Hi guys, here in the calculation of tax deferred account why have we used cost basis? Cost basis is used during the tax deferral method and not for tax deferred account (TDA). For tax deferred account we simply tax the full principle and interest.
Also, for post tax sd isn’t post sd equat to pre tax sd for TDA?
So, for calculation after tax value in tax deferred account, tax deferral method is only used.
No, for TDA post tax s.d. is not equal to pre-tax s.d. because tax has to be paid at the end and just that tax is deferred annually, its value is less volatile than other accounts.
But in tax deferred account we have this formula,ie, (1+r)^n(1-T) , where do we use this then?