MBR Financial, Inc.
2000 West Loop South
Ste. 1510
Houston, TX 77027
832-667-8787
281-974-2108
contactus@mbrfinancial.com
 
 




Saving for Retirement: Inside a Plan vs. Outside a Plan Calculator
Saving for Retirement: Inside a Plan vs. Outside a Plan Calculator

This calculator compares two scenarios: (1) making contributions each year to a tax-advantaged retirement plan, and (2) making tax-equivalent alternative investments outside the retirement plan.


Saving inside a Retirement Plan
Your contribution type
Your annual contribution to retirement plan $
Enter your annual contribution to a qualified plan or individual retirement account.
Employer annual matching contribution (if any) $
If your employer will match your contribution above, enter the total estimated dollar amount of the annual matching contribution here.
Increase contribution amounts each year by (0% to 10%) %
If you enter a percentage here, the calculator will increase the annual contribution amounts each year. Entering 0% will result in the same contribution dollar amount each year.
Years until retirement (time horizon) (1 to 50)
Years until Roth (if applicable) distributions are qualified (0 to 40)
Roth distributions are generally qualified and tax free (assuming five-year holding period met) after age 59½, death, or disability. Why do we ask? The calculator determines the after-tax value of the account each year, and needs to factor this in. Most people will enter the number of years until age 59½ is reached.
Years that penalty tax on early distribution applies (0 to 40)
Penalty tax generally applies to distributions before earlier of age 59½, death, or disability. The calculator needs this information to determine the year-by-year after-tax value of the account. Most people will enter the number of years until age 59½ is reached.
Anticipated annual rate of return (0% to 10%) %
Saving outside a Retirement Plan
Projected earnings should be allocated among ordinary income, qualified dividends, long-term capital gains, and nontaxable income. Inputs must add up to 100%. We ask this information to better estimate tax on earnings.
Percent of earnings that is ordinary income %
Percent of earnings that is qualified dividends %
Percent of earnings that is long-term capital gains %
Percent of earnings that is nontaxable %
Percent of long-term capital gains recognized each year (0% to 100%)
Additional 3.8% Medicare tax on net investment income
This tax generally applies if your modified adjusted gross income exceeds a threshold based on your tax filing status ($200,000 for individuals, $250,000 if you are married and filed jointly, $125,000 if you are married and filed separately).
Tax Rates
Ordinary income tax rate (0% to 60%) %
Long-term capital gains tax rate (0% to 40%) %


If your contributions to the retirement plan are pretax (i.e., tax deductible), the corresponding amounts contributed to savings outside the plan equal the after-tax value of your retirement plan contributions (e.g., if you contribute $1,000 pretax to the retirement plan, and you are subject to a 25% tax rate, the calculator compares your $1,000 pretax contribution with a $750 savings contribution outside of the plan). If your contributions to the retirement plan are not pretax, the same amounts are contributed to savings outside the plan. Employer matching contributions are always pretax and, since these contributions are made by the employer and not by you, corresponding contributions are not made outside the retirement plan for employer matching contributions.

Contributions are assumed to be made at the beginning of each year and taxes paid or accrued at the end of each year.

Inside the retirement plan, tax is deferred and the accrued tax liability (used to determine the after-tax value of the retirement plan in a given year) is calculated at the ordinary income tax rate. The penalty tax on early distributions (if applicable) is equal to 10% of the taxable portion of the plan funds.

For savings outside of the retirement plan, tax (other than any accrued capital gains tax) is assumed to be paid each year from savings. A percent (as specified by you) of previously untaxed capital gains is assumed to be recognized each year; tax on the remaining nonrecognized capital gains is deferred.

All capital gains are assumed to be long term.

This calculator does not take into account the contribution limits that apply to retirement plans.



IMPORTANT DISCLOSURES Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018.