Next week, state employees will notice a 3.25% increase in their paycheck. This increase is thanks to legislation that passed in March 2022, and is intended to help people with the COVID-19 pandemic and the cost of inflation.
With the extra money coming in, you may feel like you can finally book that trip to Ocean Shores or get something from your Amazon Wishlist.
Now is a good time to book that vacation — just don’t forget about your long-term goals too.
Here are 3 reasons why you should increase your DCP savings now
1. Stress-free investing
It’s an easy way to start investing for the future, especially when you have no idea where to start and are concerned about losing your hard-earned money.
Funds available for accounts are professionally managed, so all you have to do is decide how much you want to contribute each month. Contributions are automatically deducted from your paycheck, so saving is easy. You can start with as little as 1% of your paycheck.
2. Take advantage of compound interest
The money you invest with DCP will grow with the help of compound interest.
Here’s an example of how your money can grow. This shows a 6% a rate of return.
- If you invest $150 a month for 10 years, your $18,000 grows to $24,705
- If you invest $150 a month for 30 years, your $54,000 grows to $150,000
3. Lower your taxable income
The money in your DCP account is taken out of your paycheck before taxes. This lowers your taxable income while you’re working. This means you won’t have to pay income taxes on your investments until you withdraw your funds in retirement. A 401(k)-retirement plan often works the same way.
If you put $100 into your DCP account each month, your paycheck is only reduced by about $60-$80 per month. (The exact amount will vary depending on your salary and tax bracket.)
How to change your contributions
With DCP, you can change or pause your contributions at any time. You can contribute to your DCP account in dollar or percentage amounts.
By choosing to contribute by percentage, it will automatically go up as your pay increases. Chances are you’ll hardly even notice the difference in your pay checks, and your tax bill will be lower.
1. Log in to your DCP account.
2. From the DCP account page, select: Change Monthly Contribution, Transactions.
Don’t have a DCP account? It only takes a few minutes to register.
Original source can be found here.
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