YOU ASK:
What is the definition of Tax-Deferred Basis?
WE ANSWER:
Tax-Deferred Basis is the method by which investment income grows and that there are no income taxes payable except when money is withdrawn from the investment vehicle (such as a tax-sheltered annuity).
The government would like to encourage investment as wells as savings towards retirement. It does this by providing tax incentives to investment or savings-related activity by allowing the investor to invest money before taxes are even deducted from it.
However, when the money is taken out of the investment (such as a retirement fund), tax is applied to the amount being withdrawn. Still, there are lower tax brackets during the time the investor withdraws the money.
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