Taxable vs Roth vs Traditional Calculator
Created by: Lucas Grant
Last updated:
Compare after-tax ending value across taxable, Roth, and traditional account paths using current and retirement tax rates, expected returns, and annual taxable-account drag.
Taxable vs Roth vs Traditional Calculator
FinanceCompare brokerage, Roth, and traditional account paths using the same savings effort so you can see which wrapper produces the strongest after-tax retirement value.
What Is a Taxable vs Roth vs Traditional Calculator?
A taxable vs Roth vs traditional calculator compares the same savings effort across the three most common account wrappers households use when building long-term wealth.
Instead of stopping at raw balances, it asks a more useful question: what is the likely after-tax value of each path by the time retirement arrives?
That framing matters because the three wrappers create different advantages.
A traditional account may let you invest more upfront through pretax contributions.
A Roth account trades today tax cost for future tax-free withdrawals.
A taxable account usually compounds less efficiently, but it offers flexibility and liquidity that retirement accounts do not.
Looking at only one of those attributes often leads to a shallow recommendation.
A strong comparison tool therefore has to show both the numbers and the planning tradeoff.
The chart and table should help you see whether one account clearly dominates, whether the result is close enough to justify diversification, or whether the taxable account still deserves funding because access flexibility matters more than pure long-run tax efficiency.
How the Three-Account Comparison Works
The calculator gives all three paths the same annual savings commitment, then adjusts how much actually reaches each account.
The traditional path receives the full pretax contribution, while the Roth and taxable paths are reduced by your current marginal tax rate because those dollars are contributed after current taxes are paid.
From there, all three paths compound at the same market-return assumption, but the taxable account is reduced by an annual tax-drag input.
At retirement, the traditional path is discounted by your expected retirement tax rate to estimate spendable value.
That structure keeps the outcome centered on after-tax decision quality instead of headline account balances alone.
Core Comparison Relationships
Traditional annual contribution = pretax savings amount
Roth annual contribution = pretax savings amount x (1 - current tax rate)
Taxable annual contribution = pretax savings amount x (1 - current tax rate)
Taxable net growth rate = market return - annual tax drag
Traditional after-tax value at retirement = traditional ending balance x (1 - retirement tax rate)
Example Scenarios
Lower retirement tax bracket case
A saver in a high current tax bracket who expects a materially lower retirement rate may see the traditional path produce the highest modeled after-tax ending value. In that case, the upfront deduction is doing real work rather than merely delaying tax.
Higher future tax or access-flexibility case
Another saver may prefer Roth for long-run tax-free withdrawals or still fund taxable assets for flexibility despite lower modeled efficiency. The tool makes those tradeoffs visible instead of treating every account decision as purely mathematical.
How People Use This Calculator
- Prioritize the next marginal retirement dollar across brokerage, Roth, and traditional accounts.
- Test how changes in current and future tax rates alter the ranking.
- Quantify the cost of taxable-account drag relative to tax-advantaged wrappers.
- Support household contribution-split decisions when multiple account types are available.
Account-Priority Planning Tips
Do not confuse account efficiency with total plan quality.
Even when taxable investing produces the lowest modeled ending value, it may still be essential for medium-term goals, early-retirement access, or simply avoiding overconcentration inside retirement wrappers.
Use the recommendation as part of a sequence.
Employer match usually comes first, then tax-rate-sensitive Roth or traditional decisions, with taxable savings often filling the flexibility gap once the main tax-advantaged opportunities are used.
Frequently Asked Questions
What does this three-account comparison calculator do?
This calculator compares what the same annual savings effort may become inside three different wrappers: a taxable brokerage account, a Roth account, and a traditional tax-deferred account. It focuses on after-tax value at retirement rather than just pretax balances, which makes the result much more useful when deciding where the next marginal dollar should go.
Why can a traditional account win even when the Roth looks cleaner?
Traditional accounts often start with a larger investable amount because the contribution is pretax. If your retirement tax rate is meaningfully lower than your current marginal rate, that upfront deduction can outweigh the future withdrawal tax. The calculator keeps that tradeoff visible instead of assuming that tax-free Roth withdrawals automatically dominate every situation.
How is the taxable account modeled here?
The taxable path assumes that dividend distributions, interest, and realized gains create an annual drag relative to the full pretax return. That is a simplification, but it is directionally important because a brokerage account often compounds less efficiently than a Roth or traditional account even when all three use the same underlying market return assumption.
Does this mean I should always ignore taxable investing until retirement accounts are full?
No. Taxable assets still matter for flexibility, liquidity, and early-retirement bridge spending. This calculator is about marginal efficiency, not total portfolio design. A taxable account can be the correct next dollar even when its long-run after-tax ending value is lower because it may provide optionality that retirement accounts cannot.
How should I use the recommendation output?
Use the recommendation as a starting point for contribution priority, not as an absolute rule. If the result is close, account access, employer matching, Roth income limits, and near-term liquidity needs may matter more than the small modeled spread between outcomes. The tool is most useful when one wrapper clearly outperforms the others or when the result is close enough to justify diversification.
What if my tax rate assumptions are uncertain?
Run several scenarios instead of looking for one perfect answer. The current-versus-retirement tax rate spread is often the main driver between Roth and traditional outcomes, while taxable-account drag matters more when comparing both against a brokerage path. Testing a few cases will usually tell you more than arguing over one exact tax-rate guess.
Sources and References
- General retirement-account tax-planning guidance on Roth, traditional, and taxable investing.
- IRS publications covering contribution and withdrawal treatment for retirement accounts.
- Common advisor frameworks for account-location and marginal contribution priority decisions.