Albert Einstein stated that, "Compound interest is the eighth wonder of the world."

I've used this quote for years at our seminars.

Now, why would Albert Einstein say that?

Well, because you accumulate more wealth by not paying taxes.

It's that simple.

Some clients have said to me, “Hey, you know what, tax-deferred or tax-free doesn't mean anything”.

Well, you must not have looked at the numbers...

Because when I run the numbers on somebody that has a taxable vehicle that makes 5% interest versus somebody that has a tax-deferred vehicle that makes 5% interest...

You will have more money on a tax-deferred vehicle at the end of five years, than you will in a taxable vehicle.

Hence, this is where Tax-deferred Annuities come into play.

Triple compounding is when:

#1 You're making interest on your principal.

#2 You're making interest on your interest.

#3 You're making interest on what you would have paid on taxes on interest because you're not paying taxes on the money. So it's sitting there earning more interest.

For example,

Let’s say you put in $100,000, that’s your principal.

You earn 5% interest on your principal.

Then you earn interest on your interest because the money is sitting there and you're not taking it out. So your money grows every year.

And then you earn interest on the money you would have paid taxes on because it's tax deferred. So your money is working much harder for you.

And this is called the triple compounding of interest.

Now, if you have an IRA or a 401(k), you're not paying taxes till a later date because it's tax-deferred money.

I talk about taxable money versus tax-free money versus tax-deferred money.

Those are three different categories, and each one of them does something different.

Understand that tax-deferred, is a big deal.

Tax-free is an even bigger deal.

So if you can, always have your money tax-deferred or tax-free.

It's a big deal in RETIREMENT.

*Blog Disclosure: It's not the purpose of this blog post to provide tax, legal and/or financial advice and you should always seek counsel from your CPA, attorney, and/or advisors as these topics relate to your specific needs. This information is being presented in a very general way and it's for illustrative purposes only.