About the Voluntary Deferred Compensation Plan and Trust
The City of Seattle Voluntary Deferred Compensation Plan is a 457(b) Deferred Compensation Plan and Trust available to City officers and any person identified as an employee under the Seattle Municipal Code. This plan allows you to invest in your future by building a retirement savings account using payroll deductions that go into investments you select from the diverse fund lineup selected by the City.
A 457(b) deferred compensation plan is a retirement plan offered by your employer, created to allow public employees like you to put aside money from each paycheck toward retirement. A deferred comp plan can help bridge the gap between what you have in your pension and Social Security, and how much you'll need in retirement. The City of Seattle also allows you to designate Roth contributions to the 457(b) plan.
Here are some frequently asked questions about deferred comp plans:
- What sets a 457(b) apart from other retirement plans? Once you stop working for the City, you may take a withdrawal of your pre-tax deferrals without an additional 10% early withdrawal tax. A 457(b) may offer benefits other retirement plans can't, like penalty-free withdrawals once you stop working for your public sector employer.
- What does tax-deferred mean? Basically, you don't pay income taxes on your deferred comp plan contributions or earnings until you retire and/or begin to take payments from your account. This may lower your taxable income now and in retirement. Withdrawals taken in retirement are generally subject to ordinary income taxes.
- How much can I put into a 457 plan? Check out the current contribution limits.
- Can I combine retirement accounts? Our Education Consultants may work with you to combine, or consolidate your eligible retirement accounts into your deferred comp account. This may make managing your retirement investments a little easier.
Qualified retirement plans, deferred compensation plans and individual retirement accounts are all different, including fees and when you can access funds. Assets rolled over from your account(s) may be subject to surrender charges, other fees and/or an additional 10% early withdrawal tax if withdrawn before age 59½.
Get the help you need
The sooner you enroll, the more you can possibly save. Take a look at the Enrollment Checklist to see what you'll need to have handy and enroll today!
There are three steps to participating in a deferred comp plan:
Enroll in your plan – It’s easy to participate in deferred comp. Contributions are automatically deducted from each paycheck and deposited to your account, so you don’t have to remember to write a check.
Use the Paycheck Impact Calculator to see how saving pre-tax will affect your paycheck.
Invest your money – You’ll choose funds from the list of investment options available within your plan. Keep in mind, any investment involves risk and there’s no guarantee that any fund will achieve its investment objectives. But, we’re here to help.
Use the My Investment Planner to get a personalized retirement strategy, including recommendations for your retirement income goal, savings rate and portfolio asset mix. You’ll need to enroll first and then set up online access to use this tool.
Potentially Receive income – Many public employees retire earlier than those in the private sector, and if that’s the case, you’ll want to invest enough to live in retirement on your terms. Before you begin receiving income from your account, review our Retirement Checklist to make sure you’re ready to transition from saving to spending.
When you’re ready to receive income, these tips will help you do so wisely. Depending on the plan type you’re invested in, there may also be a 10% penalty on distributions prior to age 59½.
Get more info on how to consolidate your retirement accounts to make managing money easier in retirement.
This material is not a recommendation to buy, sell, hold or roll over any asset, adopt an investment strategy, retain a specific investment manager or use a particular account type. It does not take into account the specific investment objectives, tax and financial condition or particular needs of any specific person. Investors should work with their financial professional to discuss their specific situation.
Get the help you need
The sooner you enroll, the more you can possibly save. Take a look at the Enrollment Checklist to see what you’ll need to have handy and enroll today!
Deferred comp helps put you in control of when, where and how much you invest. And that's just the beginning—here are four more reasons why it's smart to participate in your deferred comp plan:
1. You can start anytime
Your deferred comp plan will work for you whether you're approaching retirement or just getting started investing – putting away money in a tax-deferred account can offer several benefits.
- See how your investment can potentially grow due to the power of time and compounding.
- Use the Future Value Calculator to see how delaying enrollment could impact your savings.
2. Every little bit helps
Even investing a little bit of money can really add up over time – it's just important to get started! And if you continue to bump up contributions on a regular basis, the overall impact to your paycheck may not seem too painful. Consider putting raises or bonuses into deferred comp – it's an easy way to invest a little more.
|Growth Period||Ending Balance|
|Deferral Per Pay||Paycheck Impact||Annual Pay Reduction||Accumulation 10 Years||Accumulation 20 Years||Accumulation 30 Years|
Chart assumptions: Biweekly deferrals, 25% tax rate for paycheck impact, 7% annual rate of return. This hypothetical illustration is not intended to predict or project investment results. It does not assume taxes, fees or account withdrawals during accumulation; if it did, results would be lower. This chart is not intended to project the performance of your deferred compensation account. Investments involve market risk, including the possible loss of principal. Actual investment results will vary depending on your investment and market experience. Income stream durations and amounts are not guaranteed.
