THE BENEFITS OF DEFERRED COMPENSATION GO BEYOND TAX SAVINGS
While saving taxes is usually the first key benefit that comes to mind when an executive hears “Deferred Compensation,” these programs are additive to a sound financial plan in many other ways. In reviewing the upcoming election window that Walmart Associates will soon face within the Deferred Compensation Matching Plan (DCMP), we see three potential benefits for consideration outside of simply shifting the timing of income recognition:
- Potential Matching Contributions
- Tax-Deferred Growth
- Confidence and Peace in Financial Planning
Matching Contributions from an employer are not always part of deferred compensation plan design. Walmart’s DCMP does, however, provide matching opportunity to its executives – specifically, Walmart matches your contribution dollar-for-dollar up to 6% of eligible compensation that exceeds the annual IRS compensation limit for qualified retirement plans ($350,000 in 2025). Your match funds vest on a three-year cliff schedule, or 100% upon completion of your third year of participation in the plan.
The power of compounding is a concept that most investors are familiar with, but tax drag tends to fly under the radar with more subtlety. When income is recognized and therefore taxed, the outflow of tax is a reduction to the base that is then available to compound and grow. When investments grow Tax-Deferred, on the other hand, the nature of compounding can be accelerated. While there can be merit in having a balance between both tax-deferred and taxable investment sources, the DCMP is one of the most powerful resources through which to harness tax-deferred growth.
But what may be most powerful is the Courage to Stay the Course. One of the most attractive results from diligently saving through the Walmart DCMP is capturing an annual income stream for 5, 10 or even 15 years. When thoughtfully designed, these income streams can often more than cover living expenses, allowing participants to let other investment accounts in their portfolio grow untouched. In this sense, the DCMP can provide some peace and courage in knowing that even after a participant retires, an income stream will be available to support their family.
The DCMP is an important piece of a Walmart executive’s portfolio. While we believe the opportunity is exceptional, we understand that it can also feel paralyzing. Our team works hand-in-hand with executives to design and implement executive benefit strategies for tax savings, early retirement, and greater financial flexibility. Contact us today to begin a relationship with one of our Wealth Advisors that can support you through this year’s election window and beyond.
Disclaimer:
Greenwood Gearhart, Inc. (“GGI”) is an SEC-registered investment adviser located in Fayetteville, Arkansas. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that GGI has attained a certain level of skill, training, or ability.
This material is provided for informational purposes only, should not be viewed as an exhaustive discussion of the topics presented, and should not be construed as individualized advice for any reader’s personal circumstances. For guidance on how these matters may impact your financial plan or investment portfolio, please contact a GGI representative. While the information presented is believed to be factual and up to date, GGI does not guarantee its accuracy and, due to various factors, including but not limited to changes to the nature or scope of executive benefits plans offered, this information is subject to change. All expressions of opinion reflect the judgment of the authors as of the date of publication.
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