Why Use a Retirement Account?

See how Roth and Traditional 401k/IRA accounts beat taxable brokerage investing through tax-free or tax-deferred compounding. The same out-of-pocket investment grows significantly more when shielded from annual tax drag.

Your Situation

Contributions

$/ yr

Traditional pre-tax contribution: $7,692.31 ($6,000.00 / 78%)

Tax Rates

Single 22% bracket: $63,475 – $118,350 · Married 22% bracket: $126,950 – $236,700

%

Single 15% bracket: $63,350 – $548,400 · Married 15% bracket: $126,700 – $630,050

Return Assumptions

%
%
Roth After-Tax at 65
$2,655,555.33
Tax-free · 40 yrs of $6,000.00/yr
Traditional After-Tax at 65
$2,996,011.15
After 12% withdrawal tax
Taxable Brokerage After-Tax at 65
$2,203,669.73
After dividend drag + 15% LTCG
Roth Tax Savings vs Brokerage
$451,885.61
Traditional saves $792,341.42
When your current and retirement tax rates are equal, Roth and Traditional after-tax values are identical — the tax break just comes at a different time. Roth wins if your rate rises; Traditional wins if it falls.
Gross Account Balance Over Time

Gross balances as shown on your account statement — before taxes are applied. Roth's balance is already your after-tax value (nothing owed). Traditional and Taxable have taxes still outstanding at withdrawal.

After-Tax Value Over Time

All values are after-tax — what you'd actually keep if you cashed out at that age. Before age 59.5, a 10% early withdrawal penalty applies: Traditional on the full balance, Roth on earnings only (contributions are always penalty-free). Traditional assumes 12% tax on withdrawal; Taxable assumes 15% LTCG on unrealized gains; no early penalty for Taxable.