Most investors focus on performance, but far fewer focus on what they actually keep after taxes. Today, Jason and Alex break down one of the most overlooked threats to long-term wealth: tax drag. Unlike a single tax bill, tax drag quietly compounds over time, steadily eroding portfolio returns through ordinary income, capital gains, turnover, and poor asset placement.
If you’ve ever heard the phrase “It’s not how much you make, it’s how much you keep,” this conversation explains exactly why that matters — and what you can do about it.
We walk through:
📌 What tax drag is and why it compounds over time
📌 How a 1–2% annual tax drag can reduce lifetime wealth by 30–50%
📌 Why high-yield investments and mutual funds often create hidden tax costs
📌 How direct indexing and ongoing tax-loss harvesting reduce erosion
📌 Why tax-sensitive asset location matters more than most investors realize
📌 How coordinating your advisor and CPA can materially improve after-tax results
For disciplined investors, improving after-tax efficiency doesn’t require taking more risk, it requires better structure and better coordination. This episode shows you where to start.
💬 Book a Consultation with us
Concerned that taxes may be quietly eroding your returns?
Schedule a no-cost, no-obligation consultation with our IDA Wealth team to review your portfolio through an after-tax lens.
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Disclosure:
The information presented in this episode of Financial Detox is for educational and informational purposes only and should not be considered personalized investment, financial, tax, or legal advice.
Examples referenced may include hypothetical scenarios or outcomes experienced by actual clients; these examples are for illustrative purposes only and may not be representative of all clients or future results. The Tax Drag illustration referenced was sourced from Envestnet and reflects a hypothetical 20-year time horizon at a 7.5% assumed growth rate, net of fees, illustrating the impact of a 1% and 2% annual tax drag. The sample financial plan discussed is hypothetical and based on a 12-year time horizon, a 24% tax bracket, and a 6.3% assumed annual rate of return net of fees. Roth conversions and contributions are not appropriate for everyone, and tax laws, eligibility rules, and individual circumstances may change. For IRS guidance, visit www.irs.gov/retirement-plans/roth-iras.
The S&P 500 Index is a market index representing approximately 500 large U.S. companies and is commonly used as a measure of overall market performance.
Actual results will vary based on individual circumstances, market conditions, investor behavior, fees, taxes, and changes in applicable laws. No strategy or adviser can eliminate investment risk, guarantee results, or ensure positive outcomes. All investing involves risk, including loss of principal.
Intelligence Driven Advisers (“IDA”) is an SEC-registered investment adviser and does not provide specific tax or legal advice. Registration does not imply a certain level of skill or training. For additional information, including services, fees, and potential conflicts of interest, please review Form ADV Part 2A and Form CRS at www.idawealth.com.
12 Min.