What’s Your Real Return?

Investors typically look at the nominal return on their investments. This week, Craig Siminski, of CMS Retirement Income Planning, shares with us an article helping us understand the real return in order to target financial goals:

As an investor, you probably track the return on your investments.

But it’s likely that you look at the “nominal return”, which is the percentage increase or decrease in the value of an investment over a given period of time, usually expressed as an annual return.

To estimate actual income or growth potential in order to target financial goals — for example, a certain level of retirement income — it’s also important to consider the real return, which includes the effects of taxes and inflation.

Let’s say you want to purchase a bank-issued certificate of deposit (CD), because you like the lower risk and fixed interest rate that a CD can offer. CD rates rose substantially with the Federal Reserve’s aggressive increases in the federal funds rate but began to decline with the Fed’s first rate cut in September 2024.

Just as an example, let’s say you find a CD that offers 5% annual interest. That could be attractive. However, if you’re taxed at the 22% federal income tax rate…

To Read the Entire Article, Please Click Here.

Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

Please let Craig know that the Green Bay News Network Sent You!