We Rep-Percent Savings
Do you rep-percent savings?
National Save for Retirement Week, running from October 19-25, has traditionally been a great time to promote enrollment in the State of Missouri Deferred Compensation Plan. But this year, Missouri savers have taken matters into their own hands. While enrolling in the Plan remains an important step, a dramatic new movement is sweeping across the state. It’s called the “I Rep-Percent Savings” campaign. Leading the charge are ambitious savers promoting the importance of percentage-based contributions. Their persistence is paying off. In 2013 about 1 in ten deferred compensation plan savers were utilizing percent-of-pay savings. This year, 1 out of every 5 savers is utilizing this handy contribution tool, and the numbers continue to rise.
Why use percentage-based contributions?
The reason for this savings shift is simple: Percentage-based contributions allow deferrals to the deferred compensation plan to evolve with an employee’s career.
This means if salary goes up, so too will contributions to the Plan. Savers utilizing percentage-based contributions can set their contributions in one-tenth of one percent (0.1%) increments, with 1% being the minimum contribution. (VIDEO: Learn more in the October DC Update)
Another important feature of percentage-based contributions is that it allows employees to utilize the Plan’s automatic increase tool. Automatic increase is a voluntary feature that will automatically adjust a saver’s percentage deferrals (in one-tenth of the percent increments) on an anniversary date he or she chooses. For instance, a saver earning $30,000 a year who is contributing 5% of pay ($62.50 per semimonthly paycheck) can set up an automatic increase of 0.5% (five-tenths of one percent) to occur in January of each year. That means in January the saver’s contribution will increase from 5% to 5.5% of pay ($68.75 per semimonthly paycheck) and will remain at that level until next January when it will increase to 6.0%. The table below illustrates the effect this change has on contributions and savings over a 5-year span. Employees can cancel or adjust their automatic increase schedule at any time.
Automatic Increase in Action
Effect a 0.5% (five-tenths of one percent) automatic increase has on contributions and savings for an employee earning $30,000 a year who begins saving at 5% of pay and earns a 6% annual rate of return on those savings.
| Year | Contribution % | Contribution Amount Each Semimonthly Paycheck | Savings Balance with 6% annual rate of return |
| 1 | 5% | $62.50 | $1,543.93 |
| 2 | 5.5% | $68.75 | $3,337.59 |
| 3 | 6.0% | $75.00 | $5,396.42 |
| 4 | 6.5% | $81.25 | $7,736.80 |
| 5 | 7.0% | $87.50 | $10,376.09 |
Next Steps
To adjust contributions, log on to account access (in the right sidebar), click the Contributions button in the left menu, click the blue Change My Contribution Amount button, and change your contribution amount from “dollars” to a “percent”. Click the Next button and follow the prompts to complete the transaction.
To utilize the automatic increase feature, go back to the Change Contributions page, scroll down to the Automatic Increase section, type an auto increase percentage (in one-tenth of one percent increments) and choose a month the contribution increase will occur each year. Click the Next button and follow the prompts to complete the transaction.
These powerful, yet simple account features take the fuss out of managing a retirement savings strategy. They’re yet another reason the State of Missouri Deferred Compensation Plan is the premiere retirement savings plan for state of Missouri employees.
As the Plan launches its National Save for Retirement Week celebration, the real question is: Do you rep-percent savings?