See The Difference

Tax-deferred accumulation vehicles make your money work for you. Deferring income taxes on your contributions and/or earnings can have a tremendous impact on how quickly your money is able to grow. Money in tax-deferred accounts can compound more quickly than that in comparable taxable accounts. Over the long-term, tax-deferred alternatives may help you accumulate more wealth.

Here is an example* of a taxable investment versus a tax-deferred investment, using an identical hypothetical annual rate of return:

Forty-year-old John Smith has saved $50,000 for retirement. For the next 25 years until his retirement, he plans to save $10,000 a year. Given his timeframe and that he is a moderate risk-taker, John hopes to receive a pre-tax annual return rate of 8 percent. He is in the 31 percent marginal tax bracket.

The results show the hypothetical values of a taxable investment versus a tax-deferred investment and the hypothetical value of the tax-deferred investment after taxes are paid.

In a taxable account, John's money would grow to:	$732,844	1
In a tax-deferred account, John's money would grow to:	$1,131,968	2
Even after taxes, the tax-deferred account would grow to:	$874,058	3

The growth of the tax-deferred investment exceeds that of the taxable investment before and after taxes.

*This is for illustrative purposes only, and does not represent the performance of any specific product.

¹Amount accumulated assuming the entered values, but with earnings taxed annually.
²Amount accumulated assuming the entered values and tax-deferred accumulation.
³Tax-deferred amount accumulated after taxes have been paid according to the tax rate selected.