If you are a member of the pension system and expect to collect social security during retirement, you may be wondering whether joining DCP will benefit you. While pension and social security provide two-thirds of a sound foundation for retirement, these two income sources alone may not be enough to live comfortably and cover expenses adequately.
Experts say an individual will need as many sources of savings as possible for retirement. NYC DCP is an excellent choice as a third stream of income to supplement pension and social security throughout retirement
Depending on the age in which you retire, you may not be eligible to collect Social Security yet. During this time between retirement and Social Security pay out, it is possible you may not have enough to cover your expenses. Additionally, your social security benefit increases the longer you wait. This is where the NYC Deferred Compensation Plan comes in.
The money saved in the NYC Deferred Compensation Plan can be used as a bridge to cover necessary expenses in that period of time before you decide to collect Social Security. Even if you do retire at a normal retirement age and are eligible to collect social security, Pre-Tax money is tax deferred – lowering your taxable income today.
If you join the Plan on a Roth basis, the taxes are paid at the time your contributions are made. As long as you reach certain IRS requirements for Roth (attainment of age 59.5 and the first contribution having been at least five years ago), at retirement the earnings are not taxed.
So...NYC DCP is an excellent way to supplement your retirement income - whether you're an employee who is a member of a City pension plan using DCP as supplemental savings to your pension and Social Security, or a non-pension member employee using DCP as your sole retirement plan in lieu of Social Security (if elected), or a non-pension member employee who is contributing less than 7.5% to either the 457 Plan or the 401(k) Plan.