Magazine

Table: Kiss That Nest Egg Goodbye?


Deferred compensation plans are usually safe. Still, some situations could put your money at risk.

YOUR COMPANY DECLARES BANKRUPTCY

In most cases, the plan assets become company assets, and participants become unsecured creditors. That means they get whatever is left over after secured creditors, such as banks, are paid.

MERGER, TAKEOVER, OR NEW MANAGEMENT

Some plans hold the money in a company account, allowing new managers to use it as they wish.

YOU WANT OUT

Most plans impose stiff penalties for early withdrawal, usually defined as anything other than termination of employment, death, disability, hardship, or pre-retirement distribution.

YOU QUIT YOUR JOB

Some plans, designed as retention devices, have a vesting period, typically less than five years. Leave before the end of the period and you'll lose all or most of the money.


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