"...how do you account for the 20% increase in the purchasing power of that portion?"
I won't have to if you tax it away from me when I spend it.
IRA: 100,000 dollars. Under current law it's worth 80,000 dollars in purchasing power.
Taxable account: 100,000 dollars
Under current law it's worth 100,000 dollars in purchasing power.
Under a NRST the IRA becomes worth 100,000 dollars and the taxable account becomes worth 80,000.
Of course that's the most basic of illustrations. For one thing, you would have been able to accumulate more money under a NRST because the compounding would have been higher without tax liability along the way. Also, your purchasing power doesn't even kick in until you have paid for life's necessities. And, if you're like most people, you'll buy frugally and often used when making large purchases. Finally, as you spend your nest egg between shuffleboard tournaments at Del Boca Vista, the earnings on it will not be taxed.