Faint line in the Deferred Compensation Plan effortlessly

Aug 6th, 2022
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How to Faint line in the Deferred Compensation Plan

4.7 out of 5
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if youre a high earner and you have the option of contributing to a deferred comp plan through work then this episode is for you and I think youre going to find it extremely helpful because over the next few minutes what were going to do is were going to break down what a deferred comp plan is how it compares to other retirement savings options and then some key considerations you need to know so that you can use your deferred comp plan to supercharge your retirement this is another episode of ready for retirement Im your host James canal and Im here to teach you how to get the most out of life with your money and now on to the episode theres lots to break down today and Im excited for this episode because you dont typically see a ton of good information on how to make the most of your deferred comp plan so lets jump in but before we do want to quickly highlight the review of the week this comes from username thinking listener 5 star review and thinking listener says if you w

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A deferred compensation plan withholds a portion of an employees pay until a specified date, usually retirement. The lump sum owed to an employee in this type of plan is paid out on that date. Examples of deferred compensation plans include pensions, 401(k) retirement plans, and employee stock options.
First, understand the risks. As a non-qualified deferred compensation plan, your DCP account is, by rule, an unsecured liability of your employer. Meaning if your employer goes bankrupt, you could lose part, a majority, or all, of your balance in this account.
Unlike a 401(k), your deferred compensation account is not yours; it is the property of your employer and is subject to potential loss. If the company goes bankrupt or cannot pay its bills, you may lose the compensation you deferred.
Planning retirement distributions For example, the Internal Revenue Code (IRC) allows for 401(k) withdrawals to begin penalty-free after age 59but the IRC also requires that you start taking distributions at age 73. By contrast, there are no IRC age restrictions on distributions from a deferred compensation plan.
Because receiving the income you deferred isnt guaranteed, its critical to consider the financial health of your employer when deciding whether to participate in your NQDC plan.
Contribute a Set Percentage One easy way to increase your retirement savings is to contribute a percentage of your income to your Deferred Compensation Plan (DCP) account. Consider saving between 7% and 10% of your salary.
In any case, the downside is that deferred compensation cannot be accessed for years, normally until the employee retires. For most employees, saving for retirement via a companys 401(k) is most appropriate.
First, understand the risks. As a non-qualified deferred compensation plan, your DCP account is, by rule, an unsecured liability of your employer. Meaning if your employer goes bankrupt, you could lose part, a majority, or all, of your balance in this account.

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