Your 457(b) deferred compensation allows 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 calculators 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 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 Assets rolled over from your account(s) may be subject to surrender charges, other fees and/or a 10% tax penalty if withdrawn before age 59½.