Tony Novak profile picture
  "AskTony" column archive        


Most Popular

AskTony Archive

This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

Content is the opinion of the author and does not represent the position of any other person or entity. Information is from sources believed to be reliable but cannot be guaranteed.

The author is paid for product endorsements and has an ownership or other financial interest in the businesses related to the topics covered.

New questions

Submit consumer finance questions at and health insurance questions at

Sponsored by: Insurance Exchange - your source of valuable information on state and federal health reform benefits.

Core Health Insurance - America's favorite mini-med insurance  with affordable premiums, freedom to choose providers, optional PPO discounts and guaranteed eligibility regardless of medical conditions.

Please support the Web sites that make publication of AskTony services possible.

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posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date.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

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.


More resources: