Many financial experts say that you will need 70 to 80 percent of your pre-retirement income to maintain your standard of living once you retire. For NYSLRS members, a financial plan in retirement is likely to include your NYSLRS pension and Social Security benefits. For greater financial stability, it may make sense to supplement your retirement with personal savings such as a deferred compensation plan.

What is Deferred Compensation?

Deferred compensation plans are voluntary retirement savings plans like 401(k) or 403(b) plans – but designed and managed with public employees in mind. The New York State Deferred Compensation Plan (NYSDCP) is the 457(b) plan created for New York State employees and employees of other participating public employers in New York.

Once you sign up for the NYSDCP, you can build your own investment portfolio or invest in established investment funds. Your contributions will be automatically deducted from your paycheck, and you can contribute as little as 1 percent of your earnings.

One option for a deferred compensation plan is a tax-deferred account, where you make contributions with pre-tax money. This way, you won’t have to pay State or federal taxes on your contributions and earnings until you start making withdrawals. Your employer also may offer the option for a Roth account, where you make contributions with after-tax money. With a Roth account, you won’t pay taxes on withdrawals in retirement. Find out more about both options.

If your employer is not an NYSDCP participating employer, check with your human resources or personnel office about other retirement savings options.

What Does Deferred Compensation Mean For Me?

Deferring income from your take-home pay may mean less money to spend in the short-term, but you’re planning ahead for your financial future.

You can enroll in a deferred compensation plan anytime — whether you’re approaching retirement or you just started working. Usually, the sooner you start saving, the better prepared you’ll be for retirement.