January DC Update: Sweat Less, Save More

  • January 9, 2015


Adding It Up: New Year Reality Check

Your new year’s resolution doesn’t have to feel like the back-breaking work in the video above. If you’re looking for a change that’s easy to stick to and can have a major impact on your future, then consider saving with the deferred compensation plan. The Plan offers painless automatic deferrals, both pre-tax and after-tax (Roth) savings options, custom investment solutions, percent-of-pay contributions and a robust automatic increase tool. Once you enroll in the Plan, contributions occur automatically with each paycheck, and you can adjust those contributions at any time. And remember, the money you save with the Plan is yours when you leave state employment. With each contribution, you’re investing money that’s designed to provide income in retirement. Making this change takes minutes, but can have a monumental impact on your future financial situation.

Consider this:

An employee earning $35,000 a year started contributing 2% of each paycheck to the deferred compensation plan. He or she then automatically increased that contribution by 0.5% each year until reaching a 5% contribution level, which was maintained for the remainder of his or her career. Using this strategy, the employee could have over $110,000 at the end of a 25-year working career*. For this employee, a two percent contribution each semimonthly paycheck that first year equates to $29.17.

To think about it another way, this employee will contribute a total of $45,589 throughout his or her working career in return for a $110,494 balance at retirement. In even simpler terms, for every $1 this employee saves while working, he or she will have $2.42 at retirement.  Need more convincing? If that same employee were to only contribute the flat dollar amount of $29.17 each pay period throughout their entire career, they would accumulate a balance of $47,405 – that’s about $63,000 less than the previous example that used percent-of-pay contributions and automatic increase.

Next steps: If you’re not already contributing, then ENROLL in the Plan today. Your first contribution will occur on your first paycheck in February. If you are currently contributing, remember that you can adjust your contributions at any time. This includes switching from flat-dollar contributions to a percent-of-pay as well as establishing an automatic increase schedule. To make these changes, simply log on to Account Access, navigate to the Contributions page in the left menu, choose the blue Change My Contribution Amount button in the upper right hand corner, and follow the prompts on that page. As of December 1, 2014, a quarter of all participants were contributing a percent-of-pay, and that number continues to rise.

Assumes a 7% annual rate of return and 1% annual salary increases.

Getting There is Half the Fun

According to our most recent survey, about one in three Plan participants won’t check their savings progress with the deferred compensation plan this entire year. Saving for retirement is a long-term journey, no doubt, but checking your balance, contribution elections, and investment options on a regular basis will keep you focused along the way. In that spirit, 4th quarter statements will be available toward the middle of this month. For those on eDelivery, you will receive an email prompting you to logon to Account Access and view your statements. We strongly encourage you to take a few minutes and evaluate your savings situation. While you’re logged on, don’t forget you can adjust your contributions, update beneficiaries, review investment options, and use our handy RetiremenTrack calculator. RetiremenTrack, which is located under the Resources tab of Account Access, is a custom calculator built specifically for state of Missouri employees. It takes into account your pension (from either MOSERS or MPERS), Social Security benefits, other personal savings, and your balance with the deferred compensation plan to build a unique retirement forecast. It takes minutes to complete and will help you decide if there are factors you should adjust to meet your retirement savings goals.



1099-R Tax Forms

If you withdrew money from the deferred compensation plan this year, then you will need to report those distributions on your 2014 taxes. The total amount of your disbursements is reported on the 1099-R tax form, which should be available online within Account Access by the fourth week of this month. You will find your 1099-R by navigating to the View Transaction History page in the left menu under the My Account tab. Per IRS requirements, the forms will also be mailed no later than January 31, 2015.



Pocket Change Financial Seminar

Taking control of your finances to reach both short and long-term goals might seem like an overwhelming task. How do you get started? How much should you be saving? What role could your employee benefits play in the process? What if you need advice? Beginning in February, the deferred compensation plan will offer the Pocket Change financial seminar to help state employees navigate these pressing financial questions. Designed specifically for state of Missouri employees, this 2-hour training session will address topics like retirement income sources (such as pension and Social Security), budgeting, the importance of employee benefits, and savings and investing. All employees will leave the session with a personalized roadmap that can help them navigate important financial decisions throughout their careers with the state.

If you’re interested in bringing this session to your agency, please have your HR department contact Tasha Reinkemeyer at 800-392-0925 option 2, ext. 15. Visit www.modeferredcomp.org for more detailed information about this training opportunity.



Auto Enrollment Report

Since the auto enrollment initiative began in July of 2012, more than 8,000 new state employees have started their savings journey with the deferred compensation plan. That equates to more than 87% of all new employees hired by the state! Cumulative auto enrollment statistics by department, as of December 2014, are detailed below.

Please note: Detailed data for agencies with 10 or fewer hires is omitted in this report.

Department Total AE Opt Out Net AE AE Success Rate
State Auditor
20
0
20
100.0%
Office of Administration
205
13
192
93.7%
Corrections
2269
205
2064
91.0%
MOSERS
11
1
10
90.9
DESE
254
26
228
89.8%
Social Services
1656
177
1479
89.3%
Revenue
254
30
224
88.2%
Labor & Industrial Relations
66
8
58
87.9%
Transportation
606
75
531
87.6%
Agriculture
47
6
41
87.2%
Health & Senior Services
297
38
259
87.2%
Ins, Fin Inst, Prof Reg
68
9
59
86.8%
DNR
149
20
129
86.6%
Secretary of State
46
7
39
84.8%
Judiciary
557
87
470
84.4%
Public Safety
945
148
797
84.3%
Mental Health
1732
308
1424
82.2%
Conservation
76
15
61
80.3%
State Public Defender
164
34
130
79.3%
Attorney General
94
22
72
76.6%
Econ Development
92
22
70
76.1%
Legislature
114
32
82
71.9%
Higher Education
-
-
-
-
Missouri Consolidated Healthcare
-
-
-
-
Housing Development Commission
-
-
-
-
State Treasurer
-
-
-
-
Highway & Highway Patrol
-
-
-
-
Governor's Office
-
-
-
-
Lt. Governor
-
-
-
-
Totals
9,761
1,289
8,472
86.8%


Stay Connected with the Plan on Facebook, Twitter, LinkedIn and YouTube

If you're new to the state, or the deferred compensation plan, don't forget to check our informative videos on the Plan's YouTube channel. With new videos added monthly, also be sure to subscribe to our channel so you can be the first to see the latest deferred compensation plan updates. Also, if you haven't done so already, please be sure to join your coworkers who have found the Plan online at our other social media outlets – Facebook, Twitter, and LinkedIn. Connecting with the Plan on social media is a great way to receive the latest Plan news, important savings tips and much more. Until next month, this has been Casey Fick from the State of Missouri Deferred Compensation Plan, your smart, simple savings solution.