Overview
Deferred compensation—whether an executive non-qualified deferred compensation (NQDC) plan, golden handcuffs, or a business exit strategy—is a piece of concentrated wealth that needs context alongside the rest of the household's balance sheet. Here are some ideas of how to frame a client conversation around deferred compensation. These ideas are for educational purposes only and do not imply the use of specific financial planning strategies nor products.
Mapping the Asset Financial on the Asset-Map
Cataloging the Asset
The deferred compensation account is added under the member's branch (or entity if tied to a business structure) as an asset.
Tax Characteristics
Because non-qualified deferred compensation carries specific tax exposure upon distribution, it is tagged by its tax wrapper/status as retirement type or non-retirement type so the client visually understands it is not standard liquid capital.
Mapping the Cash Flow Financial
If the deferred compensation plan pays out as scheduled future income streams (e.g., $50,000/year for 10 years starting at retirement), the advisor inputs it as a future-value income source cash flow type assigned to the member.
Addressing Risk & Interdependency (Golden Handcuffs)
In the Target-Map (e.g., Retirement Target-Map), the deferred compensation payouts are toggled as an Available Cash Flow or Liquidating Asset in the What you have page. The advisor can visually demonstrate how much of the retirement goal is funded by guaranteed/scheduled deferred comp payouts by checking the box associated with the cash flow.
Ideas for Potential "What-If" Scenario Conversations
Scenario A (Standard Payout): The executive receives their deferred comp over a 5 or 10-year schedule starting at age 62, offsetting the need to draw down taxable brokerage or IRA accounts early.
Scenario B (Early Departure / Forfeiture): The advisor turns off or reduces the deferred compensation stream to show the client their funding gap if they exit the firm early or if corporate liquidity affects the payout.
Scenario C (Tax & Rate Comparison): The advisor adjusts return assumptions or tax drag on the Target-Map to show the net spendable impact of the deferred comp payouts compared to traditional qualified accounts.