Tax-deferred compounding refers to the tax-free growth of investments in a tax-deferred account.

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Tax-deferred compounding allows investments in a tax-deferred account to grow without being taxed, hence, the term "tax-deferred." This means that taxes on the investment gains are postponed until they are withdrawn from the account, which can result in larger balances over time due to the potential for compounding growth.

Tax-Deferred Compounding Refers to the Tax-Free Growth of Investments in a Tax-Deferred