Why is tax deferral a key benefit of traditional retirement accounts?
1. It allows contributors to avoid taxes on the money deposited
2. It allows contributions and earnings to maximize growth potential before being taxed at retirement
3. It exempts these accounts from all federal reporting
4. It lets contributors save money that is insured by the federal government
Answer:
2. It allows contributions and earnings to maximize growth potential before being taxed at retirement
Tax deferral in traditional retirement accounts lets contributions and earnings grow quicker through compounding, reduces current taxable income for immediate savings, and often results in taxes being paid when the owner is in a lower tax bracket, maximizing long-term wealth.
