Tax-Deferred Contribution

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Tax-Deferred Contribution

A contribution to a retirement plan on which the contributor does not pay taxes until a later date. One reduces one's taxable income by the amount of the tax-deferred contributions, shielding those contributions from taxation. However, one eventually pays taxes on these contributions when one begins to make withdrawals from the retirement plan. Those contributions (and their investment income) are taxed as ordinary income upon withdrawal. One makes tax-deferred contributions to reduce one's tax liability in the near term in hopes that one's income (and therefore one's tax liability) will be lower after retirement.
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6) The reason for the variance in allowable maximum percentages contributed is the Internal Revenue Code's restrictions on tax-deferred contributions.
Recent legislative changes and the desire to accelerate retirement savings have generated higher demand for Cash Balance Plans, which allow employers to make large tax-deferred contributions.
While there has been rapid growth in multiemployer "defined contribution" plans (such as 401(k) plans, in which workers make tax-deferred contributions to their own retirement savings accounts), these plans did not experience significant growth until the past few years -- unlike their single-employer counterparts, where 401(k) plans have been growing for more than 20 years.
Also keep in mind that, starting in 1997, both spouses can make tax-deferred contributions of up to $2,000 each to an IRA.
Individual retirement accounts (IRAs) are, by design, supposed to be simple, uncomplicated vehicles by which to make tax-deferred contributions (and obtain tax-deferred income growth) into a retirement nest egg.
This is important because taking advantage of tax-deferred contributions in a qualified retirement savings plan will help maximize the benefits of retirement savings.
Tax-deferred Contributions -- Deferring some of your earnings not only gives you a tax deduction, it also allows you to earn tax-deferred income.
com Direct Annuity offers over 30 investment options from trusted fund families including Invesco, AIM, Berger and American Century where customers can make tax-deferred contributions with no cost.
Catch-up contributions are additional tax-deferred contributions and are separate from regular TSP contributions.
A solo or self-employed 401(k) combines a profit-sharing plan with a 401(k) plan and allows a sole owner-employee to make greater tax-deferred contributions than would be permitted under the others.
The plan, called the Enterprise Individual(k), offers certain small, owner-only businesses a new choice for their retirement savings by allowing up to $40,000 in tax-deferred contributions.