Dearborn & Creggs is a highly regarded leader in providing financial planning for the municipal employee community in the Greater Houston Area. For more than a decade, we have served employees in Houston ISD, Fort Bend County and City of Sugar Land, helping them achieve their financial goals and plan for a comfortable retirement through use of the 457(b) Deferred Compensation Plan.

As an employee of HISD, Fort Bend County or Sugar Land, you have the opportunity to increase your retirement investments with the 457(b) plan. This approach provides a smart retirement savings strategy by combining pre-tax, salary-deferral contributions with tax-deferred earnings.

The 457(b) plan is designed to help you save tax dollars. Your contributions are not subject to current federal taxes and you enjoy tax-deferred compounding of any investment earnings until you make a withdrawal. Your money only becomes taxable when you begin taking withdrawals, usually at retirement or separation from service.

Here are few questions and answers about the 457(b) plan:

How does this plan work?

The 457(b) plan allows you to authorize your employer to make pre-tax, salary deferred contributions to your account. You decide the amount you wish to invest for your future and your employer remits this amount to an individual account created by you. You, along with your Dearborn & Creggs financial advisor, select the appropriate investment vehicle. All your earnings then accumulate tax deferred.

How much can I invest?

All participants in 457(b) Deferred Compensation plans are eligible to shelter 100% of their compensation up to certain limits. First there is a base amount. In 2003 the base amount is $12,000. This rises by $1000 per year until 2006 when the base amount is capped at $15,000. In addition, if you attain age 50 or greater in 2003, you may take advantage of the “age 50+ catch-up” by increasing your contribution by an additional $2000. This catch-up increases by $1000 per year until it reaches $5000 in 2006. Therefore, in 2003, you may be eligible for a total contribution to your 457(b) account of $14,000. The maximum climbs to $20,000 in 2006. If you are within three years of attaining your normal retirement age, you may be eligible to contribute as much as double the base amount. Your Dearborn & Creggs representative can help you determine your maximum contribution amount.

Can I adjust my contribution amount after my plan has begun?

Yes. Participants in 457(b) programs are permitted to make more than one salary-deferral election per year. Your employer can provide you with details regarding your plan.

Can I continue this tax-advantaged plan if I leave my present employer before retirement?

Yes. Should you go to work for another 457(b)-eligible employer, you can resume contributions to your existing plan or transfer assets into a new plan. If your new employer is not eligible, you can maintain your present account or roll over your 457(b) plan into an IRA.

When can I begin withdrawing from my account?

The 457(b) plan allows you to withdraw from your account for the following reasons:

• Separation from service with your employer
• Unforeseeable emergency as defined by IRS
• Attainment of age 70 ½
• Death

The Dearborn & Creggs team will gladly answer any additional questions you may have and discuss how the 403(b) plan can work to achieve your goals. Please contact our office at (281) 277-6400 for personal assistance.