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 Most deferred-compensation plans allow the wage earner to defer tax now so that the funds can be withdrawn and taxed at some point in the future.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 Income Tax

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

    Post-employment benefits that an employee will begin to receive ...
  6. Deferred Profit Sharing Plan - ...

    An employer-sponsored Canadian profit sharing plan that is registered ...
RELATED FAQS
  1. How does the always be closing (ABC) strategy benefit a salesperson's sales funnel?

    It is good practice in sales to always be closing, because it's common for a salesperson's sales funnel to be leaky. When ... Read Full Answer >>
  2. How reliable or accurate is marginal analysis?

    Marginal analysis is designed to show how economic reasoning allows actors to accomplish more by understanding limits on ... Read Full Answer >>
  3. What does a merger or acquisition mean for the target company's employees?

    Suppose one sporting goods manufacturer merges with or acquires another sporting goods manufacturer. Before the merger and ... Read Full Answer >>
  4. 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 >>
  5. 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 >>
  6. Why does executive compensation facilitate when a company buys back its stock?

    Stock buybacks facilitate executive compensations because a large part of executive compensation is usually stock-based. In ... 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. Personal Finance

    Are You In The Top One Percent Of The World?

    If you live in an industrialized country, cracking the top one percent of income earners isn't as difficult as you might think.
  9. Entrepreneurship

    Get the Best Freelance Rates for Your Work

    Smart strategies for estimating costs, researching fees, pricing projects and getting your rate for a range of clients.
  10. Retirement

    Equity Vs. Salary: What You Need To Know

    Equity payments are common at startup companies. Equity offers potential for a big payout but is also much riskier than a salary payment.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center