What is Tax-deferred growth?
Tax-deferred growth allows investment earnings, including interest, dividends, and capital gains, to accumulate without current-year taxation, with taxes paid only when distributions occur during retirement. This mechanism maximizes compound growth by reinvesting the full amount of earnings rather than paying annual taxes that reduce investable balances. Retirement accounts like Traditional 401k plans and traditional IRAs provide tax-deferred growth, creating substantial wealth accumulation advantages over taxable accounts during multi-decade accumulation periods. The Child traditional IRA strategy leverages tax-deferred growth combined with decades of compounding to transform modest teenage contributions into substantial retirement assets.
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