(612) 617-6170
Client Login

Taxable vs. Tax-Deferred Savings

For years, people have been told to take advantage of company-sponsored plans when saving for retirement. And while that's generally good guidance, especially if the company does some form of matching contribution, it can get tricky the closer you get to retirement. This calculator can help you start to see the pros and cons of taxable and tax-deferred accounts.

Tax-Deferred Account

Enter your expected contributions and returns for a tax-deferred retirement account (like a Traditional IRA or 401(k)).

These are example values. Update them to reflect your personal situation.

$
$0 $50,000
years
%

Taxable Account

Enter your expected contributions and returns for a taxable investment account (like a brokerage account).

$
$0 $50,000
years
%

For years, people have been told to take advantage of company-sponsored plans when saving for retirement. And while that's generally good guidance—especially if the company does some form of matching contribution—it can get tricky the closer you get to retirement. This calculator can help you start to see the pros and cons of taxable and tax-deferred accounts.

Your Results

Entering retirement with multiple sources of income can help some, but it may not be a best fit for all. What's best for you will depend on a variety of factors, including when you're considering drawing Social Security benefits.

Difference in After-Tax Value
$0
Tax-deferred account leaves you with more after taxes.

Tax-Deferred Account Results

Future Value (Pre-Tax)
$0
Future Value (After-Tax)
$0

Taxable Account Results

Future Value (After-Tax)
$0

The Annual Rate of Return is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments. This worksheet provides estimates based on certain assumptions, including Expected Tax Bracket During Retirement and Tax Bracket While Contributing. Please work with your tax, legal, or accounting professional for tax bracket information. The rate of return on investments will vary over time, particularly for longer-term investments. Investments that offer the potential for high returns also carry a high degree of risk. Actual returns will fluctuate.

Once you reach age 73, you must begin taking required minimum distributions (RMDs) from your 401(k), traditional IRA or any other defined contribution plan in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

Have A Question About This Topic?

Thank you! Oops!

Related Content

Tax Deductions You Won't Believe

Tax Deductions You Won't Believe

Here are some examples of deductions from the IRS that were permitted and some that were, uh, too creative.

Four Reasons Millennials Need an Estate Strategy

Four Reasons Millennials Need an Estate Strategy

Estate strategies for millennials may sound like less of a concern than retirement, but young adults should prepare now.

Money Myth: You Can’t Bounce Back from Retirement Setbacks

Money Myth: You Can’t Bounce Back from Retirement Setbacks

Learn how to plan for inflation, make up for lost time and adjust retirement savings goals as you approach the next chapter.