The common wisdom says pre-tax 401(k)s and IRAs beat taxable accounts hands-down. But it's not so clear to me. If you put buy-and-hold stocks or index funds in a taxable brokerage account, it's actually remarkably tax-efficient because of the ability to defer capital gains, and the preferable tax rates on dividends and capital gains.
Here's a spreadsheet where you can play with the assumptions (you'll have to make a copy for yourself to edit): link.
Yes, traditional beats taxable in simplified base case, but this ignores:
- tax loss harvesting
- HIFO withdrawals
- foreign tax credits
- higher potential future tax rates