An investment whose earnings are free from taxation until they are withdrawn by the investor. Examples of tax deferred investments include the following: Individual Retirement Accounts (IRA), Deferred Annuities
An investment which accumulates earnings that are not subject to taxes until the investor takes possession of the earnings — often at a point at which the investor is in a lower tax bracket than before, such as retirement.
Income whose taxes can be postponed until a later date. Contributions to a 401(k) plan, for example, are not taxed until they are withdrawn from the account, but when withdrawn, they are fully taxed at the applicable tax rate.
A tax-friendly environment whereby money grows free of taxes. The money that grows in a tax-deferred environment is not taxed until the money is withdrawn from the environment. Examples of tax-deferred environments include Employer-Sponsored Qualified Retirement Plans, Both Roth & Traditional IRA's, Educational IRA's, Annuities, Life Insurance, stocks, and series EE & HH Government Savings bonds.
No taxes are paid on the accumulated earnings until they are withdrawn from the account at which time they are subject to income tax. Traditional IRAs are tax deferred. Tax deferral gives an investor an advantage because earnings will compound at a faster rate than investment vehicles that are taxed every year. Individuals that anticipate being in a lower tax bracket when the money is withdrawn, such as during retirement, will also find that tax deferral will work to their advantage.
Phrase used to describe investments whose accumulated earnings are not taxed until the investor takes possession of them. In IRAs, for example, all dividends, interest and appreciation accumulate until the account owner starts withdrawing funds from the account, usually at age 59 1/2. See: Annuity; IRA; IRA Rollover; Self-Directed IRA; Qualified Pension Plan Or Trust