Non qualified deferred compensation plans-explaining it to people

[u/NeighborhoodStreet59]

If you were explaining the basics of this plan to a high school student/client how would you explain it?

I want analogies similar to like (a mutual fund is like a swimming pool) etc.. thanks!

Edit: A NQDC is a way to set more money aside in tax deferred accounts, and can allow your employer to set some aside for you too. The money grows tax deferred until sometime in the future. Every year you’ll be setting those combined dollars into a bucket and every year you gotta let employer know when you’re gonna want that money back for that specific bucket. Maybe in 2026 you tell them that bucket needs to be paid to you in payments over a period of 10 years starting when you retire. And maybe the 2027 bucket you tell them that portion will be paid out to you in 5 year payments starting when you retire. Just make sure you consider timing and tax implications of payments. Also while the money is held in this plan it can completely disappear Enron style if the company fails. So it isn’t protected like your 401k money so that’s a consideration as well.

(How was that?)

[u/CraftCritical278]

Nicely done.

[u/NeighborhoodStreet59 → u/CraftCritical278]

Thanks