Deferred Compensation is the practice of placing some earnings aside in a particular account or retirement plan or buying individual annuities to avoid paying federal income taxes on that money. The way it works is that you choose to pay a certain amount of your current income tax-free until you decide you need it. However, there are some restrictions on this. They can be placed into certain annuities for management and tax purposes.
Deferred Compensation is an alternative way to save for retirement. It’s often called “Deferral,” When you defer your pay, you can invest it and make it grow. You decide how much to contribute from each paycheck, and the amount is withheld from your pay until it reaches a set limit or you choose to make changes. It can start immediately with any employer – private, government or nonprofit – and could be available at no cost to you.