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Tax Deferred vs Taxable
Pay taxes on your earnings when you use it, not while you are building it! |
Real simple, pay taxes on your money when you are ready to spend it, not while you are attempting to accumulate it!
Tax deferral affords you the opportunity of Triple Compounding that was discussed elsewhere in this Website. Your Principal earns Interest, your Interest earns Interest, and the dollars you would have paid in taxes earns interest.
The concept here is when you are ready to use the money you will be beyond your optimal earning years and therefore be in a lower income tax bracket thereby making the distributions taxable in lower income tax bracket than your peak earning years.
During annuitization for example one can also take advantage of their tax free cost basis by employing the little know about exclusion ratio to their income payments. This can serve to substantially reduce ones income taxes on individual payments received. This only applies of course to no qualified funds as IRA’s have a zero cost basis. |
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