# After-tax real rate of return

(redirected from After-Tax Real Returns)

## After-tax real rate of return

The after-tax rate of return minus the inflation rate.

## After-Tax Real Rate of Return

The rate of return on an investment after subtracting taxes and adjusting for inflation. It is calculated simply by taking the after-tax return and subtracting the inflation rate. For example, if the after-tax return is 7% and the inflation rate is 4%, the after-tax real rate of return is 3%.
References in periodicals archive ?
5% / 2) 4/15/2007 \$115,787 \$1,890 \$51,447 10/15/2007 115,344 1,890 1,442 4/15/2008 114,896 1,890 1,436 10/15/2008 114,442 1,890 1,431 (1) (5) Premium to Payment amortize (3)-(2) 4/15/2007 \$5,443 10/15/2007 448 4/15/2008 454 10/15/2008 459 Exhibit 2: After-tax real returns for TIPS held in taxable accounts assuming different real returns, inflation rates, and tax rates 15% Tax Rate Annual Inflation Rate (Percent) 1% 12.
As long as the retiree spends only the after-tax real return amount, he or she will preserve the purchasing power of the original investment.
5% inflation rate, the after-tax real return is a more modest 1.
Recognize also that inflation was basically the same for any of these four matched-pairs, so that TIPS would also have higher after-tax real returns, as well.
By setting the after-tax real return on TIPS equal to the after-tax real return on fixed-rate debt (i.
In fact, with the combination of high inflation and taxes, it is possible that an indexed bond can have negative after-tax real returns.
The after-tax real return, discussed in the next section, declines with inflation.
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