What is a tax-deferred investment?

A tax-deferred investment is a financial product that allows an investor to postpone paying taxes on income or gains from investments until a later date. In South Carolina, taxes on investments may be deferred for as long as the investment remains in the account. This can be beneficial for investors because they can allow their investments to grow without having to pay taxes on them. This is especially advantageous for retirement savings accounts, such as 401(k)s, where the money can build up and potentially increase in value over time without taxes being deducted from the gains. It also allows investors to take advantage of compound interest by reinvesting the money they would otherwise have to pay in taxes, as well as any investment gains, without worrying about paying taxes until the money is withdrawn. Finally, if the investor decides to withdraw their money prior to the age of 59 ½, they will typically face a 10% penalty from the IRS.

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What is a tax-deferred investment?

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