September 2013 DC Update
Adding It Up: Start Small, Finish Big this National Save for Retirement Week
With National Save for Retirement Week less than a month away, it’s a great time to consider changes that could improve your savings outlook. While it’s natural to think of large-scale adjustments that will make a big impact on your account, this year we encourage you to think small. How small? Acorn small.
Acorns are the small nuts that drop from oak trees in the fall. While you may associate them with squirrels preparing for winter, these tiny shells actually hold the seeds for future oak trees. Only under certain circumstances, with the right amount of time and nourishment, do acorns sprout and grow. Like the acorn, your retirement savings start out small and require plenty of support and patience to grow large over time. With that in mind, there are several small steps you can take now to prepare your savings for that long-term growth.
Increase Your Contribution
Increasing your semimonthly contribution by only $15 could add over $24,000 to your savings over 25 years*.
Switch to Percentage-Based Contributions
Let’s say you earn $1,500 each semimonthly paycheck (that’s $36,000 annually) and contribute a flat-dollar amount of $75 to the deferred compensation plan each pay period. If you simply changed your contribution to 5% of pay, you would still be contributing $75 each paycheck; the difference is that when your salary increases, so too will your contributions to the savings plan.
Utilize Auto-Increase
Auto increase is a simple tool that lets you increase your contribution percentage in one-tenth of one percent (0.1%) increments on an anniversary date each year. The option to increase your contributions by such a small percentage is unique to State of Missouri Deferred Compensation Plan participants and is yet another gradual way to grow your savings as your career evolves. Better yet, you can set your auto increase schedule once and let the system do the rest of the work for you.
For instance, if you made $36,000 annually and increased a starting 5% contribution by a minimal amount of 0.2% (two-tenths of one percent) each year, you would have over $200,000 after 25 years**. Compare that to the little over $145,000 you could have if you kept your contribution at 5% for your entire career**.
These adjustments have a minor impact on your short-term financial situation, but they will prepare your account to grow as your career evolves. Visit www.modeferredcomp.org the week of October 20-26, 2013, for more information on National Save for Retirement Week.
* Assumes a starting account balance of $5,000 and a semimonthly contribution of $25, plus a 7% annual rate of return on your contributions.
** Both examples assume a starting annual salary of $36,000, a 2% annual salary increase and an annual rate of return of 7%.
Important Retirement Reminders
Retirement is a major step that carries with it many important personal and financial decisions. Not to be overlooked in the retirement process are a number of smaller tasks that will help make your transition a smooth one. Before leaving work, we encourage you to:- Review beneficiary designations to ensure your money will be distributed according to your wishes in the untimely event of your death.
- Update your email address so that you continue to receive important Plan information in retirement.
- Establish your 4-digit PIN on the voice response system at 800-392-0925, option 1, so that you can complete future account transactions over the phone.
For larger retirement decisions, be sure to visit the “Retirement Planning” section on our Plan Publications page for a number of useful documents, including the Transitioning into Retirement Checklist and the Key Points for Retirement Planning flyer. If you ever have any questions along the way, please feel free to contact a participant service representative at 800-392-0925.
Financial Planning Services
A recent study by the Certified Financial Planner Board of Standards, Inc. found that 59% of Americans have never worked with a financial adviser. In that same study, 87% of respondents indicated that they would feel more confident working with an adviser who has a financial planning designation like a CFP® – or Certified Financial Planner. To that end, the deferred compensation plan, in partnership with ICMA-RC, offers three levels of financial planning services administered by CFP® professionals. Those financial plans include:
- The Snapshot Financial Plan (free)
- The Goal-Specific Financial Plan ($175, or free to participants with $100,000 or more in total account balances)
- The Comprehensive Financial Plan ($450, or free to participants with $200,000 or more in total account balances).
Whatever your situation, working with an accredited financial adviser can get you started down a path toward a more secure financial future.
To begin the financial planning process, log on to Account Access and choose Financial Planning under the Planning & Tools section. Choose the financial plan that's right for you and click the Proceed button. Once you complete the online form, representatives from ICMA-RC will follow up with you by email with more information.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.