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"As one example, if you are a buy-and-hold-forever investor with a couple of decades until expected retirement - and the expected long-term capital gains tax rate in your retirement years is lower than your regular-income tax rate today - you are better off investing an after-tax amount in an ordinary taxable account, than the equivalent pre-tax amount in a 401K or conventional IRA. "

Is that really true? Example:

To fulfill the assumptions, lets say I'm a buy and hold forever investor and I'm retiring in 30 years. The cap gains tax rate in retirement (20%) is lower than my marginal regular income tax rate today (30%).

I can save $1000 pretax, or $700 post-tax, and either way I'll earn 10% compounded while I hold the investment. After 30 years, I'll have $17,449 in the pretax account, or $12,214 in the after-tax account. My understanding is that I'll have to pay cap gains taxes on the after-tax account when I cash out from that account, which would leave me with $9771 cash from that investment. For my pretax account to give me less than that, the tax rate upon withdrawal would have to be 44%, right?

I don't understand how the taxable account comes out ahead of the 401K in that scenerio, and I think the example I made up satisfies the conditions that you laid out. Could you help me out with that?
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