• Tax deferred status refers to investment income such as interest, dividends or capital gains that accumulate without paying taxes until the investor earns a constructive profit.

  • The investor benefits from tax-free income growth with tax-deferred investments, and if held until retirement, the tax savings can be substantial.
  • An example of a tax-deferred instrument is a 401(k) plan: a tax-eligible defined contribution account offered by employers to increase employee retirement savings.