What‘s the advantage of tax-deferred investing?

In a tax-deferred investment, such as your retirement plan at work or a traditional IRA, the money in the account accumulates tax-deferred, so you don't pay taxes until you take it out. This means you have more of your money working for you over the years because Uncle Sam hasn't taken his share yet.

Try our calculator below. It's designed to show you that tax-deferred investing in a retirement plan or traditional IRA can provide more money in your account than if your investment was currently taxable, like investments is a brokerage account. Of course, with a tax-deferred investment you'll still need to pay taxes on any withdrawals; tax penalties may also apply on withdrawals taken before age 59 1/2, unless an exemption applies.

Keep in mind that the calculator doesn't consider Roth (after-tax) contributions to a retirement account. Roth contributions are made with money that's already been taxed, so you won't have to pay taxes on qualified withdrawals, including earnings.

General information

  How much of your pre-tax income is targeted for savings each month?

 $

  How long until the income is needed?

    years

  Which best fits your tax situation?

   Single     - or -    Married (filing jointly)
  

Investments that offer the potential for higher rates of return also come with a higher degree of risk. Hypothetical rates of return are for illustrative purposes only and are not intended to portray actual results. Actual rates of return will vary over time. Past results are not predictive of results in future periods.

This calculator was developed by AdvisorLinks, which is not affiliated with Capital Group or American Funds. It is intended for use in making a rough estimate comparing tax-deferred to currently taxed investments. We do not guarantee the accuracy of the results or their applicability to your particular circumstances. We encourage you to seek the assistance of your financial professional.

Investments are not FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.


All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.


Use of this website is intended for U.S. residents only.


American Funds Distributors, Inc.

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