Deferred Compensation Payout Analyzer

Decide whether to take your nonqualified deferred compensation as a lump sum or spread it across installment payments. Enter the vested balance, payout horizon, and your marginal tax rate. Optionally add the plan crediting rate, expected reinvestment return, and a discount rate to see how future values and present values compare after taxes.

Total vested account value eligible for payout.
Number of annual payments you are considering.
Combined federal, state, and payroll rate applied to each dollar withdrawn.
Optional. Leave blank to assume the plan credits 3.5% annually on unpaid balances.
Optional. Expected annual return if you invest the lump sum yourself; defaults to 5.5% if blank.
Optional. Present-value rate used to evaluate the installment stream; defaults to 4.0%.

For education only; confirm distribution elections and taxation with your plan administrator and tax advisor.

Examples

  • $650,000 balance, 10-year payout, 37% tax, defaults for plan credit plus 6% reinvest and 4% discount ⇒ Net lump sum today: $409,500.00 USD. Future value after 10 years reinvested at 6.00%: $733,352.13 USD. Installment after-tax payment: $49,238.84 USD/year (total after-tax cash $492,388.40 USD). Reinvested installment future value: $649,007.06 USD. Present value of installments at 4.00%: $399,371.10 USD. Future value advantage of lump sum: $84,345.08 USD (lump sum ahead).
  • $450,000 balance, 15-year payout, 32% tax, 2.5% plan credit, 5% reinvest, 3% discount ⇒ Net lump sum today: $306,000.00 USD. Future value after 15 years reinvested at 5.00%: $636,152.02 USD. Installment after-tax payment: $24,714.54 USD/year (total after-tax cash $370,718.03 USD). Reinvested installment future value: $533,304.18 USD. Present value of installments at 3.00%: $295,040.52 USD. Future value advantage of lump sum: $102,847.85 USD (lump sum ahead).

FAQ

How do I handle a plan that credits different rates each year?

Use the average annual rate offered over the payout window or rerun the analysis with high and low crediting scenarios to bracket possible outcomes.

Can I model quarterly or monthly installment schedules?

Yes. Convert the balance into an annual equivalent by multiplying the expected periodic payment count and divide by 12 or 4 before entering the payout length in years.

Which tax rate should I enter?

Combine your expected federal, state, and payroll marginal rates for the year the income will be recognized. The tool assumes that rate applies to both the lump sum and each installment.

What if I plan to roll the lump sum into a trust or use tax-deferral strategies?

Adjust the reinvestment return and discount rate to reflect any additional tax drag or benefits so the comparison captures the after-tax reality of your chosen structure.

Additional Information

  • Installments are assumed to pay annually at the plan crediting rate and are taxed uniformly at the marginal rate entered.
  • Optional reinvestment and discount rates let you align the analysis with your portfolio return expectations and risk tolerance.
  • A positive future value advantage means the lump sum grows larger than installments when reinvested at your stated rate.

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