Calculator
Taxable vs. Tax-Deferred vs. Tax-Free Calculator
Taxable vs. Tax-Deferred vs. Tax-Free Calculator
Tax Rates
Taxable-Account Efficiency
Best After-Tax Outcome
Roth IRA / Roth 401(k)
Account Analysis
Your current 24% rate exceeds the 22% rate you expect at withdrawal, which favors the Traditional 401(k) / IRA: you take the hit to contributions at the high rate now and pay tax at the low rate later, ending with $30,183.54 after tax — though Roth IRA / Roth 401(k) edges it out here. The Roth IRA / Roth 401(k) ($38,696.84) pays today's higher rate first, and the taxable account ($37,205.89) leaks tax on distributions every year.
*Compares equal after-tax dollars across three account types using your stated return and tax-rate assumptions. Does not model contribution limits, employer matches, required minimum distributions, or state taxes. Educational only, not tax or investment advice.
The Three Ways the IRS Taxes Investment Dollars
Every investment dollar in America lives under one of three tax regimes, and the regime often matters more than the investment itself. A taxable brokerage account taxes you along the way — on dividends and realized gains each year — but the principal was already taxed before it went in. A traditional 401(k) or IRA does the opposite: a deduction now, tax-deferred growth, and ordinary income tax on every dollar out. A Roth account defers nothing today but lets both growth and withdrawal pass completely tax-free. For US savers the choice is rarely emotional and almost always a rate comparison: you get the deduction at your current marginal rate and pay it back at your future rate. If you expect to be taxed higher in retirement than you are now, paying the tax today (Roth) usually wins; if lower, the deduction today (traditional) usually wins; and the taxable account wins only when the holding is so tax-efficient and the horizon so particular that the other two aren't usable. This calculator runs all three side by side on equal after-tax dollars so the spread between them — the real cost of choosing wrong — is visible in black and white.
Same Contribution, Three Different Fates
The engine applies each regime's tax timing to the same compounding math. The deferred and Roth accounts grow cleanly: balance × (1 + return) every year, with no mid-flight tax. The taxable account leaks each year: on the year's growth, the share you assume is realized (turnover) is taxed at the qualified rate, so the balance grows by growth minus (growth × turnover × qualified rate). After the full horizon, the traditional balance is taxed once at the withdrawal rate to get its after-tax value; the Roth balance is taken as-is; the taxable balance is already after-tax. The comparison is apples-to-apples because every account starts with the same after-tax contribution. For a traditional account that means the real pre-tax money needed was larger (contribution ÷ (1 − current rate)), but what matters to you is the dollars you actually control. The Roth needs exactly that contribution after tax. The winner is whichever regime ends with the highest after-tax figure — and because the difference compounds for decades, a two-point swing in the rate assumption can flip the result, which is why the sliders matter more than the headline.
Expert Insights
It Is a Bracket Bet, Not a Product Bet
Traditional versus Roth is ultimately one question: will your marginal rate be higher or lower in retirement than today? Young savers expect raises and promotions — a rising trajectory favors the Roth, because you pay today's cheap rate and skip tomorrow's expensive one. Peak earners at the top of their bracket usually descend in retirement, which favors the traditional deduction now. The math of this calculator is only as good as your honest answer to that rate guess.
Tax Location Is the Quiet Superpower
The taxable account only competes when it holds tax-efficient assets — broad index funds with 5–10% turnover and mostly qualified dividends. Actively managed funds, corporate bonds, and REITs churn gains or pay ordinary income, and the annual tax drag compounds against you brutally. If your taxable money must live in inefficient assets, the Roth usually wins by default. The turnover and qualified-rate sliders exist precisely to show how fast efficiency erodes.
The Real Answer Is Usually 'All Three'
Few retirees live in only one regime. The standard playbook is tax diversification: traditional for the deduction at peak earnings, Roth for tax-free income that won't push up taxation of Social Security or Medicare premiums later, and taxable as the flexible bridge before RMDs begin. Rather than arguing which single account wins, treat each as a tool with a different tax dial — and in withdrawal, drawing from them strategically can keep your effective rate pinned in a low bracket for the whole retirement.
Actionable Tips
- 1
Estimate Your Real Retirement Bracket First
Before trusting the output, write down what you expect your taxable income to be in retirement and find the bracket it lands in. Don't forget that standard deductions, Social Security taxation, and RMDs all shift that number. The withdrawal-rate slider should reflect your best bracket estimate, not a guess; a wrong assumption here is the biggest source of a wrong account choice.
- 2
Fill the Roth Up to the Employer Match Floor
If your employer matches 401(k) contributions, always take the match first — it is free money no account type can beat. Then decide the Roth/traditional split on the rest. Roth is especially attractive for low-early-career years: the contribution is cheap in tax terms now and you lock in decades of tax-free growth. Revisit the split every time your bracket changes.
- 3
Put the Efficient Stuff in Taxable, the Hot Stuff in Roth
Use the tax-location principle: buy-and-hold index funds and qualified-dividend payers can live happily in a taxable account with minimal drag, while bonds, actively traded funds, and REITs belong in tax-sheltered accounts where their income never surfaces. Model your actual taxable holdings' turnover here; if the drag line looks big, it is a loud signal to move that holding into shelter.
Real-World Examples
Aisha Chose Roth Because She Knew Rates Were Going Up
Aisha, 28 and in the 22% bracket, was told to go traditional for the deduction. She ran this calculator with a projected retirement rate of 28% and saw the Roth ahead by nearly $40,000 on a 30-year horizon. She chose Roth, and a decade later after two promotions that pushed her to 32%, she was glad: every dollar she contributed at 22% now grows forever tax-free, while her later dollars — and her match — went traditional to take the now-more-valuable high-bracket deduction.
The Reyes Made the Match Rule Save Their Taxes
The Reyes were maxing a Roth 401(k) while leaving their employer match unclaimed because they assumed Roth was simply better. A colleague pointed out the free-money rule and they added the match contributions. Combined with this calculator — which showed traditional actually won for their 24%-now, 15%-retirement profile — they switched the employee portion to traditional, took the bigger immediate deduction, and redirected the tax savings into their children's 529 plans. Both accounts ended up ahead.
Harold's Taxable Bridge Fund Paid Off at 62
Harold retired at 62, years before his RMDs at 73. He had a large taxable account invested in index funds with only 9% turnover, which he modeled here and saw the drag was minor over time. Instead of touching his tax-deferred money early, he withdrew from taxable in those bridge years, keeping his taxable income low and his Social Security mostly untaxed while he delayed claiming to 70. The three-account spread he built became a withdrawal strategy, not just an accumulation choice.
Glossary of Terms
- Tax-Deferred Account
- A traditional 401(k) or IRA where contributions may be deducted now, growth compounds untaxed, and withdrawals are taxed as ordinary income.
- Roth Account
- A Roth IRA or Roth 401(k) funded with after-tax dollars; both growth and qualified withdrawals are entirely tax-free.
- Tax Drag
- The compounding cost of paying taxes each year inside a taxable account, which slows growth compared with a sheltered account.
Frequently Asked Questions
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Ivy Sinclair-Wren
Financial Chaos Analyst
Ivy Sinclair-Wren is a Financial Chaos Analyst covering investing, AI, wealth psychology, and the emotional consequences of opening finance apps during market crashes. Based in Melbourne, she specializes in demystifying the US tax code and helping users navigate the intersection of spreadsheet logic and human irrationality.