Same return, three tax treatments.
Put identical money at an identical rate into three accounts and see what each leaves you with once the tax is paid. The rate never changes between the columns. Only the timing of the tax does.
- Total put in$0
- Growth before tax$0
- Value before tax$0
Same rate, three tax treatments
Identical money, identical return. Only the tax treatment differs.
| Account | Before tax | Tax | You keep |
|---|
Why the rate is held constant. Every column earns exactly the rate you entered. This is not a comparison of products or of what any investment might return. It isolates one variable, which is when the tax is paid. A real comparison would also weigh liquidity, fees, surrender terms, guarantees, risk of loss, and whether the money is even eligible for each treatment.
Which bucket should the next dollar go into?
Most people hold all their savings in one tax treatment without ever deciding to. Spreading across taxable, tax-deferred and tax-free is what gives you control over your bracket later, when you are the one choosing which account to draw from.
Assumptions and limits. The rate you enter is a hypothetical assumption you supply; it is not a projection, forecast, or estimate of the performance of any investment, product, or strategy, and it is not a rate offered by anyone. Actual returns vary and investments can lose value. The taxable column applies your marginal rate to growth as it is earned, which reflects interest income such as a bank account, certificate of deposit, or bond; investments taxed at long-term capital gains rates, or not taxed until sold, would be treated differently. The tax-deferred column applies the withdrawal rate to the gain only, which reflects a non-qualified deferred account; a pre-tax retirement account would be taxed on the entire balance, and contributions to it may have been deductible. The tax-free column assumes the growth is never taxed and that all conditions for tax-free treatment are met. Nothing here accounts for fees, expenses, surrender charges, early withdrawal penalties, required minimum distributions, state tax, the 3.8% net investment income tax, or contribution eligibility and limits. This tool is general education, not tax or investment advice, and it is not a recommendation of any account type or product.