Most executives who get access to a nonqualified deferred compensation plan treat it like a bonus perk. They sign the enrollment form, pick a deferral percentage, and move on. That is a mistake that can cost tens of thousands of dollars in unnecessary taxes — or, in the worst case, everything.

An NQDC plan is one of the only legal mechanisms that lets a high-earning executive defer an essentially unlimited amount of compensation, compound it tax-deferred, and potentially distribute it in a lower tax bracket. The upside is real, and so is the risk hiding in the fine print. READ MORE