About Deferred Compensation
You’ve probably heard there are different types of retirement plans offered by employers. As an employee of the City of Chicago, there is a plan created specifically for you.
As the plan administrator for the City of Chicago Deferred Compensation Plan, Nationwide® has worked with public sector employees for more than 40 years, so we know the kinds of questions you may have about your plan. We’ll give you the tools and information to help you feel confident about investing for retirement. Keep in mind that investing involves market risk, including possible loss of principal, and there’s no guarantee that investment objectives will be achieved.
Your 457(b) deferred compensation plan is a retirement plan offered by The City of Chicago, created to allow public employees like you to put aside money from each paycheck toward retirement. A deferred comp plan can help bridge the gap between what you have in your pension and Social Security, and how much you’ll need in retirement.
Here are some frequently asked questions about deferred comp plans:
- What sets a 457(b) apart from other retirement plans? A 457(b) may offer benefits other retirement plans can’t, like penalty-free withdrawals once you stop working for The City of Chicago.
- What does tax-deferred mean? Basically, you don’t pay income taxes on Plan contributions or earnings until you retire and/or begin to take payments from your account. This may lower your taxable income currently.
- Can I afford to save for retirement? You can’t afford not to – and since your contributions aren’t taxed, contributing to your plan could have less of an impact to your take-home pay than you expect. Use the Paycheck Impact Calculator to see how saving will affect your paycheck.
- How much should I put in my account? If you’re unsure, you can use our tools and Learning Center to help decide how much to contribute, what funds to choose and how to use your money when you retire. To see the big picture of how much income is needed in retirement, use the Interactive Retirement PlannerSM.
- Can I combine retirement accounts? Our Retirement Specialists will work with you to combine, or combine, or consolidate your eligible retirement accounts into your City of Chicago Plan account. This may make managing your retirement investments a little easier. Qualified retirement plans, deferred compensation plans and individual retirement accounts are all different, including fees and when you can access funds. Assets rolled over from your account(s) may be subject to surrender charges, other fees and/or a 10% tax penalty if withdrawn before age 59½.
For a full-spectrum overview of the plan, review the Plan Document (PDF).
Get the help you need
The sooner you enroll, the more you can possibly save. Take a look at the Enrollment Checklist to see what you’ll need to have handy and enroll today!
PDFs require Acrobat® Reader®
There are three steps to participating in your deferred comp plan:
Enroll in your plan – It’s easy to participate in the City of Chicago Plan. Contributions are automatically deducted from each paycheck and deposited to your account, so you don’t have to remember to write a check.
- Use the Paycheck Impact Calculator to see how saving pre-tax will affect your paycheck.
Invest your money – You’ll choose funds from the list of investment options available within your Plan. Keep in mind, any investment involves risk and there’s no guarantee that any fund will achieve its investment objectives. But, we’re here to help.
- Use My Investment Planner to get a personalized retirement strategy, including recommendations for your retirement income goal, savings rate and portfolio asset mix. You’ll need to enroll first and then set up online access to use this tool.
Receive income – Many public employees retire earlier than those in the private sector, and if that’s the case, you’ll want to invest enough to live in retirement on your terms. Before you begin taking payments, review our Retirement Checklist to make sure you’re ready to transition from saving to spending.
- When you’re ready to receive income, these tips may help you do so wisely. Depending on the plan type you’re invested in, there may also be a 10% penalty on distributions prior to age 59½.
- Get more information on how to consolidate your retirement accounts to potentially make managing your money in retirement easier. Qualified retirement plans, deferred compensation plans and individual retirement accounts are all different, including fees and when you can access funds. Assets rolled over from your account(s) may be subject to surrender charges, other fees and/or a 10% tax penalty if withdrawn before age 59½.
Get the help you need
The sooner you enroll, the more you can possibly save. Take a look at the Enrollment Checklist to see what you’ll need to have handy and enroll today! Then, talk with one of our Retirement Specialists about the City of Chicago Deferred Compensation Plan.
Deferred comp helps put you in control of when, where and how much you invest. And that's just the beginning—here are four more reasons why it's smart to participate in your deferred comp plan:
1. You can start anytime
Your deferred comp plan will work for you whether you're approaching retirement or just getting started investing – putting away money in a tax-deferred account can offer several benefits.
- See how your investment can potentially grow due to the power of time and compounding.
- Use the Future Value Calculator to see how delaying enrollment could impact your savings.
2. Every little bit helps
Even investing a little bit of money can really add up over time – it's just important to get started! And if you continue to bump up contributions on a regular basis, the overall impact to your paycheck may not seem too painful. Consider putting raises or bonuses into deferred comp – it's an easy way to invest a little more.
|Growth Period||Ending Balance|
|Deferral Per Pay||Paycheck Impact||Annual Pay Reduction||Accumulation 10 Years||Accumulation 20 Years||Accumulation 30 Years|
This table shows the cumulative value of 26 biweekly deferral amounts over 10, 20, and 30 years, assuming a compound annual rate of 7% and a 25% federal tax rate, for a single person with an annual salary of $38,000 and one deduction for federal tax purposes. Actual investment returns will vary from year to year, and the value of your account after the specified periods of years shown in the table may be less or more than the amounts shown. This illustration is hypothetical and is not intended to serve as a projection of the investment results of any specific investment. If fees and expenses were reflected, the returns would have been less.
3. This plan is made for you
Unlike other retirement plans, a 457(b) deferred compensation plan takes into account that you may retire sooner than workers in the private sector. Generally, you don’t have to worry about paying a penalty for retiring early or beginning to take income from the plan before age 59½.
Read Why Invest Now? to learn why it's smart to get started with your deferred compensation now.
4. You'll get service you can count on
Nationwide is ready and willing to answer your questions. We've been helping public sector employees save for retirement for more than 30 years and our Retirement Specialists have helped educate thousands of employees about investing through their retirement plans. Feel free to call today — we don't charge a fee to work with a Retirement Specialist.
Read more about why Nationwide may be right for you.
Get the help you need
The sooner you enroll, the more you can possibly save. Take a look at the Enrollment Checklist for tips on the information you'll need to have handy and enroll today.
As a participant in The City of Chicago Deferred Compensation Plan, you'll have access to a wide range of investment options. Your investment options were selected by the City of Chicago Plan and can help meet your retirement planning needs. Keep in mind that investing involves market risk, including possible loss of principal. As you get started in the City of Chicago Plan, we'll help you understand market risk and strategies that may help you deal with it.
Understand your options
The investment choices available to you fall into five major asset classes:
- Risk-based funds
- Time-based fund
- Stock fund
- Bond funds
- Short-term investments
There are four classes of stock funds we offer:
- International stock
- Small-cap stock
- Mid-cap stock
- Large-cap stock
Get the help you need
Talk to a Retirement Specialist about your investment options or learn more about how to choose funds.
It only takes a few minutes to sign up. Here are some things you'll need:
- Your employer's name or employer's ID (City of Chicago ID #0035044001)
- Your Social Security number
- Your annual income
- Contribution amount
- Investment selections
- Read about your investment options
- Beneficiary names and Social Security numbers
Get the help you need
We'll even walk you through it. If you need more help, call one of our Retirement Specialists.