Why Your 457 Deferred Comp Plan is Your Rock-Solid

Number Two

As law enforcement professionals, we dedicate our lives to serving and protecting our communities. It’s with this dedication in mind that the Arizona Police Association wants to emphasizes the importance of protecting YOUR financial future. While your hard-earned pension remains the cornerstone of your retirement security, we want to underscore the critical role your 457 deferred compensation plan plays as the second most important financial tool available to you.

Benefits of a 457 Plan: 

Here are a few reasons why 457 Plans are a great value to members. First, contributions made into the plan are pre-tax dollars from your compensation. Meaning, if you make $60,000 a year, but you put $500 a month into your 457 savings, your taxable income at the end of the year is only $54,000. That is a savings to your tax bill right there. Second, the money and compounding interest grows tax free, earning you more dollars over the years. Last, the 457 Plan has no minimum age requirement to make withdrawals. This means once you separate from employment, you can start to withdraw the funds with no penalties no matter how young you are. As you know, 401(k)’s you must be at least 59.5 or you have to pay a 10% penalty on any withdrawals.

I Don’t Know Anything About Investments, What Do I Do?

As a law enforcement professional, you are well trained and educated in being the best officer you can be. But not many of us were trained in being an investment manager. This is okay, because most plans have options for us. First, just start saving. In my over 25 years since I started investing, I have never heard anyone say they were upset they saved too much money. Starting early is one of the best things you can do. Second, most “record keepers”, the company that keeps track of your investments for your jurisdiction (Empower, Nationwide, Mission Square, etc.) offer an investment management service for a fee. If you want professional advice, you can pay a small fee for it. Last, many plans offer “target-date” funds, such as Retire 2040, Retire 2045, Retire 2050, etc. These funds are managed to lower risk exposure as you get closer to retirement at a small fee. It’s a kind of “set it and forget it” strategy. Two words of advice if you use target-dates. Put all your funds into the one fund you pick. If you use two or three, you could be working against the fund manager. Also, pick the target date when you will need to start withdrawing the funds, not the date you plan to retire. Many officers retire early, but don’t need to start drawing the funds until years later.

In Conclusion:

The demands of law enforcement can make it easy to put off retirement planning, but every day you delay is a missed opportunity to secure your future. Talk to your agency’s benefits coordinator or a financial advisor to enroll in your 457 plan today. Even modest contributions can make a significant difference over time. As the Arizona Police Association, we urge every officer to take this critical step—because after a career of protecting others, you deserve to protect your own financial future.