What is a Deferred Account?
Deferred accounts are plans or accounts that make it possible to accumulate resources in the plans without the need to pay taxes during the period of accumulation. The payment of applicable taxes is deferred or postponed until a later date, usually when the account holder begins to make withdrawals. Many types of retirement plans, including the IRA and 401(k) plans, are structured as a deferred account. One of the main benefits to a deferred account structure is the ability to postpone or defer the tax liability until a later date. Any funds that are placed into the deferred account are deducted from the annual income of the account holder and are not subject to taxes during the current tax year. This benefit helps to encourage people to save for later years, since the amount of funds placed in a deferred account impacts the total tax liability due for the tax year. The postponed taxes are calculated based on the amount of funds withdrawn from the account during a calendar year, rather
