Sheltering investments from annual taxes lets them compound faster. See the gap.
This calculator compares investing in a taxable account with a tax-advantaged one like a 401(k) or IRA, showing how sheltering gains from annual tax lets money compound faster.
In a taxable account, taxes on interest, dividends, and realized gains take a bite each year, lowering the effective return that compounds. A tax-advantaged account shields those gains, so the full return compounds year after year. Over decades, that difference grows into a meaningful gap in ending value.
This is why financial planners generally suggest filling tax-advantaged accounts, especially those with an employer match, before a regular brokerage. The calculator models the taxable side as taxed each year, a conservative view; real taxable accounts defer some tax until sale, so the true gap usually sits between the two figures shown.
They shield gains from annual taxes, so the full return compounds every year instead of being reduced by a yearly tax bite.
Generally yes, especially to capture an employer match. Tax-advantaged accounts keep more of your growth compounding for you.
It's conservative, modeling gains as taxed each year. Real taxable accounts defer some tax until you sell, so the true gap is usually smaller.
See the exact formula and a worked example on our methodology page.