Phil Cannella Explains Tax-Deferred vs. Tax-Free – Phil Cannella Blog

Phil Cannella considers the pros and cons

Phil Cannella – Phillip Cannella Blog: Phil Cannella urges each of us to consider the pros and cons of tax-deferred growth versus tax-free growth in our retirement accounts.

Phil Cannella explains

This is how Phil Cannella explains it: “There’s a big difference between tax-deferred and tax-free and it translates to thousands of dollars in your pocket over your retirement. A tax-deferred account is one that you feed with pre-tax dollars and that grows without taxes being paid on the accumulation.  As long as you leave the gains and interest in the account untouched, taxes won’t fall due.  That’s tax-deferred.  The taxation will be postponed until you’re ready to withdraw and only then will you pay taxes on the accumulation.”

Phil Cannella goes on to explain that a lot of people have their retirement accounts in traditional IRAs which are growing tax-deferred.

“A tax-deferred retirement account is free from taxation until you want to withdraw from it.  A tax-free retirement account is never subject to taxes once it has been established,” said Phil Cannella at a recent educational event.

What Phil Cannella urges us to consider are the benefits of tax-free growth. If you factor in tax brackets today as compared to historical levels and then consider where they might be 10 or 20 or 30 years from now, Phil Cannella suggests we may be better off getting the tax infestation out of accounts now and then enjoy continued tax-free growth.

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