Investment Calculator
Taxable vs Tax-Advantaged Account Calculator
Compare how an estimated annual tax drag may affect long-term growth in taxable and tax-advantaged investment accounts.
Use the Taxable vs Tax-Advantaged Account Calculator
Your results
- Taxable account ending balance
- $0.00
- Tax-advantaged ending balance
- $0.00
- Difference
- $0.00
- Tax drag cost
- $0.00
How this calculator works
- What it does
- Compare how an estimated annual tax drag may affect long-term growth in taxable and tax-advantaged investment accounts.
- Inputs used
- The estimate uses starting investment, annual contribution, expected annual return (%), tax drag in taxable account (%), and number of years.
- Calculation approach
- The calculator applies the relationships defined for the taxable vs tax-advantaged account calculator to those inputs and updates taxable account ending balance, tax-advantaged ending balance, difference, and tax drag cost.
- How to read the result
- Treat the result as a scenario based on the values entered. Compare a few reasonable inputs and consider costs, taxes, timing, or risks that the calculator does not include.
How to Use This Calculator
- Enter Starting investment and Annual contribution using values that match the scenario you want to evaluate.
- Enter Expected annual return (%) and Tax drag in taxable account (%) using values that match the scenario you want to evaluate.
- Enter Number of years using values that match the scenario you want to evaluate.
- Review the assumptions for the taxable vs tax-advantaged account calculator, especially rates, time periods, and optional amounts.
- Select Calculate to update the results, then adjust one input at a time to compare scenarios.
Understanding the Results
- Taxable account ending balance
- The estimated value at the end of the selected period after applying the entered contributions, rates, and timing assumptions.
- Tax-advantaged ending balance
- The estimated value at the end of the selected period after applying the entered contributions, rates, and timing assumptions.
- Difference
- The difference between the current position and the calculated target or comparison value.
- Tax drag cost
- The estimated cost created by the entered rate over the selected period.
Common Mistakes
- Ignoring contribution limits, eligibility rules, taxes, penalties, or account-specific restrictions.
- Comparing pre-tax and after-tax balances as though they were directly equivalent.
- Assuming current tax rates and laws will remain unchanged.
- Treating the calculator result as individualized tax advice.
Worked Example
Example inputs
- Starting investment
- $25,000
- Annual contribution
- $7,000
- Expected annual return (%)
- 7%
- Tax drag in taxable account (%)
- 1%
- Number of years
- 25
Example results
- Taxable account ending balance
- $491,348.35
- Tax-advantaged ending balance
- $578,429.08
- Difference
- $87,080.73
- Tax drag cost
- $87,080.73
With these illustrative inputs, the taxable account ending balance is $491,348.35. The result shows how the example assumptions interact and is not a prediction of future performance.
Frequently asked questions
What is tax drag in a taxable investment account?
Tax drag is the estimated reduction in annual return caused by taxes on dividends, interest, distributions, and realized capital gains.
What is a tax-advantaged account?
A tax-advantaged account, such as an IRA or 401(k), may defer taxes or allow qualified tax-free growth depending on the account type and applicable rules.
How are annual contributions modeled?
The calculator adds the same contribution to each account at the end of every year, then compares their ending balances over the selected period.
Does this calculator include taxes on final withdrawals?
No. It models annual tax drag during accumulation only. Taxes on withdrawals, capital gains at sale, account fees, and contribution limits are not included.
How should I estimate taxable account tax drag?
Tax drag varies with investment type, turnover, distributions, tax bracket, and holding period. Testing a range of assumptions is more useful than relying on one precise estimate.
What does the Taxable vs Tax-Advantaged Account Calculator calculate?
Compare how an estimated annual tax drag may affect long-term growth in taxable and tax-advantaged investment accounts. The result is based only on the inputs and assumptions shown on the page.
How should I interpret the tax-advantaged ending balance from the Taxable vs Tax-Advantaged Account Calculator?
Use it as an estimate for the scenario entered, not as a guarantee or personal recommendation. Test changes to starting investment, annual contribution, and expected annual return (%) to see which assumptions have the greatest effect.