What is a Deferred Compensation Plan?
Deferred Compensation, also known as a 457 Plan, is an easy way for employees to save a bit more toward retirement. City of Austin employees can enroll with Empower, though most large employers offer a deferred comp plan. Empower’s Deferred Comp plan offers a range of options for investing before-tax, after-tax.
COAERS retirement alone is not generally enough to fund retirement. Deferred Comp money can be used to make service purchases at retirement to increase your annuity, or those funds can be disbursed in a lump sum, partial lump-sum, or with periodic payments that you direct.
Deferred Comp is different than your COAERS retirement account and pension benefits.
| Deferred Comp | COAERS |
|---|---|
| Voluntary – sign up at any point and determine your own level of saving | Automatically enrolled and contributions are automatically deducted |
| Choose tax deferred plan or Roth plan | Contributions are tax-deferred |
| Loans from the plan are allowed under certain circumstances | No loans allowed; your funds must remain on deposit |
| Rolling other eligible funds INTO the plan is allowed. If you have balances from 457(b), 403(b), 401(k) or 401(a) plan, or an IRA, you can consolidate these in your Empower account | All the funds in your account are from your contributions and applied annual interest |
| You bear the risk of the market both on the upside and the downside | COAERS bears the risk of the market |
| You have some say in how the money is invested; the risk tolerance is yours. | COAERS investment staff handles all investments for the long-term health of the plan |
| You can potentially outlive this money | You can never outlive your retirement |
Active City of Austin* employees who are not signed up with Empower can call 866-613-6189 to get started.
*Employees of affiliated employers should contact their Human Resources for enrollment information.
Current Empower savers can also call and make an appointment for a session with a personal financial planner, normally an expensive appointment to make.
To reach Empower:
1-866-613-6189
512-457-9240
dcaustin@empower.com
A 457 deferred comp plan can be an effective way to easily save toward your financial goals. By allocating money to be withdrawn before your paycheck arrives, it removes the temptation to spend it, and your savings can start small. Empower, the City’s deferred comp provider, offers plans for savers at all stages of life.
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