Deferred Compensation: A Plan for Unlimited Retirement Savings

Sep 13

Maxing out a 401(k) plan is the foundation of a retirement savings plan. But some highly compensated executives may have the option to participate in an additional deferred compensation plan that can offer the opportunity to save well above the limits on a 401(k) plan. The benefits include tax deductions in contribution years and tax-deferred growth like a 401(k) – but there’s no maximum for contributions.

In most instances, the taxes on the deferred compensation are not due until the funds are received well into the future. Of course, there are some tradeoffs and risks to be aware of, whether you are just thinking about participating or are approaching retirement and will soon begin receiving payouts from an existing plan. We dive into the details to help you understand these so-called “golden handcuff” arrangements.

Deciding to Participate in a Non-Qualified Deferred Compensation Plan (NQDC)

Because these plans do not have to comply with... ...