Although defined contribution (DC) plans are the most popular way for employees to store up money for retirement, savings in these plans is severely limited for high-earning executives, notes Marc McDonough, vice president of Schwab Stock Plan Services in Denver. Due to statutory limits on defined contribution plan deferrals, “an executive making $250,000 can put only about 7% of compensation in a DC plan,” he says.

Corporations use equity compensation plans—granting company stock to employees or giving them the option to purchase company stock—to attract and retain the best talent. Whether it is to fill in the retirement savings gap or increase overall financial well-being, these plans are a big driver for attracting executives, who see them as an opportunity to save more than they can in a defined contribution plan, McDonough says. Read More