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Newsletter

What Is Tax Deferral?

1/3/2019

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What Is Tax Deferral?“Tax deferral” 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.
Only investment vehicles designated as “tax deferred,” 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.
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.
Additionally, investments in tax-deferred vehicles are often made when you are earning a higher income and subject to a 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.
One note of caution: When formulating your tax plan, recognize that all withdrawals from tax-deferred plans are taxed as ordinary income. Early withdrawals (prior to age 59½) may be subject to a 10% federal income tax penalty. Once again, the government is encouraging a long-term outlook.


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. © 2019 Broadridge Investor Communication Solutions, Inc.


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Securities offered through OneAmerica Securities, Inc., a Registered Investment Advisor, member FINRA SIPC. Sunshine Financial Solutions of South Florida, Inc. is not an affiliate of OneAmerica Securities or the companies of OneAmerica and is not a broker dealer or Registered Investment Advisor. Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individual tax, legal, fiduciary, or investment advice. Neither OneAmerica Securities, the companies of OneAmerica, or Sunshine Financial Solutions of South Florida, Inc. provide tax or legal advice. For answers to specific questions and before making any decisions, please consult a qualified attorney or tax advisor. Guarantees are subject to the claims paying ability of the issuing insurance company.
  • Home
  • About Us
    • About Us
    • Meet Our Team
    • Mission Statement
    • Our Promise
    • Our Partners
    • Join Our Team
    • Brokerage Services
  • Our Services
    • Individuals and Families
    • Business Owners
    • Retirees/Medicare Eligible
  • Planning
    • Life Insurance
    • College Planning
    • Retirement Planning
    • Build Wealth
    • Disability Insurance
    • Mortgage Protection
    • Business Valuation
    • Long Term Care
    • Final Expense
    • Home + Auto
  • Business
    • Group Plans
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    • Key Employees
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    • Executive Carve Out
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    • Protect Your Business
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