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What Is Deferred Compensation

 The 457 deferred compensation plan is an affordable, convenient way for participating employees to set money aside for their retirement. The plan allows participants to pay themselves first, investing a portion of each paycheck on a pre-tax basis in a retirement plan.

 If you rely solely on a pension to get you through your retirement, get ready to take a pay cut. Most pension plans do not provide the same level of income that you are used to, creating a gap that you need to fill to maintain your current living standard. 

 One way to close this gap is to supplement your retirement income with the voluntary deferred compensation plan.

The Power of Pre-Tax

 When you use deferred compensation, you defer, or "set aside," a portion of your wages in an account on a pre-tax basis. This means the money is set aside before you pay taxes on it so by contributing to the plan you are actually lowering the taxes on your base pay.

 Additionally, the money the account earns is tax-deferred, meaning that it is not taxed until later, when you withdrawal the money. Often at retirement, you are in a lower income tax bracket, which may reduce the tax you pay on your money.

 You control how the deferred compensation account is invested within the offered plan. Then, when you retire or separate from service, this money and the money it has earned is returned to you in a payout form that you choose, depending on your situation.

 Unlike most other retirement plans, withdrawals may be taken from a deferred compensation account upon separation from service without incurring the 10% penalty for early distributions, even prior to age 59.

PEBSCO Web Site
Manage your Deferred Compensation account online.