You have probably heard the term “tax-deferred” in relation to your retirement plan contributions. This simply means the contributions to your retirement plan are not taxed at the time you contribute. You put off paying taxes on that money until you withdraw it from your retirement account, usually when you no longer work or earn an income.


The money you contribute to your retirement account is automatically deducted from your paycheck — before taxes are taken out. The money goes directly into your retirement account, making your net paycheck less than it would have been if you didn’t contribute to your retirement account. Since your taxes get applied to this reduced amount, you pay less in income taxes with each paycheck. And, since you pay less in income taxes, you may actually take home more of your paycheck than if you had paid income taxes on the full amount of your net pay.

Tax-deferred vs. taxable contributions

With a tax-deferred account:

With a taxable account:

• Money is deducted before taxes are imposed

• If your account experiences growth, the growth is also tax-deferred

• Ultimately, when the money is withdrawn, it is all taxed as ordinary income

• Original investment is from money that has already been taxed

• Any growth on the investment is taxed in the same year as the gain if it is realized

• Unrealized gains are not taxed currently but are taxed when a sale occurs and they become realized

• Dividends and capital gains are taxed at 15 percent or less for some wage earners, but the tax will apply even if you opt to reinvest dividends and capital gains

• Capital losses will reduce capital gains and may be used to offset up to $3,000 of ordinary income every year. Losses can be carried forward into future tax years until exhausted.

If you’re not already participating in your retirement plan, consider enrolling today so that you can take full advantage of your retirement benefit.

OneAmerica Financial is the marketing name for the companies of OneAmerica Financial. Non-registered group annuity contracts are issued by American United Life Insurance Company® (AUL), a OneAmerica company, One American Square, Indianapolis, IN 46282, 1-800-249-6269. Group annuity contracts are issued by AUL and registered variable annuity products are distributed by OneAmerica Securities, Inc., a Registered Investment Advisor, Member FINRASIPC, One American Square, Indianapolis, IN 46282, 1-877-285-3863. McCready and Keene, Inc. and OneAmerica Retirement Services LLC provide administrative and recordkeeping services and are not brokers/dealers or an investment advisors. Neither AUL, OneAmerica Securities, McCready and Keene, OneAmerica Retirement Services nor their representatives provide tax, legal or investment advice.

Tax qualified retirement plans from American United Life Insurance Company® (AUL) are funded by an AUL group annuity contract. While a participant in an annuity contract may benefit from additional investment and annuity related benefits under the annuity contract, any tax deferral is provided by the plan and not the annuity contract.

Any investment involves risk and there is no assurance that the investment objective of any investment option will be achieved. Before investing, understand that variable annuities are subject to market risk, including possible loss of principal.