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What does saving tax deferred mean?

April 26, 2017mean Saving

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What does saving tax deferred mean?

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Saving tax deferred allows you to postpone taxes through investing in your qualified retirement plan. Tax deferral means that you pay no federal income taxes on any earnings as long as you keep your money in your retirement plan. When you withdraw money, however, you will pay taxes on it. Withdrawals prior to age 591/2 may also be subject to a 10% IRS penalty in addition to ordinary income taxes.