The Georgia Deferred Compensation Investment Account Plan is a retirement savings program offered to employees of the state of Georgia. This voluntary plan allows employees to contribute a portion of their pre-tax income to various investment options, enabling them to save and grow their retirement funds in a tax-advantaged manner. One type of Georgia Deferred Compensation Investment Account Plan is the 457(b) plan. This plan is specifically designed for state and local government employees, including teachers, public safety personnel, and other civil servants. Through the 457(b) plan, employees can make contributions from their salary on a pre-tax basis, reducing their taxable income and potentially lowering their current tax bill. The contributions, along with any investment earnings, grow tax-deferred until the funds are withdrawn during retirement. Another type of plan is the 401(k) option, available for state employees who qualify for the Federal Insurance Contributions Act (FICA) exemption. The 401(k) component allows participants to make contributions to a pre-tax or Roth (after-tax) basis, with potential employer match options available as well. The variety of investment options within the 401(k) plan enables participants to customize their portfolios according to their risk tolerance and long-term retirement goals. Participants in the Georgia Deferred Compensation Investment Account Plan have access to a range of investment options, such as mutual funds, stocks, bonds, and stable value accounts. These options are carefully selected and managed by reputable investment firms to ensure diversification and potential growth opportunities. Additionally, participants can adjust their contribution amounts and investment allocations at any time, allowing for flexibility based on changing financial circumstances. To assist employees in making informed investment decisions, the Georgia Deferred Compensation Investment Account Plan provides educational resources and tools. Participants can access online calculators, retirement planning guides, and webinars to gain knowledge about key investment concepts and strategies. Additionally, the plan offers personalized assistance through phone consultations with retirement specialists who can address individual questions and provide guidance tailored to each participant's situation. Overall, the Georgia Deferred Compensation Investment Account Plan serves as a valuable retirement savings vehicle for state employees, offering tax advantages, investment flexibility, and educational resources. By actively participating in this plan, employees can take control of their financial future and work towards a secure retirement.
Georgia Deferred Compensation Investment Account Plan
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Investing your deferred compensation Your plan might offer you several options for the benchmark?often, major stock and bond indexes, the 10-year US Treasury note, the company's stock price, or the mutual fund choices in the company 401(k) plan.
Why Is Deferred Compensation Better Than a 401(k)? Deferred compensation is often considered better than a 401(k) for high-paid executives looking to reduce their tax burden. As well, contribution limits on deferred compensation plans can be much higher than 401(k) limits.
Remember, when received, deferred compensation is taxable as income. If you're still employed, it's added to your income, which could increase your tax rate. I advise using a deferred comp plan on a limited basis, if at all, for shorter-term goals.
Deferring income to retirement might help avoid high state income taxes (ex: California, New York, etc) if you're planning to move to a low-tax state. The biggest risk of deferred compensation plans is they're not guaranteed; if your company goes bankrupt, you might receive none of the income you deferred.
Like the better-known 401(k) plan in the private sector, the 457 plan allows employees to deposit a portion of their pre-tax earnings in an account, reducing their income taxes for the year while postponing the taxes due until the money is withdrawn after they retire.
Deferred compensation has the potential to increase capital gains over time when offered as an investment account or a stock option. Rather than simply receiving the amount that was initially deferred, a 401(k) and other deferred compensation plans can increase in value before retirement.
The plans carry some inherent risk for the employees in that the deferred payments are unsecured and not guaranteed. So if the organization faces bankruptcy and creditor claims, the employees may not receive their promised funds. (In contrast, qualified plans such as 401(k)s are protected from bankruptcy creditors).
Deferred compensation plans are funded informally. There's essentially a promise from the employer to pay the deferred funds, plus any investment earnings, to the employee at the time specified. In contrast, with a 401(k), a formally established account exists.