{"id":2607,"date":"2018-08-21T15:12:13","date_gmt":"2018-08-21T15:12:13","guid":{"rendered":"https:\/\/scrantonfg.com\/?p=2607"},"modified":"2020-12-07T18:12:13","modified_gmt":"2020-12-07T18:12:13","slug":"tax-deferral","status":"publish","type":"post","link":"https:\/\/scrantonfg.com\/tax-deferral\/","title":{"rendered":"Tax Deferral"},"content":{"rendered":"

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What Is Tax Deferral?<\/h1>\n

\u201cTax deferral\u201d is a method of postponing the payment of income tax on currently earned investment income until the investor withdraws funds from the account. Tax deferral is encouraged by the government to stimulate long-term saving and investment, especially for retirement.<\/p>\n

Only investment vehicles designated as \u201ctax deferred,\u201d such as IRAs, plans covering self-employed persons, and 401(k)s, allow taxes to be deferred. In addition, many insurance-related vehicles, such as deferred annuities and certain life insurance contracts, provide tax-deferred benefits.<\/p>\n

There is a substantial benefit to deferring taxes as long as possible, because this allows the entire principal and any accumulated earnings to compound tax deferred. The compounding effect can be dramatic over an extended period of time and can make a big difference in the accumulation of a retirement nest egg.<\/p>\n

Additionally, investments in tax-deferred vehicles are often made when you are earning a higher income and\u00a0subject to\u00a0a higher tax rate. When you reach retirement and begin taking distributions from your tax-deferred accounts, it is possible that your tax bracket will be lower.<\/p>\n

One note of caution: When formulating your tax plan, recognize that\u00a0all withdrawals from tax-deferred plans are taxed as ordinary income.\u00a0Early withdrawals (prior to age 59\u00bd) may be subject to a\u00a010% federal income tax penalty. Once again, the government is encouraging a long-term outlook.[\/vc_column_text][\/vc_column][\/vc_row][\/vc_section][vc_row][vc_column][vc_column_text]<\/p>\n

The information in this newsletter is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. \u00a9 2018 Broadridge Investor Communication Solutions, Inc.<\/div>\n

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[vc_section][vc_row][vc_column][vc_single_image image=”2583″ img_size=”full”][vc_column_text] What Is Tax Deferral? \u201cTax deferral\u201d is a method of postponing the payment of income tax on currently earned investment income until the investor withdraws funds from […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[37],"tags":[],"_links":{"self":[{"href":"https:\/\/scrantonfg.com\/wp-json\/wp\/v2\/posts\/2607"}],"collection":[{"href":"https:\/\/scrantonfg.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/scrantonfg.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/scrantonfg.com\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/scrantonfg.com\/wp-json\/wp\/v2\/comments?post=2607"}],"version-history":[{"count":0,"href":"https:\/\/scrantonfg.com\/wp-json\/wp\/v2\/posts\/2607\/revisions"}],"wp:attachment":[{"href":"https:\/\/scrantonfg.com\/wp-json\/wp\/v2\/media?parent=2607"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/scrantonfg.com\/wp-json\/wp\/v2\/categories?post=2607"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/scrantonfg.com\/wp-json\/wp\/v2\/tags?post=2607"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}