+.03)-1=2.9%
2. 0.045x(1-.4)=0.027%, then (1+.027)/(1+.03)-1=-0.29%
3. 0.10x(1-.2)=0.08%, then(1+.08)/(1+.03)-1=4.86%; 0.045x(1-.2)=0.036%, then (1+.036)/(1+.03)-1=0.58%