After-Tax Return
What is left of a return after taxes.
What is After-Tax Return?
For fully taxable income, after-tax return = pre-tax return x (1 - tax rate). Comparing after-tax returns is the only fair way to weigh taxable investments against tax-exempt ones, which is the logic behind tax-equivalent yield.
After-Tax Return: a worked example
A 6% corporate bond yield for a client in the 35% bracket nets 3.9% - less than a 4.2% muni.
More terms in Retirement Plans, Accounts & Trading
IRA Rollovers vs. Transfers
60-day rollovers are limited to one a year; direct transfers are unlimited.
10% Early Withdrawal Penalty & Exceptions
Distributions before 59 1/2 cost 10% extra, unless an exception applies.
Solo 401(k)
A 401(k) for a self-employed owner with no employees other than a spouse.
Defined Benefit Plan
A pension promising a specific benefit; the employer bears the investment risk.
Defined Contribution Plan
An individual account plan whose payout depends on contributions and returns.
403(b) Plan
A salary-deferral plan for public schools and 501(c)(3) nonprofits.
457 Plan
Deferred compensation for state and local government employees.
SIMPLE IRA
A low-cost plan for employers with 100 or fewer employees.
All Retirement Plans, Accounts & Trading terms · Full glossary