By Tucker Swiastyn | October 22, 2019
Why Deferred Compensation Plans?
Sheltering your client’s income can prove a problematic yet beneficial task. Many employers offer creative, cutting-edge benefit programs to attract potential employees. A Trusted Advisor can help direct you to the best plan for your client’s financial future.
Deferred compensation plans include pensions, employee stock options, and retirement plans. The ability for employees to delay substantial amounts of income within their plan’s limits, including potential contributions from their employer, is an attractive ingredient in taking up a new job or staying with your current employer.
In an environment where employers are competing for your top talent, deferred compensation plans have the potential to be a powerful recruiting tool.
What are Deferred Compensation Plans?
The two types of deferred compensation plans include qualified and non-qualified plans.
Qualified plans include the typical 401(k). These plans are held within trust accounts, making them more secure. Employers are required to make these plans available to any employee. The offerings available will benefit all equality.
Non-qualified plans, unlike qualified, have no limit to the contribution your client chooses to place in it. These plans prove attractive to specific employees, such as higher-ups and executives. However, since your client’s money will be part of the business’ funds, deferring large amounts of money to these plans can put your client’s money at risk, especially in the case of bankruptcy.
Our Trusted Advisor’s guidance in trust services will help you navigate what plans work best for your clients.
What does this mean for my future?
Employees primarily view deferred compensation plans as an essential element of their overall retirement plan. Deferred compensation plans, qualified or not, have benefits, including tax savings, capital gains, and pre-retirement distributions.
The key to planning lies in your client’s ability to choose what plan will preserve the tax deferral effect while drawing on the non-qualified plan during early retirement. Deferred compensation plans provide a vehicle for saving for retirement when they can’t save enough through their 401(k) or other qualified plans. You can help guide your client through this step with our Trusted Advisors trusted services.
Most employers will make contributions to your client’s plans, both as a means of motivation for providing contributions that are limited by federal law. As with qualified plans, your client’s employer investment decision support adds yet another layer of value and guidance for your client’s valued services in the workplace. Reach out to your clients and revisit their specific plan to make sure it’s still meeting their financial needs.
What next?
There are countless factors in determining what plan works best for your client’s financial situation. These factors include their salary, age, retirement plan, etc. However, do not ignore the employers offered benefits.
Taking steps to help your clients plan for future financial security plays a significant role in what jobs they choose to devote their time and labor. It also determines how secure they feel in your trusted guidance through our Trusted Advisors trusted services.
Contact one of our Trusted Advisors for trusted service in planning your client’s financial future and retirement.