Traditional IRA Calculator · Practical guide
IRA vs Taxable Account: Which Grows More?
Tax-deferred compounding plus an upfront deduction leaves a traditional IRA well ahead of an identical taxable account.
At a glance
The IRA Wins by a Wide Margin
Contribute $7,000 a year for 35 years at a 7% return, with a 22% current tax rate and 12% retirement tax rate. The traditional IRA grows to $967,658.15, and even after paying 12% tax on withdrawal you keep $851,539.17. The same contributions in a taxable account — where taxes shave returns every year, dropping the effective growth rate to 5.46% — reach just $695,889.80. Net benefit of the IRA: $155,649.37.
Interactive tool
Traditional IRA Calculator
Enter your own values, then compare the result with the examples below.
Traditional IRA Analysis
Where the Advantage Comes From
- The upfront deduction: each $7,000 contribution saves you $1,540 in taxes at a 22% rate — $53,900 over 35 years.
- Uninterrupted compounding: in a taxable account, dividends and gains are taxed annually, permanently shrinking the base that future growth builds on. In the IRA, 100% of every year's return keeps working.
- The rate spread: if your retirement bracket is lower than your working-years bracket, you deduct at the high rate and pay at the low one.
Side-by-Side at 35 Years
| Traditional IRA | Taxable Account | |
|---|---|---|
| Annual contribution | $7,000 | $7,000 |
| Effective annual return | 7.00% | 5.46% (after 22% tax drag) |
| Balance after 35 years | $967,658 | $695,890 |
| Tax at the end | $116,119 (12%) | Already paid annually |
| Spendable value | $851,539 | $695,890 |
Run the Comparison Yourself
The calculator above performs exactly this analysis: it projects your IRA balance, totals your tax savings now, estimates the tax at withdrawal, and reports the net benefit versus a taxable account taxed every year at your current rate. Try raising your current tax rate — the higher it is, the more the tax drag punishes the taxable account, and the larger the IRA's advantage becomes.
Frequently Asked Questions
Why is the taxable account's return lower if it holds the same investments?
Because taxes on dividends, interest, and realized gains are paid out of the account every year. At a 22% tax rate, a 7% gross return becomes a 5.46% after-tax return — and that lower rate compounds for decades.
Does a taxable account have any advantages?
Yes: no contribution limits, no early-withdrawal penalties, no RMDs, and long-term capital gains are often taxed at lower rates than ordinary income. It's a good home for money beyond IRA limits.
What if my retirement tax rate is higher than my current rate?
The traditional IRA's edge shrinks or disappears. That's the scenario where a Roth IRA or taxable account may serve you better — compare by adjusting the retirement tax rate in the calculator.
Does this comparison include reinvesting my tax savings?
No — the calculator compares the IRA against a taxable account funded with the same nominal contributions, which is the conservative comparison. Investing the annual deduction too would widen the IRA's lead further.