From a tax perspective, in the U.S., an investment can be categorized into tax-now, tax-deferred and tax-free. Through tax-deferred and tax-exempt investments, you can start saving for retirement at an early age and minimize your tax bills.

Tax-now means that you are subject to paying the taxes when you file your annual tax files. Your salaries/wages, gains from stocks, property taxes all fall into this category.

Tax-deferred means that you do not have to pay the taxes immediately in the tax year when you make this money. Instead, you will need to pay these taxes in the future. Pre-tax 401(k), 403(b), traditional IRA are some typical examples of tax-deferred investments.

For instance, you make $1,000 from a taxable job, and you put 8% of the income into your pre-tax 401(k), the taxes on your $80 ($1,000 x 8%) income will be tax-deferred, meaning that you will pay taxes on $920 (instead of $1,000) in the current tax year, and pay the taxes of $80 in the future.

Last but not least, tax-free means that for a certain amount/portion of your incomes, usually due to the type of your investment, you will NEVER need to pay these taxes. 7702 Plan, 529 Plan and Roth-IRA are typical vehicles for tax-free investments.

Still take the $1,000 income scenario for instance: if you elect to contribute to a tax-free plan with 10% of your income, then your $100 ($1,000 x 10%) is exempt from taxes and you only need to pay taxes on $900 (instead of $1,000).

As a general tip, it is safe to say that, it is highly recommended that you work with your financial advisor and establish a balanced combination of tax-now, tax-deferred and tax-free investments to maximize your financial gains, prepare for retirement while also maintain flexibility.