From Due.:

Investing in financial instruments like money market CDs can be lucrative, but tax brackets and state taxes significantly impact after-tax returns. A 24% tax bracket results in 3.8% after-tax returns, while a 32% bracket yields 3.4% and the highest at 37% gives a return of 3.15%.

Residency in high tax states like New York and California can also decrease after-tax returns, with the highest tax bracket reducing returns to 2.6% and 2.43% respectively. It is also important to note that cash underperforms risk assets over time.

Trying to time the market is often futile, as market movements can be unpredictable and influenced by many factors beyond an individual’s control.

In conclusion, it is crucial for investors to understand the actual returns on their investments after taxes, as well as the risk of cash investments and the drawbacks of trying to time the market. By doing so, they can make more informed investment decisions and potentially increase their returns.



Read more: Decoding Real Returns on Your Investments