Tom Gallagher Chief Financial Officer State of Florida Matthew Pararo Bureau of Deferred Compensation
The Deferred Compensation Plan allows you to “defer” or delay receiving a portion of your income. Deferred Comp is an employee funded retirement plan. The income will be in addition to your FRS and SSA benefits.
1.Florida Retirement System (Pension or Investment Plan) 2.Social Security Benefits 3.Supplemental Savings (Deferred Comp, 401(k), 403(b), etc.
Source: Florida Retirement System (www.myfrs.com) “Even Social Security and FRS benefits combined will provide you with only a portion of your pre-retirement pay. That’s why it’s important to have personal savings in your retirement nest egg.”
In the 1950s, there were 30 people working for every one person receiving benefits. Today there are only 3 workers for every beneficiary. Americans Age 65 and Older Source: Social Security Website (www.ssa.gov)
What three ways will your retirement most likely be funded? FRS System, Social Security Benefits and Supplemental Savings.
Provide employees with one of the key retirement components. Help employees secure additional retirement income. Decrease employees’ federal income taxes by delaying a portion of their income until retirement.
Over time, the account grows in value from interest earned and capital appreciation. It puts your money to work for you through: Immediate Credit (your money is credited to your account each payday) Making Pre-Tax Investments (lowers your tax bill)
How many investment providers are in the Program? Six.
Annual deferral amounts increased to: $15,000 in 2006 $500 increase for “cost of living” increments in 2007 and beyond Minimum amount to contribute to Deferred Compensation remains $20/monthly or $10/biweekly pay. You can also defer a percentage of your pay check.
Participants cannot use both features during the same year. Standard Catch-Up 3 years prior to retiring: $30,000 Total in 2006 Cost-of-living increases in $1000 increments thereafter Must sign up for Standard Catch-up 50+ Catch-Up Participants age 50 and over may make an additional deferral on top of the new limits: $20,000 Total in 2006 Cost-of-living increases in $500 increments thereafter
You can roll a full or partial amount You may roll any accrued leave payments into the Deferred Compensation Plan before you enter DROP After terminating DROP, you can roll your DROP Assets into the Deferred Compensation Plan
What is the Deferred Compensation Website? www.myfloridadeferredcomp.com
Eligible employees may participate in (and max out) other retirement plans: other 457 deferred compensation plans 403(b) plans 401(k) plans IRA plans (Roth or traditional)
At retirement or separation, you may now roll into/from IRAs, 403(b)s, 401(k)s and other 457 plans Accounts rolled from a 457 plan into another plan may be subject to the IRS 10% penalty tax if you begin to receive distributions prior to age 59 1/2
Some types of prior service may qualify for FRS credits if you wish to buy them. “…you can use your own money to buy this time with FRS, increasing your total service time under the FRS retirement plan.” “If you have qualifying service for any length of time in the past (including federal government or military service)…”
What is the deferral limit for 2006 if you are under 50? $15,000 in 2006, increases by $500 in 2007 and beyond!
1. Set realistic goals 2. Choose mutual funds that meet your risk tolerance 3. Invest a fixed amount on a regular basis (dollar cost average) 4. Reinvest dividends 5. Focus on long-term results 6. Diversify (stocks, bonds, and cash)
It is never to early or to late to begin saving for your future! Do not count on Social Security and the Pension Plan to supply you with all your retirement needs! Higher expenses for medical insurance and healthcare are likely!