Deffered compensation plan?
originally posted: 11/22/2006 reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email asktony@tonynovak.com.
Q: I am trying to decide between setting up a deferred compensation plan or a qualified retirement plan. What are the pros and cons?
A: Both will be effective in deferring taxes on the amount contributed. A qualified retirement plan is considered "safer" because the money is actually owned by a trust rather than the employer. Qualified retirement plans include IRA, 401(k), SIMPLE, SEP and Keogh plans. These are also better provisions for hardship withdrawals that are generally not allowed in deferred compensation plans. Deferred compensation plans have fewer overall restrictions on operation and no restrictions on age of withdrawal or amounts that can be deferred. Most of the most efficient deferred compensation plans incorporate the tax benefits of cash value life insurance but this decision hinges on whether you have a need for life insurance. Both are easy to set up and administer. Freedom Benefits offers fixed fee service with either plan that includes the planning design and set-up for $150. An advantage of this approach is that you save on the significant commissions and ongoing fees that are otherwise built into most common retirement and deferred compensation plans.
Summary
More resources:
www.freedombenenfits.org