The Power of Tax Deferral
Tax-deferred investing may help you increase the value of your retirement assets over time and may provide more retirement income in the future. This analysis will compare the accumulation value and after-tax withdrawals of a taxable account to a tax-deferred account. With the tax-deferred scenario, the investment is not taxed until the withdrawal is taken. With the taxable scenario, taxes are deducted annually from the investment.
* Tax Treatment of withdrawals differs depending on whether your account is qualified or non-qualified. When you cash in your qualified retirement accounts you have to pay ordinary income tax on your earnings. Depending on your tax bracket, you may lose up to 35 percent of your money to income tax. On a non-qualified account you pay income tax on dividends and interest. If you sell stocks, bonds or other assets for profit then your earnings are subject to capital gains rather than ordinary income tax. Gains on securities you held for at least one year are taxed at the long-term capital gains rate. As of 2024, the long-term capital gain rate is up to 20%.This means you may end up paying less in taxes on your non-qualified earnings than on your qualified earnings.
This calculator is provided for educational purposes only. It is made available to you as a self-help tool for your independent use and is not intended to provide investment advice. The information provided is hypothetical and does not reflect a particular investment or performance. We cannot and do not guarantee its applicability or accuracy in regards to your individual circumstances. Equitable Financial and its affiliates are not responsible for any errors or for the actions taken as a result of the information provided by this calculator. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.
This analysis is based on information and assumptions provided by you. Actual results will vary. There are risks associated with investing including the risk of loss not reflected here. The assumed rate of return is not guaranteed. Investments offering the potential for higher rates of return also involve a higher degree of risk.
Lower maximum tax rates on capital gains and dividends would make the investment return for the taxable investment more favorable, thereby reducing the difference in performance between the accounts shown. You should consider your personal investment horizon and income tax bracket, both current and anticipated when making an investment decision as these may further impact the results of the comparison. A tax penalty may apply to withdrawals from a tax-deferred investment. Equitable Financial and its affiliates do not provide tax or legal advice. Please consult your tax and legal advisors regarding your particular circumstances.
Please be advised that this document is not intended as legal or tax advice. Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent tax advisor.
GE- 6469208.1 (3/24) (Exp. 3/26)
