Investor Education
6. The Benefits of Tax-Deferred Growth
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The Potential Benefits of Tax-Deferred Growth
Every investor should be aware of the effects that taxes have on their investment portfolios. Compare the final account value of a tax-deferred account and a taxable account both invested for 20 years at an 8% annual rate of return.
Not only are the contributions made before taxes, but you also pay no capital gains throughout the life of the investment. Thus, the potential growth of a tax-deferred account could offer a more beneficial investment option than an equivalent taxable account. However, tax-deferred savings vehicles, such as a 401(k) plan for retirement savings and a 529 plan for college savings, have significant tax implications if you withdraw money prior to the age of 59 ½ or for non qualified education expenses, respectively.
*Illustrations shown and returns do not reflect the results or performance of any particular investment or mutual fund.
**The funds do not offer tax advice. Since individual tax situations vary, this strategy may not be suitable for all investors. Please consult your tax advisor to see how this information pertains to you.
***Shares of a mutual fund are not deposits of, or obligations of, or guaranteed by, any bank or its affiliates, nor are they federally insured by the FDIC. Investments in the funds involve investment risk, including the possible loss of principal.
****Fees and charges applicable to each investment type are not reflected in this illustration. Had they been considered, the performance would have been lower.
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