I have access to a non qualified deferred compensation plan at work. I can defer up to 50% of my salary.
Company is stable and not likely to be acquired. I am aware of the risks of a non-qualified plan.
My salary is just over the maximum compensation threshold for employer matching in the qualified 401(k) plan. So, if I do NOT defer, I get the maximum employer match. If I do defer to the full extent, I forego about $8K of free deferred money.
I also have an after tax 401(k) plan which I can convert immediately to a Roth (mega backdoor). If I do not defer, I can get a full $20K into this plan. If I do defer to the full extent, I can only get $14K into the plan.
So, why defer? Even if I defer to the full extent, I will still be in the top federal/state brackets for California. So, the amount I would potentially defer would otherwise be taxed at an effective rate of 49.3%.
However, if I defer that amount every year for the next 6 years and then take FIRE payments over 10 years, my effective rate drops to 15.4%. I avoid $56K in tax on each year's deferred contribution.
Is this the no-brainer that I think it is?