To illustrate the increased earnings capacity of tax-deferred interest, compare it to fully taxable earnings. $26,000 at 6.0% will earn $1,560 of interest in a year. A 28% tax bracket means that approximately $436.80 of those earnings will be lost in taxes, leaving only $1,123.20 to compound the next year. If these same earnings were tax deferred, the full $1,560 would be available to earn even more interest. The longer you can postpone taxes, the greater the gain.