Managing your retirement as a City of Chandler employee is one of the most important steps you can take for your financial future. The 457(b) deferred compensation plan is a specialized retirement savings account available to municipal employees, offering unique tax advantages and flexible options for long-term growth. Whether you are a new hire looking to enroll or a long-term employee checking your balance, understanding how to navigate this plan is essential.
What is a 457(b) Deferred Compensation Plan?
A 457(b) plan is a type of tax-advantaged retirement account available specifically to state and local government employees. It functions similarly to a 401(k) found in the private sector, allowing you to contribute a portion of your salary before taxes are taken out. This reduces your current taxable income, meaning you pay less in taxes today while building a nest egg for tomorrow.
For City of Chandler employees, this plan acts as a supplement to the Arizona State Retirement System (ASRS) or the Public Safety Personnel Retirement System (PSPRS). While those systems provide a pension, the 457(b) plan gives you more control over your individual savings and investment choices.
How to Access and Manage Your Account
The City of Chandler typically partners with established financial providers to manage these accounts. Most employees will find their accounts hosted by MissionSquare Retirement (formerly ICMA-RC) or Nationwide Retirement Solutions. Accessing your account allows you to view your balance, change contribution amounts, and adjust your investment portfolio.
Logging In Online
To manage your account, you will need to visit the specific portal for your provider. If you have not yet registered, you will typically need your Social Security number and the City of Chandler employer plan code. Once registered, you can log in at any time to monitor your performance and download tax statements.
Updating Your Contributions
One of the most helpful features of the online portal is the ability to change how much you save. You can usually choose to contribute a flat dollar amount or a percentage of your paycheck. Even small increases of 1% or 2% can make a significant difference in your total savings over several decades.
Contribution Limits and Tax Benefits
Each year, the IRS sets limits on how much you can contribute to a 457(b) plan. Staying informed about these limits helps you maximize your savings potential without exceeding federal regulations. For 2024, the standard contribution limit is $23,000. If you are aged 50 or older, you may be eligible for “catch-up” contributions, allowing you to save even more.
- Traditional 457: Contributions are made pre-tax, reducing your current taxable income. You pay taxes on the money only when you withdraw it during retirement.
- Roth 457: Some plans offer a Roth option where you contribute after-tax dollars. The benefit here is that your withdrawals in retirement are generally tax-free.
The Benefit of No Early Withdrawal Penalty
One of the most significant advantages of a 457(b) plan compared to a 401(k) or IRA is the withdrawal rule. In most retirement accounts, taking money out before age 59½ results in a 10% IRS penalty. However, with a 457(b) plan, if you leave your employment with the City of Chandler, you can access your funds without that 10% penalty, regardless of your age. You will still owe standard income tax on the withdrawal, but the lack of an early withdrawal penalty provides a unique level of financial flexibility.
Choosing Your Investment Strategy
When you log into your account, you will see various investment options. These typically range from conservative choices like money market funds to more aggressive options like stock market index funds. Choosing the right mix depends on your age, your risk tolerance, and how many years you have until retirement.
Target-Date Funds
If you prefer a “set it and forget it” approach, many employees choose target-date funds. These funds automatically adjust your investment mix to become more conservative as you get closer to your planned retirement year. This helps protect your savings from market volatility as you prepare to stop working.
Diversifying Your Portfolio
For those who want more control, you can build a custom portfolio. This usually involves spreading your contributions across large-cap, mid-cap, and international funds. Diversification helps ensure that your entire retirement savings are not dependent on the performance of a single sector of the economy.
Designating Your Beneficiaries
It is crucial to keep your beneficiary designations up to date. These designations determine who receives your account balance in the event of your passing. Because these accounts pass directly to beneficiaries outside of a will, your online account designation is the final word on who gets the funds. It is a good practice to review this information annually or after major life events like marriage, divorce, or the birth of a child.
Next Steps for Your Retirement
Taking an active role in your 457(b) plan is one of the best ways to ensure financial security in your later years. By logging in regularly and adjusting your contributions to match your goals, you can take full advantage of the benefits offered to City of Chandler employees. If you have specific questions about your plan details, you should contact the City’s Human Resources department or your dedicated plan representative for personalized guidance. Exploring other articles on personal finance and retirement planning can also help you build a more comprehensive strategy for your future.