457 Deferred Retirement PlanThe 457 retirement account is a deferred retirement plan. It is provided through your employer, but you make the contributions to this account. Your employer generally does not contribute to this plan. You are eligible to contribute to this plan if you are a state or local government employee. You decide how much to contribute from your paycheck each payday up to a maximum annual amount. This amount is tax deferred (meaning you don't pay taxes on it until you start withdrawing from this account). With the 457 plan there is no minimum retirement age so you can start withdrawing from it at any time once you leave employment with the employer you set it up with. You will be taxed at the time you start withdrawing this money and if you wait till retirement age the taxes should be less by then. Also with this plan you are not charged a early withdrawal penalty. When you leave your job and roll this money into another qualified retirement plan there is no tax withholding on it. But just be aware, depending on what type of plan you roll it over into and you then decide for an early withdrawal you at that time may have to pay a early withdrawal penalty when you withdraw it. You cannot roll a 457 deferred retirement plan over to a Roth Ira. Remember when you contributed to this plan you did not pay any taxes on the money. The Roth Ira are contributions that have already been taxed. So if your plan allows it may be better to leave it where it is until you decide to withdraw the funds. Another great thing about this account is that say you want to put $25 from each paycheck you may only actually miss about $20 from your paycheck. This is because you just lowered your tax bracket on your paycheck. Check out this paycheck calculator (coming soon) and play around with it to see what the difference would be. First put in your information as you currently have on your paycheck and make sure it is close to what your take-home check is, then put in the information with what you want to put into a tax deferred retirement plan. Again I don't want you to burden your budget, but do participate in a retirement plan. Just start small even as little as $10 each paycheck. Then every 3 or 4 months increase it by at least $5. Before you know it you'll be saving both for your retirement and on your taxes.Just think by starting out with just $10 from each paycheck (for weekly pay), and then by increasing it by $5 each paycheck every 3 months, by the end of the year you'll be saving $100 a month and not even missing it. That will add up to $930 savings the 1st year. So what do you think? How much will you have saved by the end of the 2nd year? 3rd year? and so on. See how easy just by starting out with $10 and increasing it slowly. And remember this is tax deferred so you may only miss $8 of the $10 out of your paycheck. So what are you waiting for? Go talk to your human resources person.
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