How to save more with Washington's pre-tax savings/investment accounts for educators & public employees -
If you are saving money for a long-term purpose, you can benefit from checking out the Washington State Department of Retirement System's Deferred Compensation Program (DCP). With a DCP account, you can save on a pre-tax basis. That means that your savings are deposited from your pay warrant without any taxes or social security deducted. Thus, you earn interest on a larger deposit. (Note: You will pay taxes when you withdraw the funds.) Go to www.dcp.csplans.com for more information.
Key information to keep in mind about the DCP:
*You can invest in a variety of stocks, bonds, or a Savings Pool administered by the same people who administer your State pension. DCP is public and not-for-profit. The fees for the Savings Pool or the Bond Fund are miniscule (.13%) and other investments have fees that are generally lower than what can be found elsewhere. The Savings Pool has been earning almost 5% per year for the past few years, and is like a money-market fund. These investments are not guaranteed by the FCIC.
*You can invest from $30 per month up to $16,500 per year (and another $5,500 if over 50 years old). This might also be a good option for you or your family because it is in addition to limits on 401(k) and IRA deposits.
*Unlike a Plan 3 Self-Directed Account or a 403(b) investment, you can withdraw funds before retirement age without a penalty. You simply pay taxes. You can withdraw any or all of your funds when you stop working as an educator - at any age. You can also withdraw funds while you continue to work as an educator under certain conditions: If your total account does not exceed $5,000 and if you have not contributed for 2 years and if you have made no such previous "in-service withdrawal".
*You can change or stop your contribution and your investment selections at any time, without a fee.
*DCP is available only to educators and other public employees in Washington.
NESPA is providing this information so that you are aware of these State-provided options for educators Please read the information at www.dcp.csplans.com for complete details before making any decision.
