Deferred Compensation Plan Vs 401k In Middlesex
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State:
Multi-State
County:
Middlesex
Control #:
US-00418BG
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Deferred compensation is an arrangement in which a portion of an employee's income is paid out at a date after which the income is actually earned. A Deferred Compensation Agreement is a contractual agreement in which an employee (or independent contractor) agrees to be paid in a future year for services rendered. Deferred compensation payments generally commence upon termination of employment (e.g., retirement) or death or disability before retirement. These agreements are often geared toward anticipated retirement in order to provide cash payments to the retiree and to defer taxation to a year when the recipient is in a lower bracket. Although the employer's contractual obligation to pay the deferred compensation is typically unsecured, the obligation still constitutes a contractual promise.
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Deferred compensation plans tend to offer better investment options than most 401(k) plans, but are at a disadvantage regarding liquidity. It's important to review how the new employer retirement plan options fit into your overall savings plan, including any employer matches.Does my participation in a deferred compensation plan affect my benefits from Middlesex County Retirement System? Plan Comparison Chart. Questions. 457(b) Deferred Compensation Plan. 457(b) plans and 401(k) plans are very similar. Both offer you the opportunity to make tax-deferred contributions to a retirement account. In this article, we'll be covering how deferred compensation plans work, the benefits for your financial plan, and whether they're better than a 401(k). I'm a reasonably well-informed investor and it just seems to me that the Deferred Compensation Plan is an unimpressive investment vehicle.