October 2013 DC Update
Adding It Up: The Paycheck Calculator
There are several tax advantages that come with participating in the deferred compensation plan. Perhaps the most immediate benefit is that any pre-tax money you defer from your paycheck will lower your taxable income. In other words, the more pre-tax money you save each paycheck, the less you pay Uncle Sam. The end result is that your take-home pay will not be reduced by the entire amount you contribute to the deferred compensation plan. This is an important fact to keep in mind when choosing a contribution amount.
In today’s "Adding It Up" feature, we’ll explore the Paycheck Calculator portion of our RetiremenTrack tool to illustrate how your contributions affect your take-home pay and any future retirement savings balance.
To use the Paycheck Calculator, visit www.modeferredcomp.org and click on the RetiremenTrack button in the right sidebar of the site, then choose “Paycheck Calculator”. (Note: RetiremenTrack is also available within Account Access on the Calculators page under the Planning and Tools tab. Accessing the calculator within your account will prepopulate your personal account information in a number of the fields.) For our example, we’ll assume an age of 45 years*, an annual salary of $35,000*, a semi-monthly pay frequency, a 1% annual salary increase, 2 withholding allowances, a 6% state tax rate, a status of “Married”, and “Yes” for both the FICA tax and defined benefit retirement plan questions. Next, we’ll assume a deferred compensation plan account balance of $16,000**, an expected rate of return of 6%, and 15 years until retirement distributions. On the following page, we’ll assume a per-paycheck contribution of $65** and leave the remaining fields at zero. Finally, on the “Pension Benefits” page, we’ll choose “MOSERS MSEP 2000/MPERS Year 2000 Plans” for an employee hired after June 30, 2000.
What you’ll see in the “Current Pre-Tax Savings” column on the “Results” page is a breakdown of how your pre-tax contributions affect take-home pay (“Net Pay Amount”) and how much you can expect to save by retirement (“Expected Plan Balance at Retirement”) based on the previous assumptions. Additionally, you can compare those figures to an alternate savings scenario (column 3) that, in this example, assumes no pre-tax contribution. Notice how the “Net Pay Amount” is only $52 more in this scenario, despite that $65 contribution in the “Current Pre-Tax Savings” column. That’s because you save about $13 on taxes each paycheck by contributing to the plan. It’s also important to note the “Expected Plan Balance at Retirement” in the alternate scenario. In this example, contributing $65 to the plan each paycheck added more than $36,000 to your expected balance at retirement ($74,655 vs. $38,344), but only minimized your take-home pay by $52 each pay period. Adjusting the sliders in the “Alternate Scenarios” box will illustrate how changes to your contribution amount and expected rate of return will impact your bottom line, both in the short term and at retirement.
If you’re thinking about enrolling in the deferred compensation plan for the first time, or simply considering an adjustment to your contributions, the custom Paycheck Calculator is the perfect place to start.
*Active state employee averages according to MOSERS’ 2012 Member Profile Summary
** State of Missouri Deferred Compensation Plan averages as of June 30, 2013Exploring Missouri Target Date Funds
Missouri Target Date Funds are the default option in our core investment lineup. In fact, as of September 2013, over 35% of the Plan’s assets were held in one of our 13 Target Date Funds. Introduced to the plan in 2009, these fund options are designed to be a comprehensive investment solution that target a specific year of retirement. You simply choose the one fund closest to your retirement year and an experienced portfolio team will guide your investments to and through retirement by investing more aggressively in the early years and more conservatively as you reach your “target” retirement date. Because they are managed by investment professionals and adjust automatically, these funds are designed to be low maintenance. However, we still encourage you to understand how they work and why they are the right fit for your personal situation. Here are a few key points to remember:
- It’s not necessary to invest in multiple Target Date Funds. A single Missouri Target Date Fund is a comprehensive fund option based on your anticipated retirement date. Mixing multiple Target Date Funds could have a negative impact on your retirement strategy.
- You are not required to choose the Missouri Target Date Fund closest to your retirement year. You can choose the fund that matches your risk tolerance. Generally speaking, the higher the Target Date Fund number, the more aggressive (and volatile) that fund is.
- Target Date Funds do NOT eliminate risk. Target Date Funds are diversified to minimize market risk, but just like any other investment in the market there’s no guarantee your assets will grow or be protected from a market downturn.
