How much tax will I pay on my 401k in retirement?

Every dollar withdrawn from a 401k is taxed as ordinary income. At a 22% federal rate, a $100,000 withdrawal costs $22,000 in federal taxes, plus state taxes and potential Medicare IRMAA surcharges. Over 30 years, that can exceed $660,000 in lifetime taxes.

Is IUL income really tax-free?

Yes, when properly structured under IRC §7702. IUL retirement income is accessed through policy loans against your cash value, which are not considered taxable income. Your cash value continues to earn interest while borrowed, often creating a positive spread.

What is IRMAA and how does 401k withdrawal affect it?

IRMAA (Income-Related Monthly Adjustment Amount) is a Medicare surcharge for higher-income retirees. 401k withdrawals count as income and can push you into higher IRMAA brackets, adding $700 to $5,500+ per year in extra Medicare premiums. IUL policy loans do not count as income for IRMAA purposes.

How accurate is this 401k vs IUL calculator?

This calculator provides estimates for educational purposes using standard financial formulas. It models 401k compound growth, withdrawal rates, federal/state taxes, and IRMAA surcharges. IUL projections account for early surrender charges and net crediting rates. For a personalized analysis with your specific numbers, book a free strategy call.

401k vs IUL Calculator — See How Much Tax You'll Pay in Retirement

Your Retirement Snapshot

Enter your numbers below. We'll show you the tax reality — and a different path.

Your Current Age

Retirement Age

Current 401k Balance

All 401k / traditional IRA accounts combined

Annual 401k Contribution

Including any employer match

Expected Growth Rate

Withdrawal Rate in Retirement

Retirement Tax Bracket

Based on your withdrawal + other income sources

State Income Tax Rate

Years in Retirement

Typical: 25-35 years

Compare with IUL (tax-free alternative)

IUL COMPARISON

Annual IUL Premium

Matched to your 401k contribution — edit to override

IUL Average Crediting Rate

Net of policy costs & COI charges

⚖️ Adjust IUL for after-tax reality (fair comparison)

IUL is funded with after-tax dollars. This reduces the IUL contribution by your tax bracket to create an apples-to-apples comparison with pre-tax 401k contributions.

Years Contributing (Both Strategies)

IUL is funded the same number of years as your 401k for a fair comparison

Index Loan Rate

Your cash value still earns the crediting rate — you keep the spread

🚨 Your 401k Tax Reality

Here's what happens when you start withdrawing...

401k at Retirement

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Annual Withdrawal

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You Actually Keep

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Effective Tax Rate

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📋 Annual Tax Breakdown

Federal Income Tax —

State Income Tax —

Medicare Surcharge (IRMAA) —

Total Annual Taxes —

💀 Lifetime Tax Bill (30 years)

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Money YOU saved. Money the government takes.

⚔️ 401k vs. IUL: Side by Side

Same person, same income — two completely different retirement outcomes

💰 Total Contributions Comparison

401k (Pre-Tax)

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IUL (After-Tax)

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💡 Both strategies fund the same number of years — identical capital deployed

🔴 401k Path

Balance at Retirement —

Annual Withdrawal —

Annual Taxes —

Net Annual Income —

Lifetime Taxes —

Total Kept Over Retirement

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🟢 IUL Path

Cash Value at Retirement —

Annual Tax-Free Income —

Annual Taxes $0

Net Annual Income —

Lifetime Taxes $0

Policy Runs Out Never

💀 Death Benefit at Retirement —

ℹ️ Death benefit is tax-free to beneficiaries (included with IUL, not available with 401k)

Total Kept Over Retirement

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💰 Money You Actually Keep (Lifetime)

401k Path —

IUL Path —

Tax-Free Advantage Over Your Retirement

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📌 Assumptions & Fine Print ▾

401k contributions are made at the BEGINNING of each year (annuity due), reflecting payroll deductions throughout the year. This is more accurate than end-of-year.
401k is pre-tax, IUL is after-tax. When tax adjustment is enabled, IUL contributions are reduced by your tax bracket for a fair comparison with the same gross income allocation.
Matched contributions & funding period. Your 401k annual contribution and funding duration are applied to the IUL identically — same dollars in, same years in. The only thing that changes is the vehicle. (In real-world IUL design, 7-10 year funding is often preferred to stay under the MEC limit while hitting target death benefit — we can tailor that in a personalized analysis.)
Retirement income mechanics & lapse detection. The IUL targets the same annual gross income as the 401k withdrawal for a true apples-to-apples comparison. Income is modeled year-by-year as policy loans: the loan balance accrues at your selected loan rate, while cash value continues to grow at the crediting rate. If the loan balance ever exceeds cash value, the policy lapses — the "Policy Runs Out" row shows the exact age this would happen (or "Never" if the policy sustains the draw).
IUL efficiency rates (validated): Years 1-2: 70%, Years 3-5: 85%, Years 6+: 95% — validated against real Securian and Allianz carrier illustrations. Optimistic carrier-marketing assumptions were deliberately NOT used.
Death benefit included. IUL provides permanent life insurance protection in addition to cash value accumulation. Death benefit is tax-free to beneficiaries and starts high (10-12x cash value early) then converges toward cash value over time.
401k grows at the selected rate before retirement, withdrawals use the 4% rule
IUL crediting rate is the net rate after cost of insurance (COI) and policy charges
IUL income is modeled as policy loans — tax-free under IRC §7702 when properly structured
IUL uses index loans — your cash value still earns the crediting rate while borrowed, creating a spread (e.g., 6.5% earn - 5% loan = 1.5% positive spread)
No employer match is modeled for IUL (only 401k gets the employer match)
IUL requires proper design (minimum death benefit, max-funded) — a poorly designed policy will underperform
This calculator is for educational purposes only. Results are estimates, not guarantees
Actual IUL performance depends on carrier, policy design, funding level, and market conditions

Want to Go Deeper?

This calculator uses general estimates. Your real situation — taxes, employer match, existing policies — deserves real numbers, not brochure numbers.

I'm not a guru. I'm a dad with a 9-5 who figured this out for my own family. Happy to walk you through it.

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