August 2014 DC Update
Now's the Time
Putting the Puzzle Pieces Together
Your retirement is an important part of your overall benefits package, so it’s a must that you understand how your deferred compensation plan savings work alongside other retirement income sources, like your MOSERS/MPERS pension and social security. With that in mind, the plan is excited to announce its newest seminar: Completing the Retirement Income Puzzle. This free, 60-minute session will briefly explain your pension and social security benefits and then describe in detail how to use the deferred compensation plan benefit to meet your retirement savings goals. Seating for these free seminars is limited, so please register online today.
To do so, simply click on the Register for a Seminar or Consultation button at the top of the page and then choose the Sign up for an Individual Appointment or Seminar link. Browse the available sessions in your area, choose the date that works best for you and follow the prompts. If you so choose, an email confirmation will be sent following your registration, along with an email reminder a day prior to the event.
Here are a few of the upcoming Completing the Retirement Income Puzzle seminars:
| Jefferson City | |
| August 11, 2014 1:30 pm | State Information Center |
| August 12, 2014 10:30 am | State Information Center |
| August 12, 2014 1:30 pm | Truman Building |
| August 18, 2014 9:30 am | Truman Building |
| Cape Girardeau | ||
| August 7, 2014 10:00 am | Department of Conservation Nature Center | |
| Branson | ||
| August 11, 2014 8:30 am | Taney County Probation and Parole | |
| St. Louis | ||
| November 3, 2014 10:00 am | Missouri Veterans Home | |
| November 3, 2014 1:00 pm | Missouri Veterans Home | |
Adding It Up: Now's the Time
If you could save $150 a month while you're working in return for more than $400 a month in retirement income, you would do it right? In effect, that's what you could get by saving with the deferred compensation plan. Automatic payroll deferrals, coupled with a sound investment strategy, stretched out over a period of time could produce monthly retirement income that trumps the monthly contributions you originally made to the Plan. Don't believe me? Consider this situation:
Penny began working for state of Missouri at the age of 30. She immediately began contributing $75 to the deferred compensation plan with each semimonthly pay check, or $150 a month. Penny continued this trend for 25 years, until she retired at the age of 55 with a deferred compensation plan balance of a little more than $102, 0001. If Penny were to enjoy 25 years in retirement and earned a 4% annual rate of return during that time frame, then her $102,000 balance would equate to approximately $425 of monthly retirement income. In other words, she'll receive about $275 more than she originally saved each month because she put time and the power of compounding on her side.
See what other state employees are saying about the deferred compensation plan by visiting our Real People, Real Savings website. And remember, it's never too late to start saving for retirement.
1 Assumes a $150 monthly contribution and 6% annual rate of return over 25 years of employment.
2 Assumes a 4% annual rate of return in retirement, 2% inflation and an account balance of $0 after 25 years.
Now That’s a Great Question
Each month we like to highlight popular participant questions in a segment we call “Now That’s a Great Question”. This month’s question is: What's the difference between a 401(k), a 457(b) and an IRA?
The State of Missouri Deferred Compensation Plan is a 457(b) plan. Generally speaking, all three of these options - the 457, 401(k) and IRA - are tax-advantaged savings vehicles designed to help savers accumulate money for retirement. Both 457 and 401(k) plans are available through an employer, while an IRA — which stands for Individual Retirement Account or Arrangement — is a privately held retirement account individual savers must establish on their own. A 457 plan is administered by state and local governments and tax-exempt employers, while a 401(k) is more widely available in the private or corporate sectors. While they vary in several ways, the chief difference between a 401(k) and a 457 plan is the participant's ability to access retirement savings. With most 401(k) plans, a saver may not be able to withdraw his or her savings prior to age 59 ½ without paying a 10% early withdrawal penalty. Conversely, 457 plans allow savers to access their savings prior to age 59 ½ without paying the penalty, as long as they're no longer working for the employer that sponsored the savings plan. Like a 401(k), IRAs may also impose the 10% early withdrawal penalty on any distribution prior to age 59 ½. Aside from the early withdrawal penalty, in most cases all three of these account types impose income taxes on the distribution of pre-tax savings.
Oftentimes, 457 and 401(k) plans share the same contribution limits — $17,500 in the 2014 tax year — and rollover features as set forth by the IRS. As for IRAs, contribution limits to these accounts are much lower than 457 and 401(k) plans — the 2014 limit is $5,500, for instance — and you miss out on the opportunity to receive matching contributions that could exist with a corporate 401(k) or governmental 457 plan. Finally, while many savers associate Roth, or after-tax, savings with an IRA, this feature is also available with most 457 and 401(k) plans. Be sure to read over The 457 Plan and IRAs flier on the Plan's website for more on the key characteristics of these savings options.
For more answers to popular questions, be sure to visit the FAQ section of our website. If you can't find what you're looking for there, give one of our friendly participant service representatives a call at 800-392-0925.
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Thanks for reading the August 2014 edition of the DC Update. Remember to connect with the Plan on Facebook, Twitter, LinkedIn or YouTube. Our social media channels are one of the best ways to receive timely plan news and helpful savings tips.