Understand the Advantage of Tax-Deferred Investment Growth of Deferred Annuities

Sometimes, investors don;t understand the benefit of tax deferral.  They believe if they need to pay the tax eventually, what difference does it make to defer the tax.  This article explains the benefit clearly so you make the right decisions with IRAs, annuities and other tax deferred opportunities. The secret to growing your investments is its compounding rate. The higher it is, the faster your investment grows. But that’s only half the story. Increasing the compounding rate from 6% to 8% will produce more than that 33% increase in your investment over the years -see first table. That’s the magic! And that’s why tax-deferred investments are such an advantage. Let’s take a look at some results… Per Cent Greater Accumulation for 8% over 6% Compound Rates of $10,000 Year 6% 8% % more 5 13,382 14,693 10% 10 17,908 21,589 21% 15 23,966 31,722 32% 20 32,071 46,610 45% 25 42,919 68,485 60% 30 57,435 100,627 75% Taxable accounts are those that generate interest or dividend earnings that are subject to annual taxation. If your investment return is 10% and your income tax bracket is 28%, then 28% of that 10% (i.e. 2.8%) of that investment return is lost to [...]

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