Deferred Compensation


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 Most deferred-compensation plans allow the wage earner to defer tax now so that the funds can be withdrawn and taxed at some point in the future.

BREAKING DOWN '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.

  1. Pension Fund

    A fund established by an employer to facilitate and organize ...
  2. Employee Stock Ownership Plan - ...

    A qualified, defined contribution, employee benefit (ERISA) plan ...
  3. Tax Deferred

    Investment earnings such as interest, dividends or capital gains ...
  4. Other Post-Employment Benefits ...

    Post-employment benefits that an employee will begin to receive ...
  5. Deferred Income Tax

    A liability recorded on the balance sheet that results from income ...
  6. Deferred Profit Sharing Plan - ...

    An employer-sponsored Canadian profit sharing plan that is registered ...
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. Retirement

    How Much Can You Contribute to Your 401(k)?

    Given the fairly high compensation limits on these retirement plans, most workers can pitch in more than they currently do.
  9. Personal Finance

    Salary Secrets: What Is Considered a Big Raise?

    A 4% or 5% annual jump in pay may not sound huge, but in today’s environment, it actually means you’re faring better than most.
  10. Personal Finance

    How to Job Search While You're Still Employed

    The best time to look for a new job is when you already have one.
  1. Does my employer's matching contribution count towards the maximum I can contribute ...

    Contributions to 401(k) plans come from employee salary deferral and employer match dollars. According to the IRS, employees ... Read Full Answer >>
  2. How is marginal propensity to save calculated?

    Marginal propensity to save is used in Keynesian macroeconomics to quantify the relationship between changes in income and ... Read Full Answer >>
  3. Why should investors research the C-suite executives of a company?

    C-suite executives are essential for creating and enacting overall firm strategy and are therefore an important aspect of ... Read Full Answer >>
  4. 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 >>
  5. 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 >>
  6. 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 >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!