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Squirrel away extra retirement cash using a ‘rabbi trust’

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in Small Business Tax,Small Business Tax Deduction Strategies

Can't get enough of a good thing? To hoard even more money for retirement than the tax law allows for qualified plans (such as 401(k)s or pension plans), arrange things so your company makes contributions on your behalf to a nonqualified deferred compensation plan.
 

In such cases, you face one potential pitfall: If you're guaranteed to receive payment, those dollars are taxable right away, even if you won't get your hands on the cash for years to come.
 

Strategy: Put your faith in a "rabbi trust." Using a rabbi trust, you don't need to pay any current tax because the money is technically available to other creditors. Still, the cash is socked away in a separate account, so it won't be used for general spending.
 

For decades, the rabbi trust has been an airtight way to maneuver around the tax requirements for deferred comp plans. But a tax law enacted last year throws a monkey wrench into that strategy....(register to read more)

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