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For Love Or Money: Look At Nonqualified Deferred Compensation With Eyes Wide Open

You will know if your employer truly loves you when you are offered nonqualified deferred compensation (NQDC). You can defer receiving this income until a time you elect up front, such as retirement, or for a specific number of years into the future to achieve other financial goals. However, key decisions fall on you, the recipient, that must be made on time if you wish to avoid a Trojan horse full of adverse tax surprises.



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Key Points in This Article
To make the most of NQDC, you must understand your plan's structure and how it works.
NQDC lets you defer taxable wages or bonuses until some future year when (hopefully) you are in a lower tax bracket, thereby paying taxes at a lower rate when you get the compensation, and meanwhile allowing the deferred amount and any increase in its value to grow tax-free.
However, key decisions fall upon you, and there are risks that could cause the loss of your deferred compensation.