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hi guys welcome back to the show today we're going to talk about deferred compensation plans the place where you put money away at work so you'll have a good retirement join us firefighter financial toolbox welcome back to the show my name is Brad and I'm a firefighter today and the firefighter financial toolbox we're gonna help you get some tools that can help you plan for your future today we're talking about deferred compensation plans or what are known by the IRS has qualified plans that's just a fancy way of saying a bucket of money that you can put away for your retirement now the most common one that we all know is a 401k plan 401k plan is what pretty much all of America has they can be used in big companies small companies pretty much everybody can can enroll in a 401 k plan the second type of plan out there is called a 403 B plan and these are mostly involved with either educational institutions schools universities teaching hospitals these kind of things they have some special rules that they follow ii don't know a whole lot about them other than that their contribution limits are the same as ours as firefighters we have was commonly known as a 4 5 7 b plan or a governmental agency plan for 5 7 b sr for state and local governments and a few nonprofit organizations they have some special taxation rules okay let's talk about the contribution types there's two types of contributions you can make to a deferred compensation the first is traditional or what we call pre-tax money this is money that comes out of your check before Uncle Sam gets a chance to tax you on it now the nice thing about a traditional account is you get a tax savings right up front now let's talk about whether we want to put the money away in traditional or if we want to put it in in a Roth now not all plans allow Roth contributions my 457 does not there are plans that do you'll have to check your plans rules so if you put in the money Roth the money does not get the money gets taxed before it comes to you and gets put into the into the plan so you would get taxed initially but that money will grow tax-free and it can be written be withdrawn at retirement free as well so whatever you make is yours to keep this can be especially important since we're going to have pensions now most people out there these days don't have pensions as firefighters were lucky that most of us will have some kind of pension now I know the pensions are going the way of the dinosaur and the politicians sure want to get rid of it because they sure don't like us having them but I'm pretty sure that in five years when I'm eligible to retire that I will have some kind of a pension or my tax planning in retirement I'm considering putting away a little bit extra into Roth and possibly doing some Roth conversions in the first few years of my retirement the advantage to putting money in a traditional now is if you are in a higher tax bracket or you and your spouse are in a high tax bracket you can get a nice savings for example this year wife and I will put away approximately $50,000 between her 401 K and my 457 that's going to reduce our taxable income by $50,000 that's a big tax savings problem being is when we go to take it out if we are in a higher tax bracket we're going to have to take that money - whatever our tax bracket is so let's say we're in the twenty five percent tax bracket and retirement that means a quarter of the money that I have saved let's say five hundred thousand dollars I'm gonna lose 125 thousand - taxes right off the top so that's something to think about like them or not and I don't want to get into politics Trump did lower our taxation rate and in fact it's the lowest it's been in almost 50 years so it's a good time if we were thinking about doing the Roth contributions to think about it because as you know in 2024 though Sachs rates are going to go back up to what they were before 2018 changes so I know that I was in the 28 percent tax bracket and I've been dropped down the 22 percent so six percent of a hundred thousand dollars was $6,000 so as far as putting away money into either a Roth IRA or if you're a plan allow into a Roth contribution to your 401k or your deferred compensation plan so let's ask an important question does your employer give a match if your employer gives a match you need to take advantage of it here's why it's free money you put a dollar in they put a dollar in you get a hundred percent return your money there's no better investment now a lot of plans have restrictions on how that works a lot of times you'll see it written as will match 50% up to 6% you alright I hope you guys enjoyed the show I hope you got something on learn about the qualified plans and deferred compensation and different plans and some of the different things that involve what we need to do for these plans I'd like you to subscribe to the channel please if you like liked it hit the thumbs up button comment down below tell me what you if your plan has a match and if so are you contributing that much are you contributing to a Roth and you're contributing to any other plans let me know in the comments also if you have any plans for future shows guys put them in the comments I will respond if you give me an idea I want to talk about it I want to help well I want to thank you again for joining me today on the firefighter financial toolbox where we give you tools to get financial independence and enjoy a long retirement have a good week [Music]