Dear Dave: I work for a fire department in Mississippi, and I’ve been trying to get information on the state’s deferred comp plan. No one here seems to know a lot about it. Should keep looking for information or is it not worth the bother?
Brandon: Deferred comp simply means you are electing to defer and receive a portion of your compensation at a later time or date. People who use these types of plans have a portion of their compensation withheld and directed into an investment of some kind instead, and you aren’t taxed on it immediately. It’s sort of like a pre-tax investment, but it’s not transferrable to an IRA or 401(k).
I would only do deferred comp after I’ve done everything else in terms of saving 15 percent of my income for retirement, including a Roth IRA. These are funded by after-tax dollars, but they grow tax-free. But I wouldn’t do any of this until after I had paid off all my debt, except for my home, and had an emergency fund of three to six months of expenses.
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Dear Dave: Our three kids are enrolled in a private Christian school. It’s a great place, and we truly believe our kids are getting a wonderful, faith-based education, but the tuition is pretty expensive. We’ve already had to start digging into our savings to make this happen, and the kids are only in elementary school. Should we keep them enrolled, or should we transfer them to public school?
Dear Maureen: I understand wanting your kids to get the best education possible. Private schools can provide some advantages academically, while a good Christian school might offer spiritual advantages. But the bottom line is this: If you can’t cash flow it, you shouldn’t do it.
All of my kids went to public schools, and they are good, moral people and strong Christians. In the process, they learned how to interact with people of all faiths, no faith, and how to display their faith and beliefs adequately in their personal lives and in the marketplace.
The truth is, you’ll find great things and bad things in any school, private or public, Christian or not. And no matter where your kids go to school, as parents, you still have to teach them about the world — the good and the bad, the right and the wrong.
Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.