23 June 2022 1:30

Are the New York State Deferred Compensation Plan (NYSDCP) 457(b) Costs and Fees Comparable to Other Retirement Investment Options?

What type of plan is Nysdcp?

voluntary retirement savings plan

The Plan is a voluntary retirement savings plan that provides quality investment options, investment educational programs and related services to help State and local public employees achieve their retirement savings goals. The Plan can be easily adopted.

Is the 457 deferred compensation plan good?

For employees, the key benefit of a 457 plan is that the savings are tax-deferred: Contributions are made on a pre-tax basis, reducing taxable income and growing tax-deferred until withdrawal. 457 plans also have the advantage of catch-up options. Employees over age 50 can contribute on top of the limit for the year.

What are the benefits and disadvantages of a 457 plan?

The advantages of a 457b are contributing more to retirement and early withdrawals. 457b disadvantages are the potential for limited investment choices and tax implications of lump-sum distributions.

Is deferred compensation the same as retirement?

A deferred compensation plan withholds a portion of an employee’s pay until a specified date, usually retirement. The lump sum owed to an employee in this type of plan is paid out on that date. Examples of deferred compensation plans include pensions, 401(k) retirement plans, and employee stock options.

What do I do with my 457 plan when I retire?

The 457 plan is a retirement savings plan and you generally cannot withdraw money while you are still employed. When you leave employment, you may withdraw funds; leave them in place; transfer them to a 457, 403(b) or 401(k) of a new employer; or roll them into an Individual Retirement Account (IRA).

What is NYS deferred compensation plan 457b?

Section 457 deferred compensation plans permit employees to defer a portion of their salary earnings on a pre-tax basis and, beginning in 2011, to a Roth 457 account within the deferred compensation plan.

What is the difference between a 457 plan and a 457 B plan?

There are two different types of 457 plans—the 457(b), which is offered to state and local government employees, and the 457(f) is for top executives in nonprofits. A 403(b) plan is typically offered to employees of private nonprofits and government workers, including public school employees.

Is 457 B better than 401k?

If your employer offers a match on the 401(k), it behooves you to contribute at least up until the match. Even if you expect to retire early, paying a 10% early withdrawal penalty on a 100% free match is still a good deal. Otherwise, those with plans for an early retirement ought to favor the 457.

Is a 457 better than a Roth IRA?

If tax rates are substantially higher when you retire, you will significantly benefit from your Roth IRA because your withdrawals will be tax-free. If tax rates are lower when you retire, your 457 will be the more tax-efficient account. Either way, one will help to balance the other.

Does deferred compensation affect Social Security benefits?

Deferred compensation shouldn’t affect Social Security benefits. Generally, the Social Security Administration isn’t worried about payments that aren’t for work in the current period.

How do I avoid taxes on deferred compensation?

If your deferred compensation comes as a lump sum, one way to mitigate the tax impact is to “bunch” other tax deductions in the year you receive the money. “Taxpayers often have some flexibility on when they can pay certain deductible expenses, such as charitable contributions or real estate taxes,” Walters says.

How much tax do you pay on a 457 withdrawal?

16 1 Page 3 Federal tax law requires that most distributions from governmental 457(b) plans that are not directly rolled over to an IRA or other eligible retirement plan be subject to federal income tax withholding at the rate of 20%.

At what age can you withdraw from 457 without penalty?

59 and a half years old

Early Withdrawals from a 457 Plan
Money saved in a 457 plan is designed for retirement, but unlike 401(k) and 403(b) plans, you can take a withdrawal from the 457 without penalty before you are 59 and a half years old. This is a very important rule that often times goes overlooked with the 457 plan.

Do you pay Social Security tax on 457 withdrawals?

457 distributions are not earned income and will not affect social security payments.

Can I roll my 457 into an IRA?

You can transfer or roll over assets tax-free from your 457 plan to a traditional IRA as often as you want after you leave your job. However, your plan may require you to move your balance to your new employer’s 457 if you change jobs.

Can I transfer my deferred compensation to an IRA?

If your deferred compensation plan is a qualified plan, then it can be rolled over to a retirement account such as a Roth IRA or a traditional IRA or other qualified retirement plans.

Should I roll my 457 into a 401k?

Governmental 457 plans are subject to a separate contribution limit that is the same as qualified plans, even though these limits are not cumulative. However, if you roll over money from a 457(b) plan to a 401(k) plan, you can’t take out money penalty-free before age 59 1/2 anymore.

What is difference between 403b and 457b?

The 403(b) has a much higher limit than the 457(b), which lacks a separate contribution limit for employers. 457(b)s only allow $20,500 in contributions from any source in 2022, whereas 403(b)s allows total contributions of $61,000, including $20,500 from an employee.

Should I contribute to both 403b and 457b?

Many universities and colleges offer access to both a 403(b) plan and a 457 plan. A question I get often is, “Can I contribute to both a 403(b) and 457 plan?” The answer is yes. If your employer offers both, you can contribute to (and max out) both.

What is the difference between a 457 and 401 K?

The main distinguishing factor between 457 and 401(k) is how the retirement plan is offered. 457 plans are common in government entities such as state governments, as well as non-profit organizations. In contrast, 401(k)s are offered by private companies to their employees.