Retirement can sneak up on us before we feel ready. This is what makes investing in retirement plans sooner than later so important. A deferred compensation program is one retirement plan that offers unique benefits. Exploring what this involves and how to apply might make your retirement process easier. However, if bankruptcy is becoming a major issue, then try talking with a Chattanooga bankruptcy attorney about your options.
What is a Deferred Compensation Plan?
A deferred compensation plan provides retirement benefits with unique perks that are slightly different from 401K retirement plans. Unlike 401K retirement plans, 457B deferred compensation plans tend to be offered by government and nonprofit employers. Income taxes can also be deferred through deferred compensation plans.
The Employee Benefits Office is what primarily controls deferred compensation plans, rather than a private employer. This office will approve eligible employees for this retirement program. Employees are allowed to move money under this plan into other accounts as long as those accounts are approved.
When it comes to deferred compensation plan benefits, these include paying less income tax, building more money for retirement, and tax deferment. This plan provides multiple investment options. Certain conditions may allow you to put more money into this retirement plan. Those conditions include the age 50 plus catch-up or the special catch-up.
However, this type of retirement plan does not offer employer matching, Roth, or after-tax options. There are annual administrative fees for participating in the plan. There are early withdrawal penalties if funds are taken out before the age of 59 and a half.
You can take out the retirement funds when you decide to retire, under disability retirement, an unforeseeable emergency, death, employment severance, and service credit purchases. Those who turn 70 and a half years old while still working may also take their retirement funds out at that time. Retirement funds can be provided in monthly payments or a lump sum.
Tips for Retirement Planning
There are several retirement planning tips that may make this process easier. One of the most important tips is knowing how much money you need to successfully retire. The last thing you want to do is find yourself stuck in a bad financial situation due to a miscalculation.
Once you know how much you need, then you can start exploring options for retirement. Compare retirement plans to see which one is most likely to cover all of your retirement expenses. Use a retirement budget to increase your chances of meeting this goal.
You can use your budget to plan ahead and figure out when you would need to start investing in retirement. A deferred compensation plan can do many of these steps for you. Private retirement options will require more conscious effort and planning.
Call Tom Bible Law Today
You may not have to go through bankruptcy alone. Feel free to contact us at Tom Bible Law by dialing (423) 424-3116 for a consultation today about bankruptcy. Our legal team of Tennessee bankruptcy lawyers can help you explore the best bankruptcy options given your unique financial situation. We are located in the Tennessee cities of Chattanooga and Tullahoma.