You’ll likely be dishing out gifts and making bigger purchases with December upon us. But one person you shouldn’t leave off your list is that future, slightly older version of yourself enjoying the perks (and paychecks) of retirement.
As a CalPERS member, you can set up recurring payments designed to cushion your CalPERS pension and Social Security (if you’ll receive that). We call them deferred compensation plans, otherwise known as extra retirement income.
The idea is to save now for a more comfortable future. Here’s how.
Deferred Compensation: The Gift That Keeps Giving
You have the opportunity to set aside money beyond what you’re already contributing to your state pension — not to mention what you’ll receive from Social Security and extra savings.
CalPERS offers voluntary deferred compensation plans to bolster your retirement income when the time comes. You can contribute relatively low amounts each pay period to these plans — remember, every dollar counts — but they all have different annual contribution limits, governed by the IRS.
You may want to speak with a financial advisor to decide what contribution levels make sense for your budget and lifestyle, but at the very least consider the benefits of our deferred compensation plans, all of which can help bridge the cash gap you might experience when you finally hang up your hat.
Public Agency and School Employees: Check Out the CalPERS 457 Plan
The CalPERS 457 Plan is a deferred savings plan that allows you to stash portions of your paycheck on a pre-tax or Roth after-tax basis. This money will be invested into a retirement fund and compound in value over time as you continue to chip in — much like a traditional 401(k).
The catch is your employer must contract with us for this benefit. Not sure if they’re on board? Check out this list of participating agencies whose employees are eligible to sign up for the CalPERS 457 Plan.
The big picture is the CalPERS 457 Plan offers an array of benefits, including competitively priced deferred compensation plans, target retirement date funds, professionally managed investment strategies, brokerage accounts, Roth plan options, a large swath of retirement planning and education tools, and lots more — all at your fingertips for a nominal fee.
And speaking of fees, we’ve got good news — due to the plan’s popularity and related asset growth, fees have dropped again.
State or California State University Employees: Check Out Savings Plus
As a State of California or California State University (CSU) employee, you have access to Savings Plus, which includes 401(k) and 457(b) plans. You can invest in one or both based on your financial situation, and you may contribute on a pre-tax basis, Roth basis, or both. Both plans provide a window for catch-up contributions before your retirement target date.
Check out the Savings Plus enrollment guide (PDF) to learn more.
State and Judges’ Retirement System Employees: Check Out the Supplemental Contributions Plan
Some CalPERS members have another savings plan available — known as the Supplemental Contributions Plan (SCP) for state employees and members of the Judges’ Retirement Systems.
This account allows for investing on an after-tax basis and has different rules that apply. To learn more about the SCP, read about it here.
What’s the Minimum to Get Started?
For as little as $25 a month you can start contributing to any of these deferred compensation plans — money you might have otherwise spent on a new watch for yourself. Rather than buying one material item today, why not pay yourself for years to come?
To learn more about the savings options available to you and which one might be best, read about it on PERSpective.
Get started today and treat yourself to the happiest of holidays.