June 2014 DC Update
Adding It Up with Percentage-Based Contributions
Adding It Up with Percentage-Based Contributions
Participants have traditionally made flat-dollar contributions to the deferred compensation plan, but recent Plan changes have made it possible to contribute a percentage of pay in one-tenth (0.1) of one percent increments. Percentage-based contributions are a valuable savings tool because they'll ensure your payroll deferrals will grow as your career evolves. Consider the following scenario:
Mike and Phil are new state employees and decide to start contributing to the deferred compensation plan. Both have an annual salary of $35,000 and want to contribute about $45 per semimonthly pay period. Mike chooses to contribute a flat $45 each semimonthly pay check, while Phil chooses to contribute 3% of his pay (which equates to $43.75 each semimonthly pay period). After 30 years on the job, and assuming identical salary increases (2% annually) and investment returns (6% annually), Phil will have accumulated approximately $19,000 more in retirement savings by using percentage-based contributions. That's $109,000 in retirement savings for Phil and approximately $90,000 for Mike, even though their contributions to the deferred compensation plan were nearly identical when they began their careers. That's because when Phil's salary increases, so too do his contributions to the deferred compensation plan (only incrementally per pay period to $44.62 in year 2, $45.52 in year 3 and so on). Compound those contribution increases over a 30-year career and it's clear to see why percentage-based contributions are a powerful way to boost your savings rate without breaking the bank.
Adjust your contributions by logging on to Account Access, clicking Contributions in the left menu, and selecting the Change My Contribution Amount button at the top of the page. In addition to changing your contribution type on this page, you can also enroll in the automatic increase program. With auto increase, your contributions will increase by a percentage that you choose on an anniversary date that you establish. Visit the Plan website to learn more about contributing to the plan and utilizing the automatic increase program. To see the automatic increase program in action, view the February 2013 DC Update.
Savings Challenge Wrap Up
A special thanks to those who participated in last month's 4-Week Savings Spree Challenge – our online employee appreciation contest that challenged state employees to connect with the deferred compensation plan on social media and share savings stories and tips with others. Those who connected to, liked, or shared content on our Facebook, Twitter, LinkedIn or YouTube pages were entered in a random prize drawing, while those who added their own savings tips or story were awarded FREE T-shirts. All told, 115 state employees from across the state earned FREE T-shirts, while there were more than 1,000 entries in the random prize drawing. The contest culminated at State Employee Recognition Day on the capitol lawn May 29. Visit the Plan on social media to see all of the stories and tips shared throughout the Challenge, and if you haven't done so already, please be sure to connect with the Plan on your social media platform of choice.
We'd especially like to congratulate the random prize drawing winners. Dawna Keiholz was the recipient of one of the Plan's Goal-Specific Financial Plans (a $175 value), while Brad Gibson, Dawn Haslag, and Tracy Klug each won restaurant gift cards. And finally, in the spirit of state employee recognition week, we'd like to thank state of Missouri employees far and wide for their tremendous support of the deferred compensation plan and their dedicated service to this fine state.
4-Week Savings Spree Challenge Prize Winners
- Dawna Keilholz - Goal-Specific Financial Planning Session ($175 Value)
- Brad Gibson - $15 Restaurant Gift Card
- Dawn Haslag - $15 Restaurant Gift Card
- Tracy Klug - $15 Restaurant Gift Card
Financial Status Survey Results
We'd like to thank the 4,300 employees who responded to our anonymous Financial Status Survey earlier this year. Designed to explore the personal savings and spending habits of Plan participants, this short online questionnaire will help us develop custom education and communications materials for Missouri savers. Visit www.modeferredcomp.org for the complete survey results, and be on the lookout next month for the 2nd quarter edition of the Simply Put newsletter, which takes a closer look at the survey findings and outlines steps participants can take to improve their financial status.
Stay Connected with the Plan on Facebook, Twitter, LinkedIn and YouTube
Thanks for reading the July 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.