Answer:
I am not in your course of whatever you are in, so I will give a couple of reasons, hopefully one of them meets your eye.
1. Lower your tax bill right now
2. Raise the potential for compounding
3. Save on taxes over the long term
4. Eliminate current taxes on investment gains
5. Support your savings discipline
Step-by-step explanation:
Explanation for 1.
Tax deductions are powerful financial tools. Making the maximum contributions to your tax-deferred accounts effectively takes a chunk of money you would have paid to the government and lets you keep it now and pay it later. The higher your tax bracket, the more you will save. Even if your income is lower, you may still be able to realize a significant tax benefit by qualifying for the saver’s tax credit. Also, if you don’t have access to an employer-sponsored retirement plan like a 401(k), or you’ve already reached the max contribution limit, you could consider opening an Individual Retirement Account as you might be eligible to realize even more tax benefits.
Explanation for 2.
Compounding is a basic principle of investing. Say you invest money in an account that produces earnings. Any earnings you receive can produce earnings of their own, and the cycle continues over time. Because tax-deferred accounts allow you to invest funds before you pay taxes on them, you give more of your current funds an opportunity to take advantage of this “magical” mechanism.
Explanation for 3.
Many people expect to earn less in retirement than they did in their working years as they downsize and shift to relying on pensions, Social Security and retirement accounts for income. If your income drops, your tax bracket may drop, too. In that case, you could wind up paying less in taxes over time, since your withdrawals in retirement would be taxed at a lower rate than those funds would’ve been when you were working.
Explanation for 4.
Usually, when you sell stocks or other assets that have grown in value since you bought them, you realize a capital gain, which triggers a related tax. But within a tax-deferred account, you can buy and sell assets without triggering any tax at all. You can feel free to make investment moves without worrying about the effect of a sale on your current tax situation ― as long as that money stays in your tax-deferred account.
Explanation for 5.
Except in special cases, withdrawing money from a traditional IRA or employer-sponsored plan before the age of 59½ will come with a 10% early withdrawal penalty. Why is that a good thing? Because one of the biggest impediments to building your retirement savings is the temptation to tap into it early to cover your current expenses. Keeping the money in your tax-deferred account can be a powerful incentive for avoiding early withdrawals.
Hope this helps and have a wonderful day!