Taxable against tax-deferred
Equal nominal contributions into both accounts. The taxable one is charged a modeled rate on its earnings every year; the deferred one is charged once, at the end.
$347,444 after tax in the deferred account against $351,386 in the taxable one, on equal nominal contributions over 25 years at 6.00% a year. Under these assumptions only.
What equal contributions mean here. Both accounts receive the same nominal dollars. Because the withdrawal tax is applied to the whole deferred balance, the deferred contributions are being treated as pre-tax dollars — but no current-year deduction is credited for them. That understates a real deductible contribution, and it is why this setting can leave the taxable path ahead. Switch the base to earnings only to model contributions that were already taxed.
Modeled break-even withdrawal tax rate: 21.12%. Re-running the whole comparison at the exact solved rate leaves $0.00 between the two paths; typing the rounded 21.12% back into the field above leaves -$21.48, which is the two-decimal rounding on a $445,441 base. Your 22.00% sits above it, which is why the deferred path is behind here. It is a break-even point, not a recommendation.
- Contributions and starting balance: $175,000 (39.3%)
- Growth kept: $176,386 (39.6%)
- Tax modeled during accumulation: $55,701 (12.5%)
- Growth those taxes would have earned: $38,355 (8.6%)
- Contributions and starting balance: $175,000 (39.3%)
- Growth kept: $172,444 (38.7%)
- Tax modeled at withdrawal: $97,997 (22.0%)
- Growth those taxes would have earned: $0 (0.0%)
| Measure | Taxable account | Tax-deferred account |
|---|---|---|
| Contributions and starting balance | $175,000 | $175,000 |
| Gross investment growth modeled | $232,086 | $270,441 |
| Tax modeled during accumulation | $55,701 | $0 |
| Balance at the comparison date | $351,386 | $445,441 |
| Tax modeled at withdrawal | $0 | $97,997 |
| After-tax value | $351,386 | $347,444 |
Nothing is modeled as paid by the deferred account during accumulation, and nothing by the taxable account at withdrawal. That timing is the whole comparison.
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| Annual drag ↓ / Withdrawal → | 14% at withdrawal | 22% at withdrawal | 30% at withdrawal |
|---|---|---|---|
| 16% drag | $3,082 | -$32,553 | -$68,188 |
| 24% drag (selected) | $31,694 | -$3,941 | -$39,577 |
| 32% drag | $57,881 | $22,246 | -$13,389 |
A positive figure means the tax-deferred path ends higher after tax. Heavier annual drag pushes the comparison toward deferral; a heavier withdrawal rate pushes it away.
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| Years | Taxable ending balance | Deferred after-tax balance | Difference | Tax paid during accumulation |
|---|---|---|---|---|
| 5 | $64,787 | $53,195 | -$11,592 | $3,091 |
| 10 | $114,512 | $98,286 | -$16,226 | $9,320 |
| 20 | $254,322 | $239,380 | -$14,942 | $34,523 |
| 30 | $472,692 | $492,058 | $19,366 | $84,534 |
| 40 | $813,766 | $944,566 | $130,799 | $173,295 |
Each row is a full run at that horizon, not an interpolation. The sign of the difference does not have to move in one direction: a terminal tax charged on principal costs the same fraction whenever it lands, while the compounding advantage keeps building.
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| Annual tax drag | Taxable ending balance | Tax paid along the way | Difference vs deferred |
|---|---|---|---|
| 0.0% | $445,441 | $0 | -$97,997 |
| 10.0% | $403,186 | $25,354 | -$55,741 |
| 20.0% | $365,374 | $47,594 | -$17,930 |
| 30.0% | $331,530 | $67,084 | $15,915 |
| 40.0% | $301,224 | $84,149 | $46,220 |
Scroll the table sideways on a narrow screen to see every column.
| Year | Taxable opening | Gross earnings | Tax paid | Contributions | Taxable ending | Deferred ending | Tax to date | Balance gap |
|---|---|---|---|---|---|---|---|---|
| 1 | $25,000 | $1,663 | $399 | $6,000 | $32,264 | $32,663 | $399 | $399 |
| 2 | $32,264 | $2,099 | $504 | $6,000 | $39,859 | $40,786 | $903 | $927 |
| 3 | $39,859 | $2,555 | $613 | $6,000 | $47,801 | $49,397 | $1,516 | $1,596 |
| 4 | $47,801 | $3,031 | $728 | $6,000 | $56,105 | $58,524 | $2,244 | $2,419 |
| 5 | $56,105 | $3,530 | $847 | $6,000 | $64,787 | $68,199 | $3,091 | $3,411 |
| 6 | $64,787 | $4,051 | $972 | $6,000 | $73,866 | $78,454 | $4,063 | $4,588 |
| 7 | $73,866 | $4,595 | $1,103 | $6,000 | $83,358 | $89,324 | $5,166 | $5,966 |
| 8 | $83,358 | $5,165 | $1,240 | $6,000 | $93,283 | $100,847 | $6,405 | $7,564 |
| 9 | $93,283 | $5,760 | $1,382 | $6,000 | $103,661 | $113,061 | $7,788 | $9,400 |
| 10 | $103,661 | $6,383 | $1,532 | $6,000 | $114,512 | $126,008 | $9,320 | $11,496 |
| 11 | $114,512 | $7,034 | $1,688 | $6,000 | $125,858 | $139,732 | $11,008 | $13,874 |
| 12 | $125,858 | $7,715 | $1,852 | $6,000 | $137,721 | $154,279 | $12,859 | $16,558 |
| 13 | $137,721 | $8,427 | $2,022 | $6,000 | $150,125 | $169,699 | $14,882 | $19,573 |
| 14 | $150,125 | $9,171 | $2,201 | $6,000 | $163,095 | $186,044 | $17,083 | $22,949 |
| 15 | $163,095 | $9,949 | $2,388 | $6,000 | $176,656 | $203,370 | $19,470 | $26,714 |
| 16 | $176,656 | $10,763 | $2,583 | $6,000 | $190,836 | $221,735 | $22,053 | $30,899 |
| 17 | $190,836 | $11,613 | $2,787 | $6,000 | $205,662 | $241,203 | $24,841 | $35,541 |
| 18 | $205,662 | $12,503 | $3,001 | $6,000 | $221,164 | $261,838 | $27,841 | $40,674 |
| 19 | $221,164 | $13,433 | $3,224 | $6,000 | $237,374 | $283,712 | $31,065 | $46,338 |
| 20 | $237,374 | $14,406 | $3,457 | $6,000 | $254,322 | $306,898 | $34,523 | $52,576 |
| 21 | $254,322 | $15,423 | $3,701 | $6,000 | $272,043 | $331,475 | $38,224 | $59,432 |
| 22 | $272,043 | $16,486 | $3,957 | $6,000 | $290,572 | $357,527 | $42,181 | $66,954 |
| 23 | $290,572 | $17,598 | $4,223 | $6,000 | $309,947 | $385,141 | $46,404 | $75,195 |
| 24 | $309,947 | $18,760 | $4,502 | $6,000 | $330,204 | $414,413 | $50,907 | $84,209 |
| 25 | $330,204 | $19,976 | $4,794 | $6,000 | $351,386 | $445,441 | $55,701 | $94,056 |
Every headline figure above is a total of these rows. Each year's tax is that year's gross earnings multiplied by the drag rate, charged at year end; the balance gap is measured before the withdrawal tax is applied.
Scroll the table sideways on a narrow screen to see every column.