Don’t Turn Down Free Money
It is hard to imagine a scenario when turning down free money is a good idea. If you fail to contribute to your retirement plan up to the amount your plan sponsor/employer matches, then you are turning down money you could otherwise use for your retirement. Be sure to take advantage!
Know Your Formula
UMPIP plan sponsors may offer one, or a combination of, the following types of plan sponsor/employer contributions to participants.
Matching—Your plan sponsor contributes a percentage of your contributions up to a percentage of your compensation.
Example 1: Your plan sponsor contributes 100% of your contributions up to 2% of compensation, which is a dollar-for-dollar match.
If you contribute 2% to UMPIP, your plan sponsor contributes 2%.
If you contribute 1%, your plan sponsor contributes 1%, which means you miss out on a possible additional 1%.
Example 2: Your plan sponsor contributes 50% of your contributions up to 2% of compensation, which means that when you put in a dollar, you get 50c from your plan sponsor.
Conditional—Your plan sponsor contributes a percentage of your compensation if you contribute a minimum amount.
Example: Your plan sponsor contributes 6% of your compensation if you contribute at least 3% of your compensation.
If you contribute 3%, your plan sponsor contributes 6%.
If you contribute 2%, your plan sponsor contributes 0%.
Discretionary—Your plan sponsor may choose to make a contribution to your retirement account at the end of the plan year, but the contribution is not guaranteed.
Non matching—Even if you contribute nothing to your retirement account, your plan sponsor contributes a certain percentage of your compensation.
Keep in mind your formula may be different from the examples presented above. CRSP* participants—If you contribute to UMPIP, the Church matches 100% of your contributions (up to 1% of your plan compensation) and deposits those matching funds into your CRSP DC account. RPGA** participants—If you contribute to UMPIP, the Church matches 100% of your contributions (up to 2% of your compensation)—and deposits those matching funds into your RPGA account.
Choose a Percentage to Contribute, Not a Fixed Amount
As your salary grows, the dollar value of your withholding and the employer contributions will also automatically increase. Selecting a percentage to contribute also makes contributing to your retirement easier because you won’t miss any earnings you don’t see.
Save More When You Can
While averaging a 1% (CRSP) or 2% (RPGA) contribution to UMPIP will earn you the matching funds, a higher level of contributions will better prepare you for retirement. Plus, saving more than your match might reduce your taxes.
Before-tax retirement contributions aren’t taxed until they are withdrawn from your account, which means they reduce your taxable income in the year they are contributed. Learn more about tax savings that may be available when you contribute toward your retirement.
You’re allowed to make annual personal contributions of $18,500 in 2018 ($24,500 if you are 50 or older), according to IRS rules. Employer contributions are not included in your annual contribution limit. Learn more about IRS limits.
You can begin contributing to UMPIP or change your contribution percentage at any time by submitting a new Contribution Election form.
The longer you wait, the more you’ll have to set aside to prepare for your financial future, and you’ll miss out on potential earnings on your investments. So start or increase your savings today!
Earn a Full Match for Months Missed this Year
Even if you did not begin contributing to UMPIP on January 1, there is still may be time to earn the full match. CRSP participants (and some RPGA participants) can catch up contributions. Here’s how:
1. Submit a Contribution Election form to your conference or salary-paying unit indicating the percentage of compensation you would like to contribute to UMPIP.
2. Make sure you contribute enough to make up for the months you missed. For example, if you are in CRSP and begin contributing in June, you will have missed 5 months of contributions. Therefore, you could:
Contribute at least 2% of your plan compensation to UMPIP for five months and make your regular 1% contribution for the final month of the year, or
Contribute an extra 5% for one month, making your contribution for that month 6% of plan compensation, or
Contribute an additional one-time, flat-dollar amount to UMPIP that’s equal to the amount of contributions you missed.
Spread your extra contributions over as many months as you choose provided you catch up by the end of the year.
3. Don’t know how much you need to contribute to catch up? Review your copy of the Contribution Election form(s) you submitted to your plan sponsor to determine the percentage or flat-dollar amount you have contributed to UMPIP this year.
* CRSP is the Clergy Retirement Security Program
** RPGA is the Retirement Plan for General Agencies