3. After-Tax Rate of Return

Once the factors like expected time horizons and spending requirements are determined, the next thing to be calculated is the after-tax rate of return. This will access the feasibility of the portfolio. The too early exhaustion of the retirement portfolio is one of the biggest risks an individual can face, which is referred as longevity risk, that is the risk of living too long and thus outlasting the investments. The investment returns are typically taxed depending on the type of retirement account you hold. Thus the actual rate-of-return must be calculated on an after tax basis.