Can a lower return leave you with more money after taxes?

The number that matters

It sounds backwards, but an investment with a lower return can leave you with more money than one with a higher return. The number that actually matters is what’s left after taxes, and that can be very different from the return on your statement.

Why two similar investments end up different

In a regular investment account, some investments get taxed every year, whether you touch them or not. Others can grow for years without tax until you sell them. So two investments can earn about the same, and one leaves you with noticeably less, simply because of how it’s taxed.

That difference happens quietly, a little each year, and over twenty or thirty years it adds up.

What you can control

• The type of investment and how its income is taxed.
• Where you hold it: a regular taxable account, a tax-deferred account like an IRA, or a Roth.
• How long you hold it, since that can change how a gain is taxed.

Each of these can be planned, and each is easy to overlook when the return is the only number you’re watching.

How we handle it

At Sansone CPA & Financial, we coordinate your tax, investment, and retirement decisions so your investments are measured by what you actually keep.