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Taxable vs. Tax Deferred Investments Calculator

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Taxable vs. Tax Deferred Investments

How taxes are applied to an investment can make an incredible difference. This calculator is designed to help compare a normal taxable investment and an investment where taxes are deferred until withdrawals are made.

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By changing any value in the following form fields, calculated values are immediately provided for displayed output values. Click the view report button to see all of your results.
Taxable vs. Tax Deferred Investments
*indicates required.
Increase tax-deferred contribution by tax deduction savings.
Annual After-Tax Withdrawal Column Graph: Please use the calculator's report to see detailed calculation results in tabular form.
Annual Balance of Accounts Line Graph: Please use the calculator's report to see detailed calculation results in tabular form.

Definitions

Annual rate of return

This is the annual rate of return you expect from your investments after taxes. The actual rate of return is largely dependent on the types of investments you select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending December 31st 2023, had an annual compounded rate of return of 15.2%, including reinvestment of dividends. From January 1, 1970 to December 31st 2023, the average annual compounded rate of return for the S&P 500®, including reinvestment of dividends, was approximately 10.9% (source: www.spglobal.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a financial institution may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.

It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that investment funds and/or investment companies may charge.

Years to contribute

Number of years you plan on making contributions.

Years of withdraws

Number of years you plan on taking distributions. Enter '1' for a lump sum distribution. All distributions are assumed to happen at the beginning of the period.

Existing balance

Any existing balance for the accounts.

New contributions

Your periodic contribution. All contributions are assumed to happen at the beginning of the period.

Contribution frequency

The frequency of your contributions. The options are Monthly, Quarterly, or Annually. All contributions are assumed to be made at the beginning of the period.

Withdrawal frequency

The frequency of your distributions. The options are Monthly, Quarterly or Annually. All distributions are assumed to be taken at the end of the period.

Tax during contributions / withdrawals*

Your estimated marginal tax rate. Use the ‘Filing Status and Federal Income Tax Rates on Taxable Income’ table to assist you in estimating your Federal tax rate.

Filing Status and Federal Income Tax Rates on Taxable Income for 2024*
Tax RateMarried Filing Jointly or Qualified Surviving SpouseSingleHead of HouseholdMarried Filing Separately
10%$0 - $23,200$0 - $11,600$0 - $16,550$0 - $11,600
12%$23,200 - $94,300$11,600 - $47,150$16,550 - $63,100$11,600 - $47,150
22%$94,300 - $201,050$47,150 - $100,525$63,100 - $100,500$47,150 - $100,525
24%$201,050 - $383,900$100,525 - $191,950$100,500 - $191,950$100,525 - $191,950
32%$383,900 - $487,450$191,950 - $243,725$191,950 - $243,700$191,950 - $243,725
35%$487,450 - $731,200$243,725 - $609,350$243,700 - $609,350$243,725 - $365,600
37%Over  $731,200Over  $609,350Over  $609,350Over  $365,600
*Caution: Do not use these tax rate schedules to figure 2023 taxes. Use only to figure 2024 estimates. Source: Rev. Proc. 2023-34
*Lower maximum tax rates on capital gains and dividends would make the investment return for the taxable investment more favorable, thereby reducing the difference in performance between the hypothetical investments shown. Investors should consider their personal investment horizon and income tax bracket, both current and anticipated, when making an investment decision, as these may further impact the comparison.

Increase tax-deferred contribution by tax deduction savings

If you check this box the calculator will assume contributions to the tax-deferred investment are tax-deductible when they are made. The calculator will then increase the contribution amount for the tax-deferred investment by the amount required to make the net contribution equal to the investments that have contributions made on an after-tax basis.

Farmers Financial Solutions, LLC31051 Agoura RoadWestlake Village, CA

These calculators are designed to be informational and educational tools only, and do not constitute a recommendation or investment advice.  While it is a helpful tool, you should understand its limitations.  The results generated by these calculators are hypothetical, do not reflect any actual returns and are not an implied or expressed guarantee of any investment performance. We also encourage you to review your investment strategy periodically as your financial circumstances change.  Farmers Financial Solutions, LLC (FFS) and its affiliates are not responsible for the consequences of any decisions or actions taken in reliance upon, or as a result of the information provided by these tools.  Due to the complexity of each individual’s specific investment and tax situation, we recommend that you seek advice from an appropriate financial or tax professional when planning your investment strategy.