The Philadelphia Municipal Retirement System, also known as Philly457, is a deferred compensation plan designed to help City of Philadelphia employees save for retirement. If you are a City of Philadelphia employee, it's essential to understand when to apply for Philly457 to maximize your retirement savings. In this guide, we will provide you with a comprehensive overview of the Philly457 plan, its benefits, and the best time to apply.
Understanding Philly457
Philly457 is a voluntary retirement savings plan that allows City of Philadelphia employees to contribute a portion of their salary to a tax-deferred retirement account. The plan is designed to supplement the employee’s primary retirement benefit, which is provided through the City of Philadelphia’s pension system. By contributing to Philly457, employees can reduce their taxable income, lower their tax liability, and accumulate a significant amount of money for retirement.
Benefits of Philly457
The Philly457 plan offers several benefits to City of Philadelphia employees, including:
- Tax-deferred growth: Contributions to the plan are made before taxes, reducing the employee’s taxable income and lowering their tax liability.
- Flexible contribution options: Employees can contribute a fixed amount or a percentage of their salary to the plan, making it easy to save for retirement.
- Portability: The plan is portable, meaning that employees can take their account balance with them if they leave the City of Philadelphia or retire.
- Loans and withdrawals: Employees can borrow from their account balance or withdraw funds in certain circumstances, such as separation from service or retirement.
It's essential to note that the Philly457 plan is a defined contribution plan, which means that the employee's retirement benefit is based on the amount of money contributed to the plan, plus any investment earnings. This is in contrast to a defined benefit plan, which provides a guaranteed benefit amount based on the employee's salary and years of service.
When to Apply for Philly457
City of Philadelphia employees can apply for the Philly457 plan at any time, but it’s generally recommended to start contributing as soon as possible. The earlier you start saving, the more time your money has to grow, and the larger your retirement account balance will be. Here are some scenarios where it may be beneficial to apply for Philly457:
New Hire
If you are a new City of Philadelphia employee, it’s a good idea to apply for the Philly457 plan as soon as possible. This will allow you to start saving for retirement right away and take advantage of the plan’s tax-deferred growth benefits.
Pay Increase
If you receive a pay increase, you may want to consider contributing a portion of your raise to the Philly457 plan. This will help you save more for retirement without reducing your take-home pay.
Changing Financial Circumstances
If your financial circumstances change, such as getting married, having a child, or paying off debt, you may want to reassess your contribution amount to the Philly457 plan. You can adjust your contribution amount at any time to ensure that you are saving enough for retirement.
| Contribution Type | Contribution Limit |
|---|---|
| Elective Deferral | $19,500 in 2022 |
| Catch-up Contribution | $6,500 in 2022 (if age 50 or older) |
How to Apply for Philly457
To apply for the Philly457 plan, you will need to complete an enrollment form and submit it to the plan administrator. You can obtain the enrollment form from the City of Philadelphia’s website or by contacting the plan administrator directly. Once you have completed the form, you will need to specify your contribution amount and investment options.
Investment Options
The Philly457 plan offers a range of investment options, including:
- Stock funds: Invest in a portfolio of stocks, such as the S&P 500 index.
- Bond funds: Invest in a portfolio of bonds, such as government or corporate bonds.
- Target date funds: Invest in a portfolio of assets that automatically adjusts based on your retirement date.
- Money market funds: Invest in a portfolio of low-risk, short-term investments, such as commercial paper or treasury bills.
It's essential to choose investment options that align with your retirement goals and risk tolerance. You can also seek the advice of a financial advisor or investment professional to help you make informed investment decisions.
What is the contribution limit for the Philly457 plan?
+The contribution limit for the Philly457 plan is 19,500 in 2022, plus an additional 6,500 catch-up contribution if you are age 50 or older.
Can I borrow from my Philly457 account?
+Yes, you can borrow from your Philly457 account, but you will need to meet certain requirements and follow the plan’s loan provisions.
What happens to my Philly457 account if I leave the City of Philadelphia?
+Your Philly457 account is portable, meaning that you can take it with you if you leave the City of Philadelphia or retire. You can also choose to leave your account balance in the plan or roll it over to an IRA or another qualified retirement plan.
