The Motley Fool Discussion Boards
Investing/Strategies / Retirement Investing
|Subject: Re: "Highly Compensated" - now what?||Date: 2/6/2002 7:55 PM|
|Author: LooseChange||Number: 33683 of 76237|
RK is correct. I fell into the "highly compensated" category and was offered the deferred compensation deal at my company. You are essentially a creditor to your company. Any compensation that you defer is not "held in trust" as 401k money is. Basically, you have to know the financial stability of your company going forward because there is a legal possibility that your money may not be protected if your company files bankruptcy.
Even if you do not wish to contribute to a deferred comp. plan you can still use it as a safety net for catching any excess contributions to your 401k. Any excess contribution that would normally be returned to you would just be rolled into the deferred comp plan. This would prevent the distribution of the excess 401k funds from counting as income during the tax year and screwing up your tax returns unexpectedly (I'm assuming your tax year and your 401k's plan year are on the same calendar).
Note some 401k plans prevent excess contributions by limiting your contribution % when you cross over a certain salary amount. If this is the case, then the safety net approach would not work.
|Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us|