Transcript Document

A NEW WAY TO SAVE FOR
RETIREMENT
…INTRODUCING
THE ROTH OPTION
C42557
TODAY’S DISCUSSION
1. WHAT IS THE ROTH OPTION?
2. WHO MIGHT BENEFIT?
3. CONTRIBUTION LIMITS
4. DISTRIBUTION AND ROLLOVER
OPTIONS
5. WHAT ARE MY INVESTMENT OPTIONS?
6. GETTING STARTED
WHAT IS THE ROTH 403(B) OR
ROTH 401(k) OPTION?
>Retirement plan feature
>Allows for after-tax contributions, and
>Tax-free withdrawals of the accumulations
attributable to those contributions
THE BASICS OF ROTH SAVINGS
>Available in IRAs since the late 1990s
>Contributions are made on an after-tax basis
>Benefits:
> Qualified distributions are 100% tax free
> Provides additional flexibility in planning
retirement income
> Protects against higher future tax rates
EXPANDING THE ROLE OF ROTH
SAVINGS
403(b) or 401(k) retirement plans may allow a
participant to designate some or all of their
retirement plan elective deferrals as an after-
tax Roth-style contribution rather than a pretax contribution*
* Since January 1, 2006
WHO MIGHT BENEFIT?
> Highly compensated employees
> Young employees in a low tax bracket
> Individuals who seek to maximize flexibility
in drawing their retirement benefits
> Individuals who wish to diversify against
potential tax risks associated with pretax
savings
WHO MIGHT BENEFIT?
>The expected tax bracket a participant will
be in during retirement is important in
selecting their savings vehicle:
Higher rates
Roth is generally superior
Same rates
Depends
Lower rates
Traditional is generally superior
WHAT ARE THE DISTRIBUTION
OPTIONS?
>Tax-free withdrawals for qualified distributions
>A “qualified distribution” is generally one that
was made after age 59½ (or disability or), and at
least five years after January 1 of the year in
which the first Roth contribution was made to
this or a predecessor plan.
>Unlike the Roth IRA, first-time home purchase
is not a “qualified distribution.”
>Earnings from nonqualified distributions will be
subject to tax and potentially a 10% penalty.
WITHDRAWAL AND INCOME OPTIONS
TAKING INCOME WITH TIAA-CREF
AN ARRAY OF FLEXIBILITY AND CHOICE*
LIFE
ANNUITY
CASH OR
SYSTEMATIC
WITHDRAWALS**
TIAA
TRADITIONAL
INTEREST
ONLY
FIXED
PERIOD
ANNUITIES
MINIMUM
DISTRIBUTION
OPTION
* Income option availability is subject to your institution’s plan provisions.
** If you have an RA contract, the TIAA Traditional annuity contract does not allow lump-sum cash withdrawals from
the TIAA Traditional Annuity and transfers must be spread out in ten payments over a nine year period. If you have a
GRA contract, lump-sum withdrawals are available from the TIAA Traditional Annuity only within 120 days after
termination of employment and are subject to a surrender charge. All other withdrawals and all transfers to the Real
Estate Account or to CREF must be spread out in ten payments over a nine year period (five years for withdrawals
after termination of employment).
IS ROTH PARTICIPATION LIMITED
BY HOUSEHOLD INCOME?
> No !
> Unlike Roth IRAs, there are no maximum
income limits for Roth 403(b) or Roth
401(k) contributions.
CONTRIBUTION CHOICES ARE
> Roth after-tax contributions
> Pretax contributions
> Both pretax and Roth after-tax contributions
CAN I SPLIT MY ROTH DEFERRAL
ELECTION?
> Yes.
> You can elect a combination of both pretax
and Roth after-tax deferrals.
HOW ARE ANNUAL IRS
CONTRIBUTION LIMITS AFFECTED BY
ROTH AFTER-TAX CONTRIBUTIONS?
> The combination of traditional pretax and
Roth after-tax deferrals cannot exceed IRS
limits.
> For 2008, the 402(g) elective deferral limit
is $15,500 or $20,500 if you are age 50 or
older.
IDENTIFYING SAVINGS GAPS
TAKE ADVANTAGE OF HIGHER
CONTRIBUTION* LIMITS