48. We continue the circumstances of Exercise 47. Instead of saving $100 per month—money on which you have already paid taxes, “after-tax” dollars—you have the alternative option offered in the tax code of participating in a tax-deferred retirement account (TDA), either through payroll deduction at work [e.g., as part of a 401(k) plan] or through an independent retirement account (traditional IRA). The money that goes into such a fund consists of “pre-tax” dollars: You do not pay tax on the money until you withdraw it (usually at retirement). Since you don’t pay income tax on the money as you put it in, you can actually put in more than $100 per month while reducing your take- home pay by only $100.

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