tax-deferred accounts

Tax-deferred accounts are investment accounts where you can postpone paying taxes on your earnings until a later date, usually when you withdraw the funds. Common examples include retirement accounts like 401(k)s and IRAs. The money you contribute may reduce your taxable income in the year it's invested, allowing your investments to grow more quickly since they aren't taxed yearly. However, taxes will apply when you take money out, generally during retirement, when you might be in a lower tax bracket. This strategy aims to maximize long-term savings and investment growth.