Taxes & timing
Taxes and the Cost of Delay (Basics)
Taxes can reduce net growth, and waiting to start shrinks compounding time. Together, they can make the cost of delay feel larger. Here’s a simple, non-advice overview.
Published: December 22, 2025 · Updated: December 22, 2025 · By FinToolSuite Editorial
Model timing in the calculator
Compare start-now vs start-later using an approximate net assumption.
Disclaimer
Educational purposes only; not financial, tax, or legal advice. Examples are illustrative; real returns vary and investments can go down as well as up. Tax rules vary by country, region, account type, and over time. Fees, inflation, and provider rules vary.
Quick answer
Tax drag reduces what you keep (net return). Net return is what compounds. The timing of taxes—paid along the way vs later—can change outcomes.
Salary After Tax CalculatorWhat “tax drag” means
If part of your gains/interest is taxed, the amount left to compound is smaller. Less money compounding can mean a lower projected balance than a pre-tax illustration.
Why timing matters
Taxes paid along the way can reduce the base earlier. Taxes paid later leave more invested until the end. Actual timing depends on product/account rules and local law.
Illustrative net vs gross snapshot
| Scenario | Rate used (illustrative) | Note |
|---|---|---|
| Gross assumption | 5% | Before taxes/fees |
| Approx. net (after-tax/fee haircut) | 4% (example) | Illustrative “net” if tax/fees reduce the effective rate |
Illustrative only. Real tax and fee effects vary by account, provider, and jurisdiction.
Fees and delay together
Delay reduces time for compounding. Taxes and fees reduce the rate that compounds. Combined, a delayed start with a lower net rate can widen the gap versus a no-delay, pre-tax illustration.
How to model taxes approximately
- Pick a gross rate you want to test.
- Create a “net” scenario by lowering the rate (e.g., reduce by an illustrative amount).
- Run start-now vs start-later using the net rate.
- Save and compare both scenarios.
Open the tool: Cost of Delay Calculator · More cases: cost of delay examples.
Common mistakes
- Assuming pre-tax returns are what you keep.
- Using one “average” number as a guarantee.
- Mixing net and gross assumptions between scenarios.
- Forgetting fees and inflation when thinking about net results.
FAQ
What is tax drag?
The reduction in net growth when part of gains/interest is taxed.
Does tax affect the cost of delay?
Yes. Lower net returns plus fewer compounding periods can widen the gap in a model.
Do I need to include taxes in the calculator?
The tool takes one rate. You can approximate after-tax by using a lower “net” rate.
How can I estimate after-tax returns safely?
Use illustrative lower rates; avoid treating any number as certain.
Does tax timing matter?
Yes. Tax paid sooner vs later can change how much stays invested; rules vary by account and jurisdiction.
Are taxes the same as fees?
No. Taxes and fees are separate costs; both can reduce net outcomes.
Do tax rules vary by country/account?
Yes. They differ by country, account type, and can change over time.
Are calculator results guaranteed?
No. They are estimates based on inputs; real outcomes vary.
Final CTA
Run two versions: one with a gross assumption and one with a lower “net” assumption. Compare start-now vs start-later in each.