Contributing to your 457 deferred compensation plan is an excellent way to save for retirement. But did you know the Illinois Municipal Retirement Fund (IMRF) Voluntary Additional Contribution program gives you the opportunity to earn 7.5% (subject to change) on after-tax contributions. Surprisingly, only a handful of people are aware of this program and even less are taking advantage of it! How does the program work? IMRF allows you to make after-tax contributions up to 10% of your earnings. Then, at the end of the year, whatever your January 1st balance was, IMRF applies a credit to your account equal to 7.5% of that amount.
Here’s an example of how the interest crediting works:
January 1, 2014 balance: $0
2014 contributions: $1,000
Credit applied on December 31: $0
January 1, 2015 balance: $1,000
2015 contributions: $500
Credit applied on December 31: $75
Here are your 2 options if you stop making contributions:
1. Leave your VAC on deposit with IMRF, or 2. Request a refund
Here are your 2 options if you leave your IMRF employer:
Here are your 2 options for withdrawals:
1. Take a lump sum, or 2. Get a monthly annuity (if your VAC balance is $4,500 or more)
Important things to consider:
– You can download IMRF’s VAC enrollment form here – The – – The information provided is a condensed version of the VAC program. Please be complete in your research and review all of the VAC program rules, which can be found here – If you withdraw your VAC before 59 ½ (or 55 if leaving an IMRF employer) you may have income tax penalties on earnings unless you rollover the taxable amount to an IRA or similar plan – – — You can get a refund of your VAC at any time, but you have to withdraw all of your VAC; you cannot take a partial refund – – You should strongly consider your tax status and determine if making pre-tax or post-tax contributions to a retirement plan is right for you (my post titled “Attack of the Tax Zombies” addresses this)
Securities and advisory services offered through Ausdal Financial Partners, Inc. Member FINRA/SIPC 5187 Utica Ridge Road Davenport, IA 52807 563-326-2064 www.ausdal.com. Public Retirement Planners, LLC and Ausdal Financial Partners, Inc. are separately owned and operated.