Nonqualified deferred compensation
Defer, or take it now?
An educational illustration of one hypothetical election: defer pre-tax compensation inside a nonqualified plan, or take it as pay, pay tax, and invest the remainder in a taxable account. The figures update as the assumptions change. No signup is required.
After-tax difference versus investing outside the plan
What this means
Deferred path
After-tax value if distributed at the year entered
Taxable path
Taxable account at that same year
Year-by-year, after tax
The line chart did not load. The year-by-year table uses the same figures.
Each point is the illustrated after-tax value if the balance were taxed that year at the distribution rate entered. The first point applies those tax rates today, before growth. Same formula as the headline.
Break-even distribution tax rate
Employer counterparty risk
Tax if taken now
Illustrated tax on the taxable path, before anything is invested.
Tax at distribution
Illustrated tax on the plan balance when it is paid.
Invested outside the plan
What remains to invest after the tax if taken now.
Assumptions used
| Year | Plan balance, pre-tax | Deferred if taxed | Taxable account |
|---|
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