- A Target Date Fund is not the same as a single stock or bond fund. Therefore, it’s inaccurate to compare the investment performance of a Missouri Target Date Fund to the performance of one single stock or bond fund. Target Date Funds are made up of multiple components (including stocks, bonds and other diversifiers) working together to provide a complete portfolio solution. A single stock or bond fund possesses different objectives and risk profiles and cannot provide a complete portfolio solution on its own.
Visit the Missouri Target Date Fund microsite for more information on this custom investment option.
Online Account Access
Convenient online account access is an important benefit of participating in the deferred compensation plan. With a few clicks of a mouse, you can adjust contribution amounts, view personal performance, designate beneficiaries, transfer assets and complete a host of other transactions. There are currently two ways for you to access your online account:
1. Log on to the Missouri State Employee Self-Service portal (ESS). The ESS is a convenient way to access multiple benefit providers using one User ID and password. To access your deferred compensation plan account, click the Benefits tab and choose the Log Me in to Deferred Compensation Plan link.
2. Visit www.modeferredcomp.org and log on in the right sidebar of the site, under the “Tools” heading. If it’s your first time logging on, click the New User - Register Now button and follow the directions. Please note the following requirements when creating a password:
- Passwords are not case-sensitive.
- Passwords cannot have been used previously.
- Passwords must be between 8-12 characters in length.
- Please limit characters to A-Z, a-z, 0-9 and special characters (.,*, @, _, -).
- Passwords must contain at least 1 alphabet, 1 number or 1 special character.
- Your password cannot equal your User ID.
Auto Enrollment Statistics
The table below displays cumulative auto enrollment participation statistics by department as of September 1, 2013.
Please note: Detailed data for agencies with 10 or fewer hires is omitted in this report.
| Department |
Total AE | Opt out | Net AE | Automatic Enrollment Success Rate |
| State Auditor | 11 | 0 | 11 | 100% |
| Dept. of Elem & Sec Ed | 136 | 6 | 130 | 95.6% |
| Dept. of Corrections | 1235 | 91 | 1144 | 92.6% |
| Office of Administration | 103 | 8 |
95 |
92.2% |
| Dept. of Health & Senior Services | 155 |
15 |
140 | 90.3% |
| Dept. of Conservation | 39 | 4 | 35 | 89.7% |
| Dept. of Social Services | 931 | 98 | 833 | 89.5% |
| Dept. of Revenue | 150 | 16 | 134 | 89.3% |
| Public Safety | 582 |
68 |
514 |
88.3% |
| Dept. of Transportation | 319 | 41 | 278 | 87.1% |
| Dept. of Agriculture | 22 | 3 | 19 | 86.4% |
| Judiciary | 362 | 52 | 310 | 85.6% |
| Dept. of Mental Health | 1116 | 178 | 938 | 84.1% |
| Dept. of Labor & Industrial Relations | 41 | 7 | 34 | 82.9% |
| Dept. of Natural Resources | 79 | 14 | 65 | 82.3% |
| Dept. of Ins, Fin Inst., Prof Reg. | 33 | 6 | 27 | 81.8% |
| Attorney General | 54 | 10 | 44 |
81.5% |
| Secretary of State | 26 | 5 | 21 |
80.8% |
| State Public Defender | 88 | 19 | 69 | 78.4% |
| Legislature | 97 |
27 |
70 |
72.2% |
| Dept. of Econ Development | 42 | 16 |
26 |
61.9% |
| Dept. of Higher Education | -- | -- | -- | -- |
| Governor's Office | -- | -- | -- | -- |
| Highway & Highway Patrol | -- | -- | -- | -- |
| Lt. Governor | -- | -- | -- | -- |
| Missouri Consolidated Healthcare | -- | -- | -- | -- |
| MO Housing Development Commission | -- | -- | -- | -- |
| MOSERS | -- | -- | -- | -- |
| State Treasurer | -- | -- | -- | -- |
| Totals | 5647 |
687 | 4960 |
87.8% |
Stay Connected
You can find the State of Missouri Deferred Compensation Plan on Facebook, Twitter and YouTube. Whichever you prefer, staying connected with the Plan is a great way to receive timely plan news, valuable savings tips and more.