Any earnings your tax-deferred contributions produce during the time they remain in your account are also tax deferred. This means the combined amount has the opportunity to compound at a faster rate, since everything is being reinvested and no money is being taken out to pay taxes.
 And no matter how many times you sell investments that have increased in value, you won't owe capital gains tax on any profit you may make. Instead, you can reinvest the entire amount, although there will be transaction fees for your trades. Of course, if you sell investments that have lost value, you can’t claim your capital losses either.
The tax you eventually pay depends on your income tax rate at the time of the withdrawal. For example, if your combined taxable income including the withdrawal puts you in the 28% federal tax bracket, the tax you owe will be figured at that rate. Although there’s no way of predicting what your income tax rate will be when you withdraw from your account, many people have less income in retirement than they did when they were working, and so pay tax at a lower rate.
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