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Advantages To Pre-Tax Deferral Of Income After Tax Reform

Employees who once routinely deferred compensation are now rethinking those habits after tax reform under the Tax Cuts and Jobs Act. One concern is whether it may be better to take income today because of uncertainty about tax increases in the future. This article shows how you should consider tax changes and investment returns when analyzing whether to participate in your company's nonqualified deferred compensation (NQDC) plan.

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Key Points in This Article
Employees who once routinely deferred compensation are now rethinking those habits as they consider updates to their financial plans after tax reform under the Tax Cuts and Jobs Act. One of the concerns is whether it might be better to take income today because of the uncertainty about tax increases in the future.
The analysis in this article compares deferred compensation to the after-tax investment of the same money.
When tax rates rise, NQDC can perform better over the long term than a comparable personal investment account.