Tax-deferred Savings

What is it? Investments that postpone taxes on earnings and sometimes contributions. Unlike taxable savings, the taxes on the interest, dividends and any associated capital gains are postponed until you dip into the savings. You usually have restrictions on how much you can save, and you cant dip into the savings without significant taxes and penalties until you are 59?. 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 your less if you anticipate being in a lower tax bracket when you withdraw your money, such as during retirement.

Added By: Gabrielle

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