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Receiving your deferred compensation in installments over several years can reduce your tax bill, because the smaller installment payments will typically be taxed at a lower rate than a larger lump-sum payment will be.

With a nonqualified deferred compensation (NQDC) plan, your employees can defer some of their pay until a later date. This type of deferred compensation plan typically pays out income after an employee leaves their job, like in retirement, for instance.

457(b) Assets can be withdrawn without penalty at any age upon separation from service from the plan sponsor, or age 70½ if still working.

One way to value deferred compensation is to calculate its present value, which is the amount of money that you would need to invest today to receive the same amount of money in the future.

Calculate the present value of the pay plan. Calculate the present value using the following formula: Present Value = Compensation / ((1 + interest rate) ^ years) until compensation. So, for our purposes that means Present Value = 100,000 / (1.01 ^ 5) or $95,147.

While taxes need to be paid on the withdrawn funds, these plans give the benefit of tax deferral, meaning withdrawals are made during a period when participants are likely to be in a comparatively lower income tax bracket. Deferred compensation plans also reduce the current year's tax burden on employees.

Deferred income is also known as deferred revenue or unearned income. As the name suggests, it refers to income that you have received or not earned yet. Usually, this is because a customer or client has made an advance payment for services that have not yet been rendered or goods that have not yet been delivered.