Investment Calculator
Nominal vs real returns · Taxable vs Traditional vs Roth side-by-side
Last updated: June 2026 · Modeling US tax-account regimes
Inputs
Bump monthly contribution by this % each year (raises).
Applied to Traditional withdrawals at horizon end.
Balance Over Time: Taxable vs Traditional vs Roth
Pre-tax balances during accumulation. After-tax adjustment applied at withdrawal in the table below.
Side-by-Side: After-Tax Final Balance
| Account Type | Nominal After-Tax | Real (Today’s $) |
|---|---|---|
| Taxable Brokerage | $987,646 | $470,853 |
| Traditional 401(k)/IRA | $892,977 | $425,720 |
| Roth 401(k)/IRA | $1,174,969 | $560,158 |
| Total Contributed | $268,408 | |
Taxable: ~20% of annual gains taxed during accumulation (rebalance drag) + cap-gains on remaining unrealized gain at withdrawal. Traditional: ordinary tax on full balance at withdrawal. Roth: no withdrawal tax.
Understanding Investment Returns
Rule of 72 and Compounding
The Rule of 72 says years to double at rate r ≈ 72 / r. At 8% nominal that's 9 years; at 10%, 7.2 years; at 6%, 12 years. The rule is derived from ln(2)/ln(1+r) and is accurate for r between 5% and 15%. A 25-year-old who invests $10,000 once at 8% real return is sitting on $40,000 by age 43 (two doublings) and $80,000 by age 52 (three doublings), without further contributions. Time matters more than amount, this is why "start now" beats "save more later" for most people.
Nominal vs Real Returns
Nominal return is the raw % gain; real return subtracts inflation. The S&P 500 has averaged ~10% nominal long-term but only ~7% real. For multi-decade goals (retirement, college funding) plan in real terms because expenses inflate alongside the portfolio. A $1M nominal portfolio in 30 years at 2.5% inflation has the same purchasing power as $477,000 today, the deflator matters. This calculator displays both nominal and real outputs so you can see the cone shrink.
Tax Drag in a Taxable Brokerage
In a Taxable account, dividends and realized capital gains are taxed each year, even if you do not sell. Total-market index ETFs typically generate 0.3-0.7% annual tax drag from distributions and small rebalances. Over 30 years a 0.5% drag compounds into ~15-20% less final wealth than a tax-sheltered account. Mitigations: hold tax-efficient broad-market index ETFs (VTI, ITOT), tax-loss harvest, place tax-inefficient assets (REITs, high-yield bonds) inside Traditional or Roth wrappers, and use direct indexing or muni bonds for high earners.
Traditional vs Roth: When Each Wins
When the marginal rate is the same at contribution and withdrawal, Traditional and Roth are mathematically equivalent. Roth wins when (a) your future rate will be higher than today, (b) you want to max effective sheltering (Roth limits are stated in after-tax dollars), (c) you want to avoid future RMDs, (d) you want to control Social Security/IRMAA taxation in retirement. Traditional wins when (a) you are in a high bracket today expecting a lower retirement bracket, (b) you want immediate deduction to free cash for other goals. Most people benefit from holding both for tax diversification.
Contribution Priority Order
Widely-cited stacking order: (1) 401(k) to the full employer match (free money). (2) Pay off >8% interest debt. (3) Max HSA if HDHP-eligible (triple-tax-advantaged). (4) Max Roth IRA. (5) Max 401(k) to $24,500. (6) Mega-backdoor Roth if available. (7) Taxable brokerage. Adjust for personal context: high earners may skip (4) and use backdoor Roth instead; lower earners with no match get less juice from (1).
Frequently Asked Questions
What is the Rule of 72?
A back-of-envelope shortcut: years to double = 72 / annual return %. At 8% the doubling time is 9 years; at 6%, 12 years; at 10%, 7.2 years. Derived from ln(2)/ln(1+r). Accurate for r between 5-15%. Useful for fast gut-checks without spreadsheets.
Real vs nominal returns, what is the difference?
Nominal is the raw % gain; real subtracts inflation (real ≈ nominal − inflation). S&P 500 averaged ~10% nominal long-term but only ~7% real. For multi-decade goals plan in real terms because expenses inflate. $1M nominal in 30 years at 2.5% inflation = $477k of today's purchasing power.
Why does Roth often win in equal-bracket comparisons?
Mathematically Roth and Traditional are equal when rates are the same at contribution and withdrawal. Roth wins on effective sheltering (limits stated in after-tax dollars), avoids RMDs, removes future tax-rate risk, and keeps SS/IRMAA brackets lower in retirement. Traditional wins only if your retirement rate is lower than today.
What is tax drag?
Annual tax on dividends and realized gains in a Taxable account, even if you do not sell. Typically 0.3-0.7%/yr for index ETFs. Over 30 years a 0.5% drag compounds to ~15-20% less final wealth vs a tax-sheltered account. Mitigate with tax-efficient ETFs, loss harvesting, and asset location.
What is sequence-of-returns risk?
The danger that poor returns in the EARLY years of withdrawal do disproportionate damage. Same average return, different sequence = wildly different outcomes for retirees. Defenses: 2-3 years of cash, rising equity glide path, dynamic spending guardrails (Guyton-Klinger).
Optimal contribution priority order?
(1) 401(k) to full match. (2) Pay off >8% debt. (3) Max HSA if HDHP-eligible. (4) Max Roth IRA. (5) Max 401(k) to $24,500. (6) Mega-backdoor Roth if available. (7) Taxable brokerage. Adjust for personal context.
What is the 4% rule for withdrawals?
Bengen 1994 / Trinity Study 1998: withdraw 4% of initial portfolio per year, adjust for inflation, ~30-year sustainability. Inverse gives 25x annual expenses as a target. Bengen has revised SAFEMAX to ~4.7% with a more diversified portfolio; Wade Pfau argues 3.25-3.5% for 50+ year FIRE horizons.