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What is that DCPSAFEHARBR line on my paycheck

Page history last edited by Robert da Silva 8 months, 2 weeks ago

tl;dr - UCSC takes some of our summer paycheck and puts it into a retirement investment account


Currently your money is in a "UC Pathway" fund, which estimates the year you'll retire and invests your money for you.  This is good---most years you can expect a return higher than inflation and way higher than a savings account at a bank.  The status quo is that every summer you will put in a little money, which will automatically be invested in a "UC Pathway" fund. (This is a 401A account, if that matters to you. You can open other accounts through fidelity.)


If you want to check on your account, or switch that money to a different fund, or contribute extra money to a retirement account, you can do that online. You can do this easily from the At Your Service portal (where you see paychecks). Click Investment Links; Fidelity Retirement Services; (make an account); UC DCP; Change Investments.  (Or open a new, non-DCP account)


Remember, this isn't a normal investment fund---you pay a high penalty if you try to get the money early (and I don't think you're even allowed to access that money until you leave UCSC).  There are also other options for starting to save for retirement (e.g. independent retirement accounts, IRAs).


Finally when you graduate, that account will probably be closed and you will be sent a check (details below).  You should put this into a retirement account; you should not cash this check yourself (doing so incurs tax penalties)


Below is the relevant details quoted directly from Badgrads


After Grad School: Saving your DCP money

 So you've graduated and you'd like to keep the 3٪ of your summer salaries that the University has diligently socked away for you at Fidelity. What do you do? It turns out that you can simply call Fidelity and ask them to change the account over to a “rollover” IRA (which is just an IRA started with cash from a different kind of retirement account). Thirty days after you formally terminate your employment with UCSC, inform your favorite financial services company (such as Vanguard, T. Rowe Price, Fidelity, or whoever is handling your IRAs) that you'd like to roll over your existing 401(a) plan into an IRA. They'll gladly walk you through the steps. Ideally, you'll perform what's called a “direct rollover” where Fidelity sends the money directly to your new IRA (actually, Fidelity sends you a check made out to the other institution and you pass it along. If the check is made out to you, it's an indirect rollover – see below). Effectively, the money simply changes names from a 401(a) plan to a rollover IRA.


 As of Jan. 1, 2008, you have two options on how to do this: you can roll your money into a Roth IRA or a traditional IRA. If you roll into a Roth, you'll have to pay regular income tax on the pre-tax portion of the conversion (since you haven't paid any taxes on this DCP money yet) but it's worth it to get a Roth (see the reasons a Roth is better below). If you roll the money into a traditional IRA, you can then convert it to a Roth later. An important note here if you are married or leaving UCSC for a high paying job: if your MAGI (roughly your total income minus pre-tax retirement contributions) on your income tax form for the year you roll over your money is more than $100,000, you cannot roll or convert the money into a Roth. In that case, you must roll the money into a traditional IRA and wait until 2010, when this income limit will disappear.


 If you don't have another IRA to merge with your rollover IRA from DCP funds, you won't be able to put this rollover IRA money into an mutual fund unless you've saved over $1000 (you usually need $3000, but there are a few plans (such as Vanguard's STAR fund) which will let you start with only $1000.) In that case the money will have to sit in a low-yield account, such as a money market account, until you can supplement it with money from your pocket to get up to the minimum. Until then, it will still be tax-advantaged, but it won't grow very fast.


 If you don't act to save your DCP money, Fidelity will mail it to you when you leave grad school (or after a sufficiently long period of account inactivity). By law, Fidelity will withhold a 20٪ tax penalty for early withdrawal of your retirement savings. If this happens, you still have a chance to save the money and avoid the penalty through an “indirect rollover”. To do this you must, within 60 days of the date on the check, open up a rollover IRA and put in the value of the check plus the 20٪ withholding penalty that was taken out. As long as you put the money back into a retirement account within 60 days, you won't be responsible for the 20٪ penalty (or, rather, you'll get it back when you do taxes because you'll add it to your “taxes paid” (listed on your 1099-R form) when calculating what you owe.)


 Rollovers and conversions don't count toward your $5000 annual contribution limit; that limit only applies to new, out-of-pocket contributions.

The details of Roth IRA rules are kind of complicated. Here is an excellent website with clear and detailed explanations of the rules.


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