Deferred Compensation Plan: Best Way To Reduce Taxes

Deferred Compensation Plans do not have limits specified by the government.

The downside is that ERISA protections are no longer available.

You can choose to enroll in both the 401(k) and Deferred Compensation Plan.

Roth IRA and Deferred Compensation Plan both grow tax free.

Difference Between Roth IRA And Deferred Compensation Plan

However, with Roth IRA, you pay taxes now on your contribution. With Deferred Compensation Plan you pay taxes on both the growth and contribution when you receive the money.

The Deferred Compensation Plan is offered to a select group of management and highly compensated employees.

Every year you can defer a certain percentage of your salary. Your deferrals are taken on a before-tax basis, and will reduce your federal taxable income.

Deferred Compensation Plan Investments The salary or bonus you defer can be invested. Often, the same plan options which are in your 401(k) plan are available to invest your Deferred Compensation Plan contributions.

You elect how your deferred salary or bonus will be allocated among any combination of investment options.

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