
BVSD offers seven different voluntary tax-deferred retirement savings opportunities that you can contribute to through payroll deductions: one 401(k), five 403(b) providers, and one 457(b). All BVSD employees are covered by the Colorado Public Employees’ Retirement Association (PERA). These voluntary savings plans are in addition to PERA. Visit www.copera.org or call PERA at 303-832-9550 for more information on PERA. Contributions to any of the voluntary tax-deferred savings plans will not affect your PERA benefit.
Once a month, each provider will be contributing an article to BVSD on the Inside. Visit BVSD's Savings Plan and Retirement Information page for information on all the plans. This month’s article is contributed by Dale Forde at VALIC, one of the five 403(b) providers.
Can you afford not to plan for retirement?
Perhaps the most obvious reason to include retirement planning in your financial strategy is the high cost of not planning for retirement.
Here’s why: Without a retirement plan, you could be missing an important opportunity to accumulate money for the future. You also could be paying higher current income taxes than necessary.
Worse, PERA or other resources might not be enough to maintain the standard of living you envision, particularly since certain cost-of-living expenses (such as healthcare, household and recreational expenses, plus income and property taxes) might increase over time while your retirement income might not.
Those are compelling reasons to start planning for retirement now while time is on your side. The sooner you start saving, the more time you’ll have to make use of a powerful tool—compounded interest on your long-term investments.
Know the facts about your retirement plans
When you participate in one of the tax-advantaged plans through BVSD, your benefit is determined by the total of your contributions, plus compounded interest, at the time of retirement. These types of plans include 403(b), 401(k) and 457(b) plans.
Important tax advantages: pretax contributions and tax-deferred earnings
Contributions to these plans are generally made by payroll deduction, before tax withholding is calculated. This reduces your taxable earnings and, consequently, your current income taxes. In addition, taxes on interest and earnings from your account are deferred until withdrawal, usually at retirement. So money that otherwise would have gone toward federal taxes remains in your account where it can continue to grow through compounding over time. You can contribute as much as $16,500 to a 403(b), 401(k) or 457(b) plan in 2009—and if you are at least 50 years old, you could be eligible to make an additional “catch-up” contribution of up to $5,500 in 2009.
Your savings through these plans is a tax-deferred, long-term investment; income taxes are payable at withdrawal. Federal restrictions and tax penalties can apply to early withdrawals. For more information and help with enrolling in a retirement plan with VALIC, call your local financial advisor at 1-800-448-2542 (option 2).