The New York State Deferred Compensation Plan (NYSDCP) Roth Option

The NYSDCP (New York State Deferred Compensation Plan) Roth Option is a new retirement savings option available as of August 1, 2012 to all Port Authority and PATH employees. What this new feature allows you to do is make contributions to a Roth Account that sits inside your deferred comp plan. This Roth Option will show up online — just like a part of your New York State Deferred Compensation core account.

Here is what matters most: (1)
All contributions to Roth accounts are made AFTER-TAX.
Which means, way down the road in retirement, there will not be any taxes owed when you take this money OUT. That is, unless the tax laws change!

Here is what matters most: (2)
You can still only contribute $17000 in 2012 (or $22,000 if you are over 50 years old). The special catch-up amount still stays at $34000. It simply does not matter whether the money goes into a Roth account or not. So if you are “maxing” your contributions each year (and you should!), you cannot contribute MORE than $17,000 per year ($22,000 if you are over age 50).

So you can choose:

Pay income taxes NOW and deposit all of your money into a Roth account (may be good if you are young).
Leave it the way it is — all contributions go tax free into your “core” account at deferred comp (may be good if you are at or near retirement).
Split the contributions: a portion into deferred compensation, a portion (taxed) into a Roth.

The main thing is we all need to save more money for retirement. No one has saved enough!

A few other points:

You cannot borrow from this account. (but it IS included when calculating the amount you can take in a loan against deferred comp)
If you take money OUT of a Roth account (or Roth IRA), and the account has not been open for at least five years — part of the distribution (the gain) will be taxable.
A Roth Account in your Deferred Comp is *NOT* the same as a Roth IRA. Some folks put money for their kids’ college in a Roth IRA. Call me to discuss.

Oh, you can Click Here for a pretty brochure the friendly folks at New York State Deferred Compensation have whipped up for you!

By the way, do you know about the “Special 457 Catch-up Provision?”
This could be a VERY big deal for you!
Participants who have not contributed the maximum limit under IRS law, in previous years, may now contribute an amount less than or equal to the maximum limit (essentially, up to double the maximum) in the three years prior to the individual’s normal retirement age.

So, what is your normal retirement age?