The Guam Deferred Compensation Investment Account Plan (GDC IAP) is a retirement savings plan designed specifically for employees of the government of Guam, as well as certain nonprofit organizations. It allows participants to save and invest a portion of their pre-tax income for retirement, providing them with a tax-advantaged way to build a nest egg for their golden years. The GDC IAP offers various investment options to participants, allowing them to customize their retirement portfolios based on their risk tolerance and financial goals. These investment options typically include mutual funds, stocks, bonds, and other types of securities. Participants can choose to allocate their contributions among these options according to their individual preferences. One particular type of Guam Deferred Compensation Investment Account Plan is the traditional 401(k) plan. This type of plan enables employees to contribute a portion of their salary deferrals on a pre-tax basis, meaning that these contributions are deducted from their taxable income. The earnings on these contributions grow tax-deferred until withdrawals are made during retirement, at which point they are subject to income tax. Another type of deferred compensation plan available in Guam is the Roth 401(k). Similar to the traditional 401(k), employees can contribute a portion of their salary deferrals into a Roth account, but these contributions are made on an after-tax basis. While participants can't deduct their contributions from their taxable income, the earnings and withdrawals from the Roth account are tax-free as long as certain conditions are met. This can be advantageous for individuals who expect to be in a higher tax bracket during retirement. The Guam Deferred Compensation Investment Account Plan also offers participants the opportunity to make catch-up contributions if they are age 50 or older. These catch-up contributions allow individuals to contribute additional funds to their retirement accounts, providing them with the ability to accelerate their savings as they approach retirement age. In summary, the Guam Deferred Compensation Investment Account Plan (GDC IAP) is a retirement savings plan designed for employees of the government of Guam and select nonprofit organizations. It offers various investment options, including traditional and Roth 401(k) plans, allowing participants to save for retirement in a tax-advantaged manner. Furthermore, the GDC IAP allows for catch-up contributions for individuals aged 50 and older. By taking advantage of this plan, employees can take control of their financial future and work towards a successful retirement.
Guam Deferred Compensation Investment Account Plan
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A deferred compensation plan withholds a portion of an employee's pay until a specified date, usually retirement. The lump sum owed to an employee in this type of plan is paid out on that date. Examples of deferred compensation plans include pensions, 401(k) retirement plans, and employee stock options.
Deferred compensation plans can be a powerful tool for early retirement goals. Deferring income to retirement might help avoid high state income taxes (ex: California, New York, etc) if you're planning to move to a low-tax state.
Key Differences Deferred compensation plans tend to offer better investment options than most 401(k) plans, but are at a disadvantage regarding liquidity. Typically, deferred compensation funds cannot be accessed, for any reason, before the specified distribution date.
In general, deferred compensation plans allow the participant to defer income today and withdraw it at some point in the future (usually upon retirement) when taxable income is likely to be lower. Like 401(k) plans, participants must elect how to invest their contributions.
457(b)s only allow $22,500 in contributions from any source in 2023 ($23,000 in 2024), whereas 403(b)s allows total contributions of $66,000, including $22,500 from an employee. For 2024, the employee 403(b) cap is $23,000, plus up to another $7,500 in catch-up contributions.
You can take out small or large sums anytime, or you can set up automatic, periodic payments. If your plan allows it, you may be able to have direct deposit which allows for fast transfer of funds. Unlike a check, direct deposit typically doesn't include a hold on the funds from your account.
Deferring income to retirement might help avoid high state income taxes (ex: California, New York, etc) if you're planning to move to a low-tax state. The biggest risk of deferred compensation plans is they're not guaranteed; if your company goes bankrupt, you might receive none of the income you deferred.