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Venture123, below is an illustration of what I believe is the correct calculation. This assumes that all of your assumptions about tax rates and capital gains rates are correct and hold.

Scenario 1 - With the Keough:

I'm in the 33% tax bracket and, over, say a 25 year period, I put \$200,000 into my Keogh, and invest it completely in S&P and Total Market Index Funds. Now lets assume that by the time I retire 25 years later, and pull the money out, it has tripled to \$600,000. If I'm still in the 33% bracket, (and there is no reason to believe I'll be in a lesser bracket when I retire), then my tax bill will be around \$198,000.

Good enough, so far.

Scenario 2 - Taxable Account

The \$200,000 that I earned over the years would get taxed at 33%, assuming I don't go into a higher bracket, and this would amount to 66,000.

So far, so good

So I would hold it for 25 years or so and, lets say it triples to \$600,000

Here's where you have a problem.

You assume that your base with which you money grows is the same \$200,000, when it is only \$134,000.

If that \$134,000 Triples to \$402,000, you have a capital gain of \$268,000 - which will give you a tax bill upon receipt of \$53,600 for a total of \$119,600. (\$66,000+\$53,600)

It will also only give you an after-tax accumulation of \$348,400. (\$402,000-\$53,600)

Letting your original \$200,000 grow tax deferred will give you an after-tax accumulation of \$402,000. (\$600,000-\$198,000)

While you have paid \$78,400 more in taxes, you end up with \$53,600 more at the end.

There are a lot of numbers here, and I didn't exactly sent this through peer review, so let me know if this is correct and if it is helpful.