Qualified vs. Non-Qualified Accounts
Qualified / Tax-Deferred
A Qualified account (e.g., Traditional 401k, IRA, 403b, SEP, 457b) is funded with pre-tax dollars. The IRS deferred the tax when you contributed. When you withdraw money in retirement, you will owe ordinary income tax on every dollar you take out.
Non-Qualified / After-Tax
A Non-Qualified account (e.g., Roth IRA, Roth 401k, Brokerage account — cost basis/principal, Savings) is funded with after-tax dollars. Because you already paid tax on those contributions, no additional income tax is owed on those withdrawals in this model.
This model draws from your Non-Qualified accounts first (tax-free), then moves to Qualified accounts (applying a tax gross-up so you receive your target after-tax income).