How to enter non-qualified deferred compensation

Deferred compensation plans are best entered as investment accounts with Account Type set to Non-Qual Deferred Comp. Here, you can enter the account's target asset allocation, balance, and the distribution plan for these funds. 

To enter the distribution plan, click on Distribution Settings, then under Account Type, select Non-Qual Deferred Comp.

Here you will choose the frequency (e.g., every 1 year, every 1 month, every 3 months) and the date range for the distributions (e.g., 1/2024 to 12/2029, inclusive of these dates). 

The application will then automatically model the payout of these funds (and their tax consequences) over this period of time. The modeled payouts will spread across the payout period, and amounts will be in proportion to the remaining period. 

For example, over the 5-year period shown above, we would see 1/5 of the account balance paid out in 2025, 1/4 of the remaining balance in 2026, 1/3 in 2027, 1/2 in 2028, and the rest in 2029. If there were no growth or loss in the account, this would result in $20,000 per year for a $100,000 account.

If, however, there were returns, the amounts would vary over time.

If the deferred compensation plan you are modeling has more complex distributions, you may have to enter a few "sleeves" of the plan as separate "accounts" in your Income Lab plan. For example, if the account pays out 50% in 2024 and the other 50% in 2025-2029, you'd want to enter the plan as two accounts:

• Sleeve 1: Lump sum 50% in 2024
• Sleeve 2: Payout of the other 50% over 2025-2029