How to Use This Calculator
- 1
Enter Your Income & Contribution Details
Input your gross annual income, effective tax rate (average rate, not marginal), and the after-tax dollar amount you want to contribute to savings or investments.
- 2
Review Your Results
The calculator displays Pre-Tax Income Needed, Tax Cost on Contribution, Net Take-Home Income, Total Tax Paid, Remaining Net Income, and Contribution Rate. The Insights card shows tax drag analysis, monthly breakdown, and savings rate check.
Example Calculation
An individual earning $60,000 with a 20% effective tax rate wants to contribute $4,000 after-tax to a Roth IRA.
Gross Income
$60,000
Effective Tax Rate
20%
Desired After-Tax Contribution
$4,000
Results
Pre-Tax Income Needed
$5,000.00
Tax Cost on Contribution
$1,000.00
Net Take-Home Income
$48,000.00
Total Tax Paid
$12,000.00
Remaining Net Income
$44,000.00
Contribution Rate
8.3%
Insights card shows $1.
Tips
Compare Pre-Tax vs. After-Tax Options
In the example, $4,000 after-tax costs $5,000 gross ($1,000 in tax drag). A pre-tax 401(k) contribution of $5,000 saves $1,000 in current taxes — but you'll pay taxes on withdrawal. At 20% rate, after-tax (Roth) is often better if you expect higher future taxes.
Know Your Effective vs. Marginal Rate
Use your effective rate (total tax / gross income), not your marginal bracket. In the example, 20% effective on $60,000 means $12,000 total tax. Your marginal rate may be 22%, but effective rate gives a more accurate picture of actual tax drag on contributions.
Target 15-20% Savings Rate
The example's 8.3% contribution rate is below the 10-15% retirement guideline. To reach 15% of net income, increase to $7,200/yr ($600/mo) — requiring $9,000 gross income with $1,800 in tax cost.
The After-Tax Contribution Calculator shows the true cost of saving after taxes.
With $60,000 gross income at a 20% effective tax rate, contributing $4,000 after-tax requires $5,000 in pre-tax income — $1,000 goes to taxes.
Your net take-home is $48,000, with $44,000 remaining after the contribution (8.3% savings rate).
Every $1 saved costs $1.25 in gross earnings at this tax rate.
The After-Tax Contribution Formula
The calculator determines how much gross income is needed to meet an after-tax savings goal, revealing the tax drag on your contributions.
Net Income = Gross Income x (1 - Tax Rate / 100)
Pre-Tax Amount Needed = After-Tax Contribution / (1 - Tax Rate / 100)
Tax Cost on Contribution = Pre-Tax Amount Needed - After-Tax Contribution
Remaining Net Income = Net Income - After-Tax Contribution
Contribution Rate = (After-Tax Contribution / Net Income) x 100
The key insight: at a 20% rate, $1 after-tax costs $1.25 gross.
At 30%, it costs $1.43.
At 35%, $1.54.
This "tax multiplier" makes pre-tax options increasingly attractive at higher rates.
Worked Example: Funding an After-Tax Savings Goal
An individual wants to contribute $4,000 to a Roth IRA from their $60,000 salary.
Inputs:
- Gross Income: $60,000
- Effective Tax Rate: 20%
- Desired After-Tax Contribution: $4,000
Step-by-step:
- Net Take-Home Income: $60,000 x (1 - 0.20) = $48,000
- Total Tax Paid: $60,000 x 0.20 = $12,000
- Pre-Tax Income Needed: $4,000 / 0.80 = $5,000
- Tax Cost on Contribution: $5,000 - $4,000 = $1,000
- Remaining Net Income: $48,000 - $4,000 = $44,000
- Contribution Rate: $4,000 / $48,000 = 8.3% of net income
Monthly breakdown: $333/mo after-tax contribution requires $417/mo in gross income, with $83/mo going to taxes on that specific contribution.
Pre-Tax vs. After-Tax: When Each Makes Sense
The choice between pre-tax and after-tax contributions depends on your current vs. expected future tax rate:
- After-tax (Roth) is better when: You're in a lower bracket now (the example's 20% is favorable), you expect income growth pushing you into higher brackets, or you want tax-free retirement income. The $1,000 tax cost now buys unlimited tax-free growth.
- Pre-tax (Traditional) is better when: You're in a high bracket now (30%+) and expect lower retirement income. A $5,000 pre-tax contribution saves $1,000 immediately at 20% — same money, but you keep it now and pay tax later.
- Both (split strategy): Many advisors recommend contributing to both types. Max out Roth IRA ($7,000 limit for 2026) plus traditional 401(k) ($23,500 limit) for tax diversification in retirement.
Frequently Asked Questions
How much gross income do I need to save a specific after-tax amount?
Divide your desired after-tax amount by (1 - effective tax rate). In the example, $4,000 / (1 - 0.20) = $5,000 gross needed. The $1,000 difference is the tax cost. At a 30% rate, the same $4,000 requires $5,714 gross ($1,714 tax cost) — 71% more tax drag than at 20%.
What's the tax drag on after-tax contributions?
Tax drag is the extra gross income needed beyond your desired contribution. In the example, every $1 saved after-tax costs $1.25 in gross income at a 20% rate. The $1,000 tax on the $4,000 contribution is 25% of the contribution itself. Higher tax rates increase the drag: at 30%, each $1 costs $1.43; at 35%, it costs $1.54.
When should I choose after-tax (Roth) over pre-tax contributions?
Choose after-tax/Roth when you expect higher tax rates in retirement, you're in a lower bracket now (the example's 20% is favorable for Roth), or you want tax-free withdrawals. Choose pre-tax when your current rate exceeds your expected retirement rate. In the example, the $1,000 tax cost now buys tax-free growth and withdrawals — a good trade if your retirement rate would be 25%+.