THE EFFECT OF INFLATION AND TAXES ON YOUR SAVINGS ACCOUNT
Warren Buffett Quote: “ Our outlook for inflation is always the same. We feel there’s a big bias toward inflation-both in the U.S. and around the world…It’s a world where prices are going up and up. It’s just a question of how much. You could definitely have some explosive inflation at some point. Printing money is just too easy. I’d do it myself if I could get away with it.” Annual meeting in 1988.
|Rate of rerturn||6%|
*** We have used a 6% rate of return. Most savings accounts today pay 1% to 2%.
Multiply your earnings by your tax rate to determine tax owed:
|Tax Rate||x 28%|
INFLATION- determine your loss in purchasing power by multiplying Savings by the assumed inflation rate
|Loss in pruchasing Power||$3,000|
Determine your actual rate of return by subtracting the taxes owed and loss in purchasing power from your earnings:
|Loss in Purchasing Power||$3,000|
Actual Return on
Determine the percentage of return on your savings account by dividing the actual return by your savings:
$1,320.00 / $100,000 = 1.3%
To understand the financial benefits of real estate ownership it is necessary is to understand inflation. Please log on to the
and experiment with their inflation calculator.