The below post is taken from the Video Blog, the Subject Matter Minute. If it’s a little hard to read, it’s because it’s taken from the spoken word. You can view the episode on YouTube if you would like. Find it here: Episode #11 – 457 Deferred Compensation Plan
If YouTube is blocked for you or your agency, you can scroll to the bottom of this post to view it from Google Drive.
You can also listen to an audio version.
Hey hey hey! Welcome to another episode of the Subject Matter Minute, I’m Matt Nagy, thanks for joining me.
I haven’t asked for a while, or maybe not as much as I used to, but I’d really like it if you folks would subscribe to my youtube channel. At the bottom of every video there’s a big red button that says “subscribe.” So go ahead and click that now. All of you guys have a YouTube channel now associated with your Gmail, so it’ll subscribe you, and if you go into YouTube you might see the stuff that I post along the side. It also gives me some numbers just in case somebody wants a report generated and wants to actually know how many people are actually watching me. So I’d really appreciate it.
Last month there was no subject matter expert, because I was the subject. If you didn’t watch, it was a blooper reel. It seemed to go over pretty well considering it had the most views of any of my videos! Thanks for laughing with me, or perhaps at me. It was a lot of fun to put together and I’m glad you guys liked it.
This month the subject matter expert is, once again, Polly Scott of the Wyoming Retirement System. She got me the information, she’s very helpful… thank you very much Polly.
The subject of this month’s Subject Matter Minute is the Wyoming 457 deferred compensation plan.
First of all, what is it. It’s a retirement plan. We have our pension, which is probably top two of the best benefits that we have as state employees, and that’s most likely the thing that’s going to get you the most towards retirement. And then we have social security, which hopefully we’ll have at that point. But generally speaking, you’re going to need some extra money put aside of your own money to have a comfortable, sustainable, retirement. That’s what this is… the 457 deferred comp plan is a retirement vehicle for you to put your own money aside.
Why would you want to do it? First of all, if you’re not doing it you’re losing $20 a month! All state employees of the executive, legislative, and judicial branches, for sure, will get a match of $20 a month if you put in $20 a month. So if you simply do the minimum of $20 a month the state matches it. If you’re not doing it, you’re losing $20 a month, so please do it for that reason at least.
There’s lots of other good reasons.
It’s easy. The money comes automatically out of your account and like other similar things you can get it taken out pre-tax or post tax. If you get it taken out pre-tax, it reduces your taxable income. If you get it taken out post tax, you can take the money out in retirement tax-free.
Another good reason to use it is the money is immediately yours… you’re immediately vested. So right away after you put money in. If you leave your job you can keep that money in that account.
Also, you decide how the money is invested. Well, if you want to. There’s actually three different ways to do this and I’ll go into those later.
Some of the details: You can contribute a minimum of 20 and a maximum of $18,000 a month. There are situations when those getting close to retirement can contribute more than the maximum of $18,000 a month. If you’re in that situation please contact WRS.
You can also add money to this account by rolling over accounts… so other IRAs or 457 s from another job can be rolled into this account.
When you leave employment you can either keep the account; keep logging in and managing the account, or you can roll it into an IRA or a or another jobs 457 plan.
Keep in mind that this is not a savings account, this is a retirement account, which means that you can’t just withdraw money. There are certain scenarios where you can. First of all, obviously you can withdraw money when you retire. That’s the natural scenario. Second of all, you can when you leave employment with the state. Now keep in mind if you do that you’re gonna be hit with some fees and some taxes. Another scenario where you can withdraw the money is if you have an unforeseen financial emergency. The IRS says that this is a severe financial hardship resulting from illness, disability, or accidental property loss. So in this scenario we’re not talking about paying off your home loans your car loans or things like that, it’s more like if your home is about to be foreclosed on or if you have a bunch of uncovered medical expenses. If you think that you’re in that scenario talk to Wyoming Retirement System and they’ll help you out. There’s one more… it won’t benefit you much, but if you were to die, your beneficiary can withdraw the money.
Now let’s talk about your involvement in these funds. There’s three different ways you can be involved. First one is not involved at all. This is a pre-mixed target-date fund. Basically, you pick a fund that ends right about when your retirement is going to happen, and then the pros take over and they mix a nice diversified portfolio that as it gets closer to your retirement, becomes more and more conservative. That’s number one… hands off.
Level two is a mix-your-own fund. You have access to several funds that the Wyoming retirement system has put together and you decide which ones you use. You can have them all in the international fund, or you could have them all and the bond fund, or you can mix and match. So you have some involvement there.
Level three is a self-directed brokerage account. This is for the pros, and it’s done through TD Ameritrade. If you’re interested in doing that, go ahead and talk to Wyoming Retirement System, and they’ll get you set up. There are fees associated with these things… there always are. These are very low. The Wyoming retirement system board is tasked with finding low-fee, high quality investments, and that’s what they do.
I think that’s all I’m going to cover this time. I could go on and on about investing I suppose, not that I’m a pro, but I’m looking through the Wyoming Retirement System information and there’s just so much stuff! But we’re gonna keep it to that. Just know that you should definitely be investing at least twenty dollars a month in the 457. If you are a state employee that will be matched by the state, please put the $20 in and make an extra twenty.
Don’t forget to look down on the show notes where you’ll find links to all sorts of important stuff including an enrollment form. If you just want to jump in and do that target date fund, go down, find the link, and enroll. All right, thanks for watching! Remember again to subscribe to my channel and I’ll see you next time on the Subject Matter Minute!