No. of Recommendations: 3
Deferred compensation is only worthwhile if you believe that your future marginal tax rate is going to be lower than your current tax rate. If the rates are the same, you will pay the same amount in taxes. Set up an excel spreadsheet & see for yourself. I could write out the mathematical formula for you, but I don't know how to do it in html.

If you are saving as much as it seems like, your marginal tax rate will not go down in retirement. I know mine isn't going to decrease.

As far as I can see, taxes are as low as they are likely to be for a generation or longer. I would take the money now, pay the taxes and not have to worry about the company's fortunes.

As an added benefit, you can invest the after-tax money and pay capital gains on any increase, instead of income tax.

Or, if you want, you can buy real estate and through 1031 exchanges avoid paying any future taxes at all, right up until death. This is the only real tax "loophole" left to the upper middle class, and you have to die to take full advantage...

The only drawback is that your account will seem smaller because it will be after-tax money instead of before-tax money. I prefer this myself, because it keeps me saving and investing more. If my current marginal tax rate is 40% (state and federal) $600k after tax is the same as $1M before tax, but I don't spend as much. And, when the relatives come a-knocking at the financial door DW doesn't think we are so well-off.


And, there is the huge benefit of being the master of your own investment destiny instead of being at the mercy of someone else.
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.