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Taxable vs Tax-Deferred Growth Calculator
Where should the next dollar go: a regular brokerage account, a pre-tax 401(k) or Traditional IRA, or a Roth? Starting from the same pre-tax earnings, the calculator taxes each account the way it is really taxed, now, every year or at withdrawal, and compares what you keep after all taxes.
Last updated:
Money and time
$
Same pre-tax earnings for each account; the taxable and Roth accounts get what is left after today's tax.
$
Optional one-time amount in year 1.
years
%
% / yr
Taxed every year in the taxable account. Stock index ≈ 1.5–2%; bonds most of the return.
Tax rates
%
Marginal federal + state rate on your last dollar of income.
%
Average rate expected on tax-deferred withdrawals.
%
Qualified dividends often 15%; bond interest is taxed as ordinary income.
%
Enter your values to see the result.
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How to use the Taxable vs Tax-Deferred Growth Calculator
Enter the pre-tax amount you can set aside each year and, optionally, a starting amount.
Set the years and the total return, and how much of it is paid out as dividends or interest.
Enter your tax rates: income tax now, at withdrawal, on dividends and on long-term gains.
Choose whether to sell the taxable account at the end.
Press Compare accounts to see which account leaves you the most after tax.
How each account is taxed
All three start from the same pre-tax money C each year, invested at the start of the year at return r:
Tax-deferred (pre-tax 401k, Traditional IRA): the full C grows at r; at withdrawal the balance is taxed as income: FV(C) × (1 − retirement rate).
Roth: only C × (1 − current rate) goes in; it grows at r and comes out tax-free.
Taxable: the same after-tax amount as the Roth goes in, but each year the dividend and interest part of the return is taxed, so it grows at about r − yield × dividend tax rate. At sale, gains above the cost basis are taxed at the capital gains rate.
Example: $10,000 of pre-tax earnings a year for 30 years at 7%
Account
Invested each year
Taxes
Approx. after-tax value
Tax-deferred
$10,000
22% on withdrawal
$788,000
Roth
$7,600
24% up front
$768,000
Taxable
$7,600
24% up front, 15% on 2% yield yearly, 15% on gains at sale
$670,000
Rounded, using the calculator's default inputs. Your result depends on your own rates and return.
Practical order many savers use
Contribute enough to a workplace plan to get the full employer match.
Use a taxable account for money beyond the limits or for goals before retirement age, and favor tax-efficient, low-dividend funds there.
General education, not tax advice. Tax rules, brackets and limits change; check the current IRS rules for your situation.
Frequently asked questions
What is the difference between taxable, tax-deferred and tax-free accounts?
A taxable brokerage account is funded with after-tax money, and dividends, interest and realized gains are taxed along the way. A tax-deferred account such as a pre-tax 401(k) or Traditional IRA is funded with pre-tax money and everything is taxed as income on withdrawal. A Roth account is funded with after-tax money and qualified withdrawals are tax-free.
Why start from the same pre-tax amount?
It is the only fair comparison. A dollar of salary put into a pre-tax 401(k) goes in whole, but the same dollar becomes, say, 76 cents after 24% tax before it can go into a Roth or a brokerage account. Comparing equal take-home cost shows which account really leaves you more.
What is tax drag?
Tax drag is the return lost to taxes each year in a taxable account. Dividends and interest are taxed annually, so less money stays invested to compound. With a 2% dividend yield taxed at 15%, a 7% return becomes about 6.7% a year before any tax on gains at sale.
When does the taxable account come out ahead?
Rarely on pure tax math, but it can beat a tax-deferred account when your tax rate in retirement is much higher than your long-term capital gains rate, and it offers flexibility: no contribution limits, no early withdrawal penalties and no required minimum distributions.
Is a Roth always better than tax-deferred?
No. With the same take-home cost, the Roth and tax-deferred accounts end up equal when your tax rate now equals your rate at withdrawal. If you expect a lower rate in retirement, tax-deferred wins; if higher, the Roth wins. The break-even rate is shown in the results.
Does this include contribution limits or employer matches?
No. Enter an amount within the current IRS limits for your accounts. An employer match is free extra money in a 401(k) and usually makes it the best first choice; this calculator compares only the tax treatment.
What about not selling the taxable account?
Untick the sell option to see the value before capital gains tax. Under current US rules, heirs usually receive a step-up in cost basis, and gains can be realized slowly in low-income years, so the tax at sale may be lower than the full rate.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.