Deferred compensation plans allow employees to set aside part of their income to be paid later, often during retirement when they may be in a lower tax bracket. They are commonly used in Wisconsin by public sector workers. Though these plans are also available to private sector employees. A financial advisor can help you compare different types of plans, such as 457(b), and explain the rules that apply.
How a Deferred Compensation Program Works in Wisconsin
The Wisconsin Deferred Compensation Program (WDC) offers employees a strategic way to save for retirement by allowing them to set aside a portion of their salary aside to be paid out at a later date, typically upon retirement.
These programs are particularly beneficial for individuals looking to lower their taxable income during their working years. You can opt for before-tax contributions where you pay tax only when you withdraw the funds. This can result in significant tax savings as you may qualify for a lower tax rate, making it especially beneficial for those in higher tax brackets.