After Tax Return Comparison
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https://earlyretirementnow.com/2016/06/22/retirement-account-comparison/
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other parameters
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Parameters Used In CalculationsCase 1: High tax, close to retirement. Very low taxes in retirementCase 2: Typical retirement scenarioCase 3: High Fee 401(k) planCase 4: Same marginal tax rates in retirementCase 5: Low income now, high income later (Medical Doctor intern)Case 6: Consistently low tax ratesCase 7: Same as baseline, but 12/6 tax rate instead of 15/0Case 8: Very Low marginal tax in retirementCase 9: High taxes now, retire soon. 25/15% taxes in retirement.
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Investment amount:$1,000.00
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Expected Equity Index Returns:7.00%
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Price Return5.00%5.00%5.00%5.00%5.00%5.00%5.00%5.00%5.00%5.00%
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Dividend Yield (needed for txbl acct)
2.00%2.00%2.00%2.00%2.00%2.00%2.00%2.00%2.00%2.00%
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Company Matching100%50%50%50%50%50%50%50%50%100%
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Years until withdrawal10104040202020101010
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Expense Ratios:
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401(k) plan0.10%0.10%0.10%1.00%0.10%0.10%0.10%0.10%0.10%0.10%
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Health Savings Account0.20%0.20%0.20%0.20%0.20%0.20%0.20%0.20%0.20%0.20%
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Brokerage (Roth/Reg. IRA, txbl Acc.)
0.05%0.05%0.05%0.05%0.05%0.05%0.05%0.05%0.05%0.05%
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Tax:
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Initial and during accumulation
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Ordinary Income43.00%43.00%33.00%33.00%28.00%15.00%15.00%43.00%33.00%43.00%
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Dividend tax first period26.80%26.80%20.00%20.00%15.00%0.00%0.00%26.80%20.00%26.80%
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Length of first period (years)12404020520221
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Dividend tax second period15.00%0.00%N/AN/AN/A25.00%N/A6.00%6.00%15.00%
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Upon withdrawal
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Ordinary Income25.00%15.00%25.00%15.00%28.00%33.00%15.00%12.00%5.00%25.00%
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LT Cap Gains15.00%0.00%15.00%0.00%15.00%20.00%0.00%6.00%0.00%15.00%
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1234567891011
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Account TypeRoth 401(k), w/ matchRoth 401(k), w/o match401k w/ match401k w/o matchAfter-tax 401k Buy & HoldAfter-tax 401k + Roth Convsn. (NEW!!!)HSARoth IRA (direct or back- door)IRA (post-tax)IRA (pre-tax)Taxable Account
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before/after tax investmentafter taxafter taxbefore taxbefore taxafter taxafter taxbefore taxafter taxafter taxbefore taxafter tax
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Return paramsExpense Ratio0.10%0.10%0.10%0.10%0.10%0.10%0.20%0.05%0.05%0.05%0.05%
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Net Return6.90%6.90%6.90%6.90%6.90%6.90%6.80%6.95%6.95%6.95%6.95%Note: added 0.00000001 to expected return of Roths as tie-breaker between Roth and Traditional!
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InvestOwn Contribution$1,000.00$1,000.00$1,000.00$1,000.00$1,000.00$1,000.00$1,000.00$1,000.00$1,000.00$1,000.00$1,000.00
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After Tax Equiv't of Own Savings (ATEOS)
$1,000.00$1,000.00$570.00$570.00$1,000.00$1,000.00$570.00$1,000.00$1,000.00$570.00$1,000.00
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Matching: invested in regular 401k
$1,000.00$1,000.00
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Total Initial Value$2,000.00$1,000.00$2,000.00$1,000.00$1,000.00$1,000.00$1,000.00$1,000.00$1,000.00$1,000.00$1,000.00
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Final ValueFinal Portfolio Value$3,897.69$1,948.84$3,897.69$1,948.84$1,948.84$1,957.06$1,930.69$1,957.98$1,957.98$1,957.98$1,900.97
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Final Cost Basis (in taxable account)
$1,222.58adjust taxes
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Final Value After TaxBaseline$3,410.48$1,948.84$2,923.27$1,461.63$1,711.63$1,923.56$1,930.69$1,957.98$1,718.48$1,468.48$1,799.220%
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Increase all future taxes 5% (Exc. Roth)
$3,313.03$1,948.84$2,728.38$1,364.19$1,664.19$1,916.86$1,930.69$1,957.98$1,670.58$1,370.58$1,765.305%
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Increase all future taxes 10% (Exc. Roth)
$3,215.59$1,948.84$2,533.50$1,266.75$1,616.75$1,910.16$1,930.69$1,957.98$1,622.69$1,272.69$1,731.3810%
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After Tax per $1K of ATEOSBaseline$3,410.48$1,948.84$5,128.54$2,564.27$1,711.63$1,923.56$3,387.18$1,957.98$1,718.48$2,576.29$1,799.22
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Increase all future taxes 5% (Exc. Roth)
$3,313.03$1,948.84$4,786.63$2,393.32$1,664.19$1,916.86$3,387.18$1,957.98$1,670.58$2,404.53$1,765.30
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Increase all future taxes 10% (Exc. Roth)
$3,215.59$1,948.84$4,444.73$2,222.37$1,616.75$1,910.16$3,387.18$1,957.98$1,622.69$2,232.78$1,731.38
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IRR of ATEOC inv.Baseline13.05%6.90%17.76%9.87%5.52%6.76%12.98%6.95%5.56%9.93%6.05%
