Factors to consider regarding tax deferralNovember 29, 2016 | Retirement Education
Understanding tax deferral is important because of its effect on your efforts to reach your retirement goals. Here is an explanation of what tax deferral is and its benefits to you.
- What tax deferral is: Tax deferral means that the contributions to your retirement plan are not taxed. You are putting off paying taxes on that money until you withdraw it from your retirement account in the future.
- The benefits of tax deferral? With tax deferral, you not only put off paying income taxes on the money you contribute, you may also reduce the amount of money you will eventually pay in taxes. The money contributed to your retirement account is automatically deducted from your paycheck before taxes are taken out. It goes directly into your retirement account, so your paycheck is actually less than it would have been before the deduction when taxes are taken out. This means that you are paying less in current income taxes for the year.
Now that you know what tax deferral is and how it benefits you, learn more and see examples by visiting One Day is Today.