Tax-deferred (adjective)

Describing a financial investment or savings plan in which taxes on the investment or savings are delayed until a later date, usually until the funds are withdrawn.

Origin:

Tax-deferred refers to the delay of taxes being paid on an investment or savings until a later date.

Examples:

1. Tax-deferred savings plans allow investors to grow their savings without paying taxes on the interest earned until they withdraw the funds.
2. A tax-deferred annuity can accumulate tax-free until the investor begins taking withdrawals.
3. Tax-deferred investment plans such as 401(k) and traditional IRA plans allow for contributions to be made pre-tax and taxes are only paid when the money is withdrawn.
4. The tax-deferred savings plan allows the investor to save money for retirement without paying taxes until withdrawal.
5. Tax-deferred investment options are often used to reduce current income tax liability.