anothercog
Recycles dryer sheets
My MegaCorp has drastically improved their deferred comp program.
I have participated for the past couple years. I contribute a good chunk of my salary and bonus after maxing out my 401k and HSA.
Currently my plan only allows for a five year payout. The drawback of the five year payout is that taxes will be due in the state where the income was earned (California) as opposed to where I live when it's paid. The second drawback is the payment amounts over five years may be so high as to disqualify me for ACA subsidies.
The new plan will allow for ten year payouts. This will allow me to pay the taxes due in the state I then reside in vs. where earned. The longer pay out period should also lower the annual payments. The new plan will also allow me to contribute more. I can probably contribute about 65% of my pre-tax income.
Benefits of the plan are that the contributions grow tax deferred. Based on current tax rates and projected income, I can expect to save 5-6% of my federal taxes and 1-2% on my California income taxes if I remain in California and up to 9% if I move to a no tax state in retirement. I have no plans to move from California at the moment.
Drawbacks of the plan is that taxes change and who knows what the 2025 changes will bring. However, I think it's safe to say that taxes will be going up. If they go up primarily at the higher income levels, the plan will be more valuable. However, if my Company goes bankrupt, I may lose it all. That is a pretty low risk but it is not zero.
There is also a very low risk that my company would ever get acquired. But if it does the plan is held in a "Rabbi" trust that prohibits the funds from being used for anything other than plan payouts.
I'm probably about 4-9 years away from retirement.
Anyone have experience with these and if they are recommended?
I have participated for the past couple years. I contribute a good chunk of my salary and bonus after maxing out my 401k and HSA.
Currently my plan only allows for a five year payout. The drawback of the five year payout is that taxes will be due in the state where the income was earned (California) as opposed to where I live when it's paid. The second drawback is the payment amounts over five years may be so high as to disqualify me for ACA subsidies.
The new plan will allow for ten year payouts. This will allow me to pay the taxes due in the state I then reside in vs. where earned. The longer pay out period should also lower the annual payments. The new plan will also allow me to contribute more. I can probably contribute about 65% of my pre-tax income.
Benefits of the plan are that the contributions grow tax deferred. Based on current tax rates and projected income, I can expect to save 5-6% of my federal taxes and 1-2% on my California income taxes if I remain in California and up to 9% if I move to a no tax state in retirement. I have no plans to move from California at the moment.
Drawbacks of the plan is that taxes change and who knows what the 2025 changes will bring. However, I think it's safe to say that taxes will be going up. If they go up primarily at the higher income levels, the plan will be more valuable. However, if my Company goes bankrupt, I may lose it all. That is a pretty low risk but it is not zero.
There is also a very low risk that my company would ever get acquired. But if it does the plan is held in a "Rabbi" trust that prohibits the funds from being used for anything other than plan payouts.
I'm probably about 4-9 years away from retirement.
Anyone have experience with these and if they are recommended?