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  Tuesday November 21, 2017

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TAX DEFERRAL
Learn even more about this topic with the Encyclopedia of Personal Finance™

There are a variety of tax benefits available with retirement plans:

Tax deferral: The privilege of putting off paying taxes until some future date. This date may come when you retire or begin withdrawing funds from a retirement plan. Tax deferral allows an investment to grow faster before being taxed. Also, many retirees may be in a lower tax bracket than when they were employed, so tax rates may be lower.

Tax-free rollover: A rollover of one retirement plan into another without the rollover being taxed. Income taxes may be avoided if the amount is rolled over within sixty days, and if the receiving plan contains provisions for tax-avoidance.

Tax shelter: An investment that allows one to legally avoid some taxes. Traditional IRA accounts are tax shelters because one does not pay taxes on income contributed to them.

Tax-sheltered annuity: A retirement plan for employees of public schools and some tax-exempt organizations, such as churches and charity groups. 403(b) plans are commonly called tax-sheltered annuities despite the fact that they can be funded with mutual funds as well. Taxation of earned income can be deferred through pre-tax contributions to a TSA.

And now, some final words on retirement vocabulary.




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