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 Most deferred-compensation plans allow the wage earner to defer tax now so that the funds can be withdrawn and taxed at some point in the future.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

    An employer-sponsored Canadian profit sharing plan that is registered ...
  6. Other Post-Employment Benefits ...

    Post-employment benefits that an employee will begin to receive ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
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

    Is A Private Jet Always Better Than First Class?

    Here's a close look at the differences between taking first class on a commercial flight and chartering a private jet.
  9. Personal Finance

    Private Jet? There’s An App For That

    Here's how to book a trip on a private jet with a few clicks of your smartphone.
  10. Retirement

    When Do I Stop Paying Social Security Tax?

    Almost never, unless you belong to one of these special groups.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
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!