The Naval Podcast – Pre-Tax Compounding Beats Post-Tax Compounding

Check out Naval’s Episode Page & Show Notes

This podcast clip is part of a conversation between Naval Ravikant and Babak Nivi. Unless otherwise noted, quotes are from Naval. For reference, check out Naval’s famous How to Get Rich tweet storm.

Key Takeaways

  • Compound interest can be an extremely powerful force – this point has been beaten to death
  • In the financial realm, pre-tax compounding is very powerful compared to post-tax compounding
    • The compounding that results from paying taxes every year is much less than the compounding that results from paying taxes just one time at the end
    • A Roth IRA is set up so you pay taxes once before putting your money into the fund (and you never have to pay taxes ever again) – it just keeps compounding