Why pay more in retirement?
As you prepare for and enter retirement, you may see more interest from people offering to help manage your money. However, the County of San Diego Deferred Compensation Program (457(b) and 401(a) Plans) may offer important advantages for current and retired deputies.
As you transition into retirement and begin to access your retirement accounts, you may decide to look for additional ways to sustain your savings. Participants in the County’s Deferred Compensation Program (457(b) and 401(a) Plans) can take advantage of important benefits developed specifically for deputy sheriffs.
Help with your health care costs
A 65-year-old couple retiring in 2018 will need an average of $275,000 (in today’s dollars) to cover medical expenses throughout retirement.1 This estimate of out-of-pocket health care expenses does not include costs associated with long-term or nursing home care. As a retired deputy, you may be able to take advantage of a special health care provision (Provision 845) that allows you to direct up to $3,000 from your Deferred Compensation account(s) each year to pay insurance premiums for:
- Health, dental and vision
- Medicare Part B
- Medicare supplement
- Long-term care
That’s up to $3,000 per year distributed free from federal income taxes when the County of San Diego Deferred Compensation Program makes the payment directly to your insurance provider. The distribution can also apply toward your Required Minimum Distribution—an IRS rule that requires you to begin taking proportional distributions at age 70½.
This feature is unique to government plans and is not available if you roll out to an IRA.
Exemption from 10% penalty
Deputies who retire from County service at age 50 and older are exempt from a 10% excise tax on early distributions from their 401(a) (the 457(b) plan does not have an age penalty for distributions). This early withdrawal penalty exemption does not apply to distributions from an IRA, so if you roll your money into an IRA or another plan, you could be locking yourself into a 10% excise tax for any distributions until you reach age 59½.
There for you throughout your career and retirement
You may be looking at a retirement of 30 years or more, which means you have time to keep some of your assets invested for long-term growth. The investment options available through the County Program have been selected and are monitored for appropriateness to the needs of plan participants at any stage in their career and retirement. The County has a legal obligation to act only in the best interest of plan participants, and the Deferred Compensation Program belongs to several organizations that actively advocate to protect and improve the retirement benefits of deputies like you.
1Retiree health care costs continue to surge, Fidelity Viewpoints (September 2017).
Your Deferred Compensation account gives you access to a Certified Financial Planner™ at no additional cost, now and in retirement. Cathie Purdon is a Nationwide Personal Retirement Consultant, and a licensed financial representative who is dedicated to helping you consider your options and opportunities.
Cathie can help you prepare a comprehensive retirement income plan that includes a detailed cash flow analysis, unique to you. This analysis incorporates potential health care and long-term care costs so you can make informed decisions. If you, or your spouse, are eligible for a Social Security benefit, Cathie can help you understand your options and develop a strategy to maximize your benefit.
These services are available at no charge to all County of San Diego Program participants. Best of all, Cathie’s office is in San Diego, so she’s local and available by appointment.
Interested? Ask Cathie!
Cathie Purdon, CFP®
Before you consider moving to another provider, here are some additional things to consider:
Investing with lower fees
You could need 30+ years of income in retirement, which means you may want to invest some of your assets for long-term growth. Because fees are typically based on account size, the County of San Diego’s Deferred Compensation Program is able to keep participant fees low so more of your assets are at work for you in the markets.
Investment expenses – why pay 30% more?
Brokers, banks or financial advisers may offer plans with more investment options, but you may pay as much as 30 percent more for investing in them.1 Having more options available is not always better, especially if it means losing more of your account balance to pay higher costs. You would have to invest a million dollars or more to get access to some of the low-cost funds available through the County Program.
Custodial and service fees
Custodial fees are the price you may pay just to have an account at a brokerage or fund company. Some providers may charge additional service fees for things like taking a distribution either by check or direct deposit, or for rolling out to another provider. Fees are often scattered across providers’ websites in multiple documents, making it difficult to identify all applicable fees.2 The County plans do not charge any custodial fees, and unless you are requesting an overnight check there are never fees for any distributions.
Advisory fees may be charged by brokers or advisors to allocate your investments for you. The average fee for advisory services is more than 1.02% on top of the underlying investment expenses for accounts under a million dollars.3 The County offers a custom target date series which gives you a diverse asset allocation that rebalances regularly and adjusts to a more conservative allocation throughout your career and into your targeted retirement date. The County also makes Nationwide’s My Investment Planner tool available to you at no cost. My Investment Planner helps you determine your risk tolerance and select a diversified fund selection based on those results. If you prefer to have your retirement savings managed by professionals, you have access to Nationwide’s ProAccount, at nearly half the cost of the average advisory fee.
The investment options available through your County plans have been carefully selected and are continually monitored for appropriateness to the needs of County employees, at any stage in your career and retirement. The County has a legal obligation to act only in your best interest. Brokers or advisors may not serve as a fiduciary and not be required to act solely in your interest.
Consider the costs before moving
If you have retirement accounts outside the Program, evaluate the fees you pay, as well as how well you are diversified within that plan or product. Rolling your eligible retirement assets into the Deferred Compensation Program could lower what you pay in various fees and give you increased control of all your investments. Plus, the County’s Deferred Compensation Program is transparent about its minimal fees, which are needed to administer the Program and offer the available investment options. The Program also offers you access to Retirement Specialists and a Certified Financial Planner™, free to you as long as you have an account. You may want to compare the costs of the Program to others you have or are considering, before you make any moves.
1 Think Twice Before Rolling Over a 401(k), Liz Weston, NerdWallet (June 2016).
2 401(k) Plans: Labor and IRS Could Improve the Rollover Process for Participants, Government Accountability Office (2013).
3 Average Financial Advisor Fees & Costs: 2017-2018 Report, AdvisoryHQ (February 2017).
Investing involves market risk, including possible loss of principal. No investment strategy can guarantee a profit or avoid loss. Actual results will vary depending on your investment and market experience. Nationwide Retirement Specialists are Registered Representatives of Nationwide Investment Services Corporation (NISC), member FINRA. Nationwide representatives cannot offer investment, tax or legal advice. You should consult your own counsel before making retirement plan decisions.
Nationwide Investment Advisors, LLC (NIA) provides investment advice to plan participants enrolled in Nationwide ProAccount. NIA is an SEC-registered investment advisor. It assesses an asset-based fee to participant accounts when the managed account service is selected.
This material is not a recommendation to buy, sell, hold or roll over any asset, adopt an investment strategy, retain a specific investment manager or use a particular account type. It does not take into account the specific investment objectives, tax and financial condition or particular needs of any specific person. Investors should work with their financial professional to discuss their specific situation.
Nationwide has retained Wilshire® as an Independent Financial Expert for Nationwide ProAccount. Wilshire provides investment allocation portfolios based on participant ages and their personal tolerance for investment risk. Nationwide, the Nationwide N & Eagle, and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company© 2019 Nationwide.