The Need for Executives to Have Retirement Income Has Never Been More Certain
American Benefit Corporation's James Herlihy has released an article highlighting the value of non-qualified deferred compensation and the need for executives to accumulate retirement income in uncertain economic times.
With all of the change discussed in Washington, there is still one constant. Executives still need money to retire.
Taxes are going up, taxes are going down, the stock market is going up, the stock market is going down, everything is on the table in Washington. Sound familiar? The one thing that remains constant is highly paid executives are going to need money to retire and the 401(k) plan isn't the solution and neither are stock options. A previous study from American Benefit Corporation noted there are two types of financial problems an executive can have at retirement: too much tax to pay or too little income. Paying taxes is always preferable to too little income.
Our belief is that the most efficient method for executives to accumulate capital for retirement is still the non-qualified deferred compensation plan. It doesn't matter if taxes are going up or going down, retirement will always require money. The sooner one starts the easier it becomes. An executive in a 40% tax bracket who defers $100,000 has a decrease in take-home pay of $60,000. How do you achieve that on your own? You don't!
You don't have to be financially savvy to accumulate money, although it may help, you simply must have discipline. The systematic saving of money on a regular basis combined with a reasonable rate of return is all that is required. When you combine this simple concept with the tax deferral aspect of a non-qualified deferred compensation plan the path to wealth is more easily achieved.
With all of the recent discussion and action in Washington there has been no discussion of amending IRC Section 409A, which regulates non-qualified deferred compensation. It is still a very attractive executive benefit.
At American Benefit Corporation, we design, fund and manage executive non-qualified benefit plans for highly compensated corporate executives who wish to reduce current income taxes and form personal capital on a tax efficient basis. Established more than 30 years ago, we serve the unique needs of executives in numerous corporations with their personal capital formation objectives.
This material is intended for informational purposes only and is not intended to replace the advice of a qualified tax advisor. Investments in securities involve risks, including the possible loss of principal. When redeemed, shares may be worth more or less than their original value.