Tax Deferred

What is it? An investment with earnings and sometimes contributions that are taxed at a later date. For example, you pay no taxes on your IRA?s accumulated earnings until you take them out, at which time they are subject to income tax. Tax deferral gives investors a big boost because earnings compound at a faster rate than with investments that are taxed every year. Tax deferral also can cost you less if you anticipate being in a lower tax bracket when you withdraw your money, such as during retirement.

Added By: Leah

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