Deferred Compensation

AAA

DEFINITION of 'Deferred Compensation'

An amount of earned income that is payable at a later date. Most deferred-compensation plans allow the wage earner to defer tax now so that the funds can be withdrawn and taxed at some point in the future.

INVESTOPEDIA EXPLAINS 'Deferred Compensation'

The most common form of deferred compensation is a retirement plan. Deferring income allows the earner to use the income later in life when they have a lower tax rate. Other examples include pension plans and stock-option plans.

RELATED TERMS
  1. Employee Stock Ownership Plan - ...

    A qualified, defined contribution, employee benefit (ERISA) plan ...
  2. Pension Fund

    A fund established by an employer to facilitate and organize ...
  3. Tax Deferred

    Investment earnings such as interest, dividends or capital gains ...
  4. Deferred Profit Sharing Plan - ...

    An employer-sponsored Canadian profit sharing plan that is registered ...
  5. Deferred Income Tax

    A liability recorded on the balance sheet that results from income ...
  6. Other Post-Employment Benefits ...

    Post-employment benefits that an employee will begin to receive ...
RELATED FAQS
  1. What is the difference between a principle agent problem and moral hazard?

    Principal-agent problems and moral hazards are related in that one gives rise to the other. Principal-agent problems occur ... Read Full Answer >>
  2. How does agency theory propose to deal with the agency problem?

    Agency theory highlights potential problems that may occur when agents and principals have different interests. Principals ... Read Full Answer >>
  3. What are some ways employers can reduce employee turn over?

    Employers can reduce employee turnover through the use of certain hiring practices, management methods, compensation, benefits ... Read Full Answer >>
  4. How does Jeff Weiner make money from LinkedIn?

    LinkedIn CEO Jeff Weiner creates revenue for his company from user subscription fees, advertising and marketing operations, ... Read Full Answer >>
  5. What impact does industrialization have on wages?

    Industrialization is the transformation of a society from an agrarian economy to an industrial one. Industrialization has ... Read Full Answer >>
  6. What moral hazards are present with salaried employees?

    A moral hazard occurs when a party acts differently knowing that he or she is protected from any kind of risk. This is a ... Read Full Answer >>
Related Articles
  1. Retirement

    5 Tax(ing) Retirement Mistakes

    Don't let these simple errors take the luster off your golden years.
  2. Retirement

    Payroll Deductions Pay Off

    Find out how you can bypass or defer taxes on thousands of dollars each year.
  3. Retirement

    Tax Tips For The Individual Investor

    We give you seven guidelines to help you keep more of your money in your pocket.
  4. Investing Basics

    Get The Most Out Of Employee Stock Options

    These plans can be lucrative for employees - if they know how to avoid unnecessary taxes.
  5. Taxes

    Retirement Plan Tax Form 5329: When To File

    Read this if you've taken early distributions or owe excess-contribution or excess-accumulation penalties.
  6. Taxes

    Retirement Plan Tax Form 8606: When To File

    If you have a Roth IRA, you are responsible for keeping track of your pretax versus after-tax assets.
  7. Taxes

    Tax Deductions You May Be Missing

    Knowing the tax deductions you're entitled to can make or break your bank account.
  8. Investing

    What are Preference Shares?

    Preference shares, also referred to as preferred shares, are equity shares that give the shareholders certain rights ahead of common shareholders. For instance, when the corporation declares ...
  9. Retirement

    Pages From The Bad CEO Playbook

    Excess compensation, golden parachutes, tunneling and IPO spinning make these bad executives even worse.
  10. Retirement

    5 Lesser-Known Retirement And Benefit Plans

    These plans aren't widely used, but they fill a specific niche for employees in certain situations.

You May Also Like

Hot Definitions
  1. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  2. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  3. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  4. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  5. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  6. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
Trading Center