Transcript Roth 403b slides 2012

Roth 403(b) Presentation
New Plan Contribution Option
Workplace Education Series
New Plan Contribution Option
– Effective [Date] a new contribution option is available to
you within your existing 403(b) plan
– You now may elect to contribute all or a portion of your
salary deferrals to a Roth 403(b) feature
– Your traditional pre-tax 403(b) contribution option will still
exist
– Roth 403(b) is a way to accumulate tax-free money for
retirement
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Roth 403(b) vs. Traditional pre-tax 403(b)
Workplace Education Series
How they are similar
How they are different
– Elect a contribution amount on
NetBenefits
–
The Roth 403(b) contributions are
after-tax
– Contributions are based on eligible
compensation just like your traditional
pre-tax contributions
–
Roth earnings are tax-free as long
as the withdrawal is qualified*
– Your Roth 403(b) contribution limits
are part of the same IRS limits set for
your traditional pre-tax 403(b)
contribution (for 2012 $17,000)
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* A qualified withdrawal in this case, is one that is taken at least 5 tax years after the year of your first Roth
contribution and after you have attained age 59 1/2, become disabled or deceased.
Roth 403(b) vs. Traditional pre-tax 403(b)
Workplace Education Series
Example: How
does Roth affect
your paycheck?
Lisa earns $40,000 annually and has elected to put
6% towards her Roth 403(b) contributions and 6%
towards her traditional 403(b) pre-tax contributions
on a monthly basis.
Lisa’s Monthly Contribution into each account
*Roth 403(b)
$200
*Traditional 403(b)
$200
Lisa’s Reduction in take home pay
*Roth 403(b)
$200
*Traditional 403(b)
$150
* This hypothetical example is based solely on an assumed 25% income
tax withholding rate. No other payroll deductions are taken into
account. Actual taxes and take home pay will depend on your
individual tax situation. Pre-tax contributions and any related earnings
will be taxed at the time of withdrawal. Any earnings on after-tax Roth
contributions are income tax-free if certain conditions are met.
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Roth 403(b) vs. Roth IRA
Workplace Education Series
– You may contribute to a Roth IRA only if your adjusted gross income falls
below a certain amount. There are no adjusted gross income limits for
contribution to a Roth 403(b).
– A Roth IRA is an account that is outside your retirement savings plan. Roth
403(b) contributions exist within your 403(b) retirement savings plan.
– The 2012 contribution limit for a Roth IRA is $5,000 per year [or $6,000 if
the Age 50 Catch-Up applies].
– In 2012, the combined IRS contribution limit for both Roth 403(b) and
traditional 403(b) pre-tax contributions if you are under age 50 is $17,000.
If you are over age 50 and make catch-up contributions, the combined IRS
contribution limit for both Roth 403(b) and traditional 403(b) pre-tax
contributions is $22,500.
– In a Roth IRA, you do not have to take a required minimum distribution
during your lifetime. With a Roth 403(b) you will have to take required
minimum distributions generally after you have retired and attained age
70-1/2.
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Note: You may be able to roll the money in your Roth 403(b) to a Roth IRA account and avoid these required
distributions – this option may most benefit those who want to leave this money to their heirs.
Who would benefit from a Roth?
Workplace Education Series
Depends on your personal tax
situation now and in the future
– If you contribute to a Roth 403(b) you are giving up a tax break today for a
tax break in the future.
–
Generally, if you expect to be in the same tax bracket in retirement as now, both a traditional,
pre-tax or a Roth 403(b) contribution are roughly equivalent from a tax perspective.
–
If you expect to be in a higher tax bracket in retirement, a Roth 403(b) may be the better
choice since you won't pay taxes on qualified distributions of earnings.
–
If you expect to be in a lower tax bracket in retirement, then a traditional, pre-tax 403(b)
contribution may make more sense for you.
– Younger employees who have a longer retirement horizon and more time
to accumulate tax-free earnings
– Highly compensated individuals who aren’t eligible for Roth IRAs, but want
a pool of tax-tree money to draw on in retirement
– Employees who want to leave tax-free money to their heirs
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Due to the differing tax implications associated with traditional, pre-tax versus Roth 403(b) contributions, and the
potential impact they may have on your current adjusted gross income, which may affect your eligibility for other tax
credits and benefits, you may wish to consult with a tax or financial advisor regarding your individual situation.
Considerations
Workplace Education Series
– Roth contributions are under the
same IRS limits as pre-tax
contributions.
– Your take-home pay will be less
than it would be if you made
traditional pre-tax contributions.
– For many participants a traditional
pre-tax 403(b) will still be the most
beneficial type of retirement savings
plan.
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Next steps
Workplace Education Series
– Read the fact sheet
– Talk with a tax advisor to help
determine if a Roth 403(b) is an
appropriate choice for you
– Call Fidelity at [xxx-xxx-xxxx]
– Go to www.fidelity.com/atwork/roth
for more information on the Roth
403(b) option
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Important legal information
Workplace Education Series
Keep in mind, investing involves risk. The value of your investment will fluctuate over time and
you may gain or lose money.
Information contained within this presentation is subject to change pending final regulations.
The tax information contained herein is general in nature, is provided for informational purposes
only, and should not be construed as legal or tax advice. Fidelity does not provide legal or tax
advice. Laws of a particular state or laws which may be applicable to a particular situation may
have an impact on the applicability, accuracy, or completeness of such information. Always
consult an attorney or tax professional regarding your specific legal or tax situation.
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