3. This plan is made for you
Unlike other retirement plans, a 457(b) deferred compensation plan takes into account that you may retire sooner than workers in the private sector. Generally, you don’t have to worry about paying a penalty for retiring early or beginning to take income from the plan before age 59½.
Read Why Invest Now? to learn why it's smart to get started with your deferred compensation now.
4. You'll get service you can count on
Nationwide is ready and willing to answer your questions. We've been helping public sector employees save for retirement for more than 30 years and our Education Consultants have helped educate thousands of employees about investing through their retirement plans. Feel free to call today — we don't charge a fee to work with an Education Consultant.
Read more about why Nationwide may be right for you.
Get the help you need
The sooner you enroll, the more you can possibly save. Take a look at the Enrollment Checklist for tips on the information you'll need to have handy and enroll today.
Most people who participate in a retirement savings plan fall into one of three investor personalities. The "help me do it" investor doesn't want to take full control of their investment decisions and would prefer one fund that can help properly diversify their portfolio. The “do it yourself” investor typically prefers having full control over investment selections and has the time and knowledge to build and maintain their own portfolio with little assistance. The “do it for me” investor does not have the time or the knowledge to manage their investments, and would prefer a professional manage their account for them, including monitoring and adjusting investments over time.
Help me do it investing
Target Date Funds offer the convenience of a single, diversified investment strategy that automatically becomes more conservative as the fund approaches a specific retirement date. This date is selected in alignment with your date of birth.
Target Date Funds invest in a wide variety of underlying funds to help reduce investment risk and are designed for people who plan to withdraw funds during or near a specific year. Like other funds, target date funds are subject to market risk and loss. Loss of principal can occur at any time, including before, at or after the target date. There is no guarantee that target date funds will provide enough income for retirement.
Do it myself investing
You have full control over your investments when you invest via this option, and you are responsible for all investments chosen, the allocations of those investments and how often your investments get balanced and/or updated. If you prefer a hands-on approach but also want help when you need it, use our free My Investment Planner offered through Wilshire to create a more guided investment strategy. Once your strategy is in place, you can manage your account and implement or modify the recommendations provided. If you choose this investment method, remember to check in regularly with your education consultant to ensure your investing style is accurate and you are on track to reach your savings goals.
When you do it yourself, you can also invest through a Self-Directed Brokerage Account (SDBA), administered by Charles Schwab & Co. The benefit of this option is that it allows you the freedom to select and manage your portfolio from a much larger variety of investment choices. Talk to your education consultant about how to use this option.
Do it for me investing
For investors who prefer a less hands-on investing experience, a fee-based managed account service is offered. Nationwide ProAccount® is a fee-based managed account service that creates and maintains a personalized retirement investment strategy. When you enroll in ProAccount, your investments are monitored and adjusted over time to keep you on track for your investment goals.
Contact us today for more information regarding the benefits, risks and fees related to ProAccount. Investment advice for Nationwide ProAccount is provided to plan participants by Nationwide Investment Advisors, LLC ("NIA"), an SEC-registered investment adviser. NIA has retained Wilshire Associates Incorporated ("Wilshire") as the Independent Financial Expert for Nationwide ProAccount, to make the investment decisions for the program. Wilshire is not an affiliate of Nationwide Investment Advisors, LLC (NIA).
As a participant in the City of Seattle Deferred Compensation Plan, you have access to a wide range of investment options. Your investment options were selected by your plan according to established Investment Guidelines and can
help meet your retirement planning needs. Keep in mind that investing involves market risk, including possible loss of principal. As you get started in the plan, we’ll help you understand market risk and strategies that may help you deal with it.
Understand your options
The investment choices available to you fall into five major asset classes:
- Target-date funds
- Stock fund
- Bond funds
- Short-term investments, including a Seattle Credit Union certificate of deposit. Fact Sheet (PDF)
There are four classes of stock funds we offer:
- International stock
- Small-cap stock
- Mid-cap stock
- Large-cap stock
Get the help you need
Talk to an Education Consultant about your investment options or learn more about how to choose funds. Information provided by Education Consultants is for educational purposes only and is not intended as investment advice.
Here are some things you’ll need to enroll:
- Your employer's name or employer's ID
- Your Social Security number
- Your annual income
- Contribution amount
- Investment selections
- Read about your investment options
- Beneficiary names and Social Security numbers
Get the help you need
We'll even walk you through it. If you need more help, call one of our Education Consultants.