The Deferred Compensation Plan

A Deferred Compensation Plan is an agreement where employees set aside a portion of their earnings now to be paid out later, often upon retirement or after a specific period. This allows employees to potentially reduce current taxes, as the income is deferred until a future date when they might be in a lower tax bracket. The company generally maintains the funds in a separate account, but there’s some risk if the employer faces financial difficulties. It’s a way for employees to save for future needs while managing tax implications strategically.