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Aug 6th, 2022
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How to Finish phrase in the Deferred Compensation Plan

4.7 out of 5
55 votes

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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Retirement plans and employee pensions are examples of deferred compensation. Employers usually withhold a fraction of employees compensation every month, accumulate it over time, and pay the lump sum amount on a date previously agreed upon in the employment contract.
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.
A deferred comp plan is most beneficial when you can reduce both your present and future tax rates by deferring your income. Unfortunately, its challenging to project future tax rates. This takes analysis, projections, and assumptions.
You can take the distribution in a lump sum or regular installments, paying tax when you receive the income. You can also arrange to withdraw some of it when you anticipate a need, such as paying for your kids college tuition. While the IRS has few restrictions, your employer will probably have their own rules.
A deferred comp plan is most beneficial when you can reduce both your present and future tax rates by deferring your income. Unfortunately, its challenging to project future tax rates. This takes analysis, projections, and assumptions.
Your Contributions 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.
Retirement plans and employee pensions are examples of deferred compensation. Employers usually withhold a fraction of employees compensation every month, accumulate it over time, and pay the lump sum amount on a date previously agreed upon in the employment contract.
A 401k plan has certain limitations on the amount that an individual can contribute each year. A deferred compensation plan, on the other hand, has no maximum contribution limit in any given year.

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