Accounts & the three tax buckets
A dollar in a 401k, a dollar in a Roth, and a dollar in a brokerage account are not the same dollar. The difference is when the IRS gets paid.
Every retirement account belongs to one of three "tax buckets": taxed later (401k, IRA), taxed already (Roth), or taxed as you go (brokerage). Your mix across the three buckets decides how much of your savings you actually get to keep — and how much flexibility you have every year of retirement.
The three buckets
| Bucket | Accounts | When taxed | The catch |
|---|---|---|---|
| Pre-tax | 401k, 403b, IRA, SEP IRA | When you withdraw — every dollar taxed as ordinary income | Forced withdrawals (RMDs) begin at 73, whether you need the money or not |
| Roth | Roth IRA, Roth 401k | Already taxed — withdrawals and all growth are tax-free forever | You paid tax up front, so contributions felt more expensive |
| Taxable | Brokerage, savings | Dividends yearly; gains when you sell — usually at lower capital-gains rates | No special protection, but no special rules either — fully flexible |
Example: You have $500K in a traditional IRA. It's not really $500K — if your retirement tax rate averages 22%, about $110K of it belongs to the IRS; you just haven't handed it over yet. The same $500K in a Roth is genuinely all yours. This is why two people with "the same savings" can have very different retirements.
Why the mix buys you flexibility
In retirement, your tax bill isn't fixed — it depends on which bucket you pull each dollar from. A retiree with all three buckets can fill the low tax brackets from pre-tax accounts, top up spending from taxable, and leave the Roth compounding tax-free — adjusting the recipe every year as circumstances change. A retiree with only a 401k has one lever: withdraw and pay ordinary income tax, every time.
That flexibility becomes very real money when forced withdrawals start (see RMDs) or when you're managing income to stay under health-insurance thresholds (see Withdrawal order).
What Vundii shows you
- The Accounts page is where each account, its type, balance, yearly contribution, and stock/bond split lives. Every account you add flows into the simulation.
- The Tax Planning page shows your current mix across the three buckets — many people discover they're 90% pre-tax and didn't know it.
- The Balances page projects how each account grows and is later drawn down, so you can watch the buckets do their different jobs over time.
What to do about it
- Add every account with its correct type — the type drives all downstream tax math.
- Set each account's equity %. A common refinement: hold more stocks in the Roth (its growth is never taxed — let it run) and more bonds in pre-tax accounts.
- Check your bucket mix on Tax Planning. Heavily pre-tax? Read Roth conversions — the years just after retirement are often a one-time window to rebalance the buckets cheaply.
- Remember the perspective-keeper: total savings still matters more than placement. Buckets decide efficiency; the balance decides success.
Related terms: equity % · RMD · Roth conversion · withdrawal order
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