Put in line in the Deferred Compensation Plan

Aug 6th, 2022
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How to put in line in the Deferred Compensation Plan

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if you have a 457b retirement plan through work then youve got something special on your hands and in this video Im going to explain how the 457b retirement plan compares to a 401k individual retirement account or other common retirement savings options and then were going to talk a little bit about how to make the best use of this account type as you prepare for your retirement [Music] welcome my name is Eric amsilog I am the owner and head financial planner at Peak financial planning thank you for taking the time to watch this video were a fee only fiduciary financial planning practice located in Southern California and we help people make better money decisions and find peace with their finances so stay tuned were going to be talking all about the 457b and how you can use that to its maximum effect in your retirement planning so a 457b is a tax advantage retirement savings plan and in many ways its very similar to more common things like the 401K plan or even a tsp or a 403b p

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Deferring income to retirement might help avoid high state income taxes (ex: California, New York, etc) if youre planning to move to a low-tax state. The biggest risk of deferred compensation plans is theyre not guaranteed; if your company goes bankrupt, you might receive none of the income you deferred.
Federal income tax is also delayed when you defer income, but you do pay Social Security and Medicare taxes. A deferred comp plan is most beneficial when you can reduce your present and future tax rates by deferring your income. Unfortunately, its challenging to project future tax rates.
Deferred compensation plans offer an additional choice for employees in retirement planning and are often used to supplement participation in a 401(k) plan. Deferred compensation is simply a plan in which an employee defers accepting part of their compensation until a specified future date.
Disadvantages of Deferred Compensation With a deferred compensation plan, you are effectively a creditor of the company, lending the company the salary you have deferred. If the company declares bankruptcy in the future, you can lose some or all of this money.
One easy way to increase your retirement savings is to contribute a percentage of your income to your Deferred Compensation Plan (DCP) account. Consider saving between 7% and 10% of your salary. The DCP makes it easy for you to save a percentage of your income through the percent-of-pay feature.
You should contribute as much as you can afford to put away for retirement, because every extra dollar you save will have an enormous impact over the long term. Say you are 30 years old and contribute $100 biweekly into your account. At age 60, if you earned 8% on your investment, you would have $306,620.
A deferred compensation plan withholds a portion of an employees pay until a specified date, usually retirement. The lump sum owed to an employee in this type of plan is paid out on that date. Examples of deferred compensation plans include pensions, 401(k) retirement plans, and employee stock options.
An employer will offer you the opportunity to defer a portion of your compensation for several years. Doing so defers taxes on any earnings until you withdraw. Examples include pensions, retirement plans, and stock options.

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