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Waiting even one year to invest can make a difference.
For every day that you postpone investing, you could lose thousands of dollars over
the next 10 or 15 years. Why? Because when you leave your money in a taxable
account instead of cashing out, any earnings continue to compound, or grow. And
when you take advantage of tax-deferred compounding in 529 plans and qualified
plans, such as IRAs and 403(b)s, the difference is even greater.
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Bill and Jane each contribute $1,500 at the beginning of each year to their individual accounts. Both invest until age 66, but Bill starts one year earlier (age 30) than Jane (age 31). Bill contributes a total of $54,000 and Jane contributes a total of $52,500. Both Bill and Jane are in the 34% tax bracket, and their accounts each earn an 8% annual return.
Whether they invest in taxable or tax-deferred investments, waiting a year makes a difference on the total return: |
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Sample 8% return does not reflect performance of an actual investment. Performance
of your investment will differ. Actual tax rates may vary for different assets and
taxpayers from that illustrated.
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