Volatility makes headlines. Tax drag rarely does.
- Anatoly Iofe

- Oct 25
- 2 min read

Turn on the news and you’ll hear about market swings, Fed policy, or geopolitical shocks. But the quiet force eating away at wealth isn’t volatility — it’s taxes compounding year after year.
I recently wrote about this for Forbes because it’s one of the most misunderstood issues in wealth planning.
Here’s the core problem: Every time your portfolio generates gains, a slice goes to taxes. That slice compounds in reverse — shrinking the base you have to grow from. Over decades, that “silent drag” can outweigh the impact of market volatility.
What families often miss:
📉 Market volatility is temporary — portfolios recover.
💸 Tax drag is permanent — once you’ve paid it, it’s gone.
📊 On paper, you might think you’re compounding at “market rates.” In reality, your after-tax return may be 1.5%–2% lower.
That gap adds up to millions over a lifetime.
Why this matters now
Many investors are fixated on whether the Fed will cut rates, or whether the S&P will end the year higher or lower. But even in strong markets, if you’re compounding with a tax drag, you’re leaving wealth on the table.
The good news?
Tax drag isn’t destiny. You can contain it with structure. Families I work with often use three main tools:
Asset location: Placing the right investments in taxable, tax-deferred, and tax-free accounts to minimize leakage.
Tax-efficient wrappers: Private placement life insurance and annuities that let capital compound without annual taxation.
Withdrawal strategy: Managing distributions in retirement to avoid unnecessary brackets, surcharges, and phaseouts.
The bottom line:
Markets will swing. Tax rules will change. But one principle doesn’t:
👉 Compounding works best when you keep the returns you earn.
That’s why the most overlooked lever in wealth management isn’t chasing the next 2% market move — it’s eliminating the silent 2% tax drag.
🔗 Full article here on Forbes: The Silent Wealth Destroyer: Why Tax Drag Matters More Than Market Volatility