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Increase all future taxes 5% (Exc. Roth)
12.73%6.90%16.95%9.12%5.23%6.72%12.98%6.95%5.27%9.17%5.85%
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Increase all future taxes 10% (Exc. Roth)
12.39%6.90%16.09%8.31%4.92%6.69%12.98%6.95%4.96%8.36%5.64%
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RankingBaseline2715118361049
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Increase all future taxes 5% (Exc. Roth)
3715118261049
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Increase all future taxes 10% (Exc. Roth)
3715118261049
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Roth Conversion / Roth IRA vs. bef tax IRARoth 401(k) versus Regular 401(k)
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Quick Reference Guide: Roth conversion attractive? Roth 401(k) better than Traditinal IRA?Roth conv'n gain / Roth IRA vs. Trad. IRARoth 401(K) vs. 401(k)$1000 Roth IRA$1000 Regular IRA + tax*$1000*Taxable AccountDifference$1000 Roth 401(k)$1000 Regular 401(k) + tax*$1000*Taxable AccountDifference
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Baseline-12.67%-12.81%$1,957.98$2,242.15-12.67%$1,948.84$2,235.30-12.81%
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Increase all future taxes 5% (Exc. Roth)
-8.06%-8.21%$1,957.98$2,129.66-8.06%$1,948.84$2,123.27-8.21%
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Increase all future taxes 10% (Exc. Roth)
-2.93%-3.10%$1,957.98$2,017.18-2.93%$1,948.84$2,011.24-3.10%
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Taxable Account Calculation
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YearPrincipal
Div Income
Div Tax rate
Reinvest after-tax dividend
Cap Gains
Cost Basis
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0$1,000.00$1,000.00
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1$1,064.27$19.5026.8%$14.27$50.00$1,014.27
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2$1,135.13$20.7515.0%$17.64$53.21$1,031.91
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3$1,210.70$22.1315.0%$18.81$56.76$1,050.73
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4$1,291.30$23.6115.0%$20.07$60.53$1,070.80
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5$1,377.27$25.1815.0%$21.40$64.57$1,092.20
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6$1,468.96$26.8615.0%$22.83$68.86$1,115.03
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7$1,566.76$28.6415.0%$24.35$73.45$1,139.38
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8$1,671.06$30.5515.0%$25.97$78.34$1,165.35
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9$1,782.32$32.5915.0%$27.70$83.55$1,193.04
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10$1,900.97$34.7615.0%$29.54$89.12$1,222.58
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11$2,027.53$37.0715.0%$31.51$95.05$1,254.09
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12$2,162.51$39.5415.0%$33.61$101.38$1,287.70
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13$2,306.48$42.1715.0%$35.84$108.13$1,323.54
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14$2,460.04$44.9815.0%$38.23$115.32$1,361.77
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15$2,623.81$47.9715.0%$40.78$123.00$1,402.55
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16$2,798.49$51.1615.0%$43.49$131.19$1,446.04
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17$2,984.80$54.5715.0%$46.39$139.92$1,492.42
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18$3,183.52$58.2015.0%$49.47$149.24$1,541.90
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19$3,395.46$62.0815.0%$52.77$159.18$1,594.66
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20$3,621.51$66.2115.0%$56.28$169.77$1,650.94
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21$3,862.62$70.6215.0%$60.03$181.08$1,710.97
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22$4,119.77$75.3215.0%$64.02$193.13$1,774.99
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23$4,394.04$80.3415.0%$68.29$205.99$1,843.28
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24$4,686.58$85.6815.0%$72.83$219.70$1,916.11
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25$4,998.58$91.3915.0%$77.68$234.33$1,993.79
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26$5,331.37$97.4715.0%$82.85$249.93$2,076.64
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27$5,686.30$103.9615.0%$88.37$266.57$2,165.01
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28$6,064.87$110.8815.0%$94.25$284.32$2,259.26
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29$6,468.64$118.2615.0%$100.53$303.24$2,359.78
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30$6,899.28$126.1415.0%$107.22$323.43$2,467.00
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31$7,358.60$134.5415.0%$114.36$344.96$2,581.36
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32$7,848.50$143.4915.0%$121.97$367.93$2,703.33
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33$8,371.02$153.0515.0%$130.09$392.43$2,833.41
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34$8,928.32$163.2315.0%$138.75$418.55$2,972.16
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35$9,522.72$174.1015.0%$147.99$446.42$3,120.15
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36$10,156.70$185.6915.0%$157.84$476.14$3,277.99
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37$10,832.88$198.0615.0%$168.35$507.83$3,446.34
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38$11,554.08$211.2415.0%$179.55$541.64$3,625.89
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39$12,323.29$225.3015.0%$191.51$577.70$3,817.40
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40$13,143.71$240.3015.0%$204.26$616.16$4,021.66
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41$14,018.75$256.3015.0%$217.86$657.19$4,239.52
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