If you are paying taxes and are actively saving for retirement, this message is for you.
We will take a look at the difference between tax deferred investments and taxable investments and why you may need both. This graph shows the growth of one hundred thousand dollars over a twenty year time period. We use average returns of the S&P 500.
- Tax deferred investments:
- Delay the taxes due on the growth of your savings.
- Generally, tax deferred investments are to be used at retirement and have more potential for growth
- Taxable investments:
- Taxes are due when you realize the gain, receive capital gains, receive dividends and interest payments.
- Taxable investments can be used pre-retirement for investment opportunities, emergency and life expenses.