This screen emphasizes that Qualified Plans defer the tax as opposed to eliminating the tax. |
Qualified Plans do two things: First, they defer the tax (but they do not necessarily save taxes) Second, they defer the tax calculation. Since the taxes are deferred, it is misleading to use the phrase “Saves Taxes” in conjunction with Qualified Plans. Since the calculation of taxes is deferred (until withdrawals start), qualified plans will work great if the you retire in a lower tax bracket than your current tax bracket. However, if you retire in a higher tax bracket, then the qualified plan has cost you money. This is because you pay more taxes in the higher tax bracket. |
No math presented on this screen. |