As a participant in the Deferred Compensation Plan (DCP), you have the option to contribute a fixed/flat dollar amount or a percentage of your pay to the DCP. While both options will help you save for retirement, contributing a percentage of pay can be a more effective way to build long-term savings.

One of the most important reasons you should consider switching from flat dollar contributions to percent of pay contributions is because your contribution rate will maintain pace with your salary. In fact, contributing a percentage of pay can lead to bigger savings over time, especially if your salary increases over the course of your career, allowing you to save more for retirement in the long run. In contrast, if you save a flat dollar amount and do not increase it over time, you risk not saving enough to keep up with the income you’ll need in retirement.

Before reading on to the step-by-step guide on how to make the switch, take a look at the chart below. This compares two savers: Joey who makes flat dollar contributions over the course of his career, and Monica who contributes at least 3%. They both have identical salaries, but the savings potential for Monica is significantly higher.

Here’s how to make the switch from flat dollar to percent-of-pay

Step 1: Sign in to your DCP account at LA457.com

Step 2: Select “Manage Contributions” under the “Contributions and Savings” tab

Step 3: Select “Update my Contributions”

Step 4: Select the “Percentage” button and drag the dial to the percentage you wish to contribute. For assistance determining the right percentage, use our helpful calculator here. Once you’ve selected the percentage you wish to contribute, click “Save Contribution Updates”. Done!

For one-on-one support, please reach out to our team of local retirement counselors for assistance. Set an appointment here.

Revitalize your retirement savings with percent-of-pay contributions

Here’s how to make the switch from flat dollar to percent-of-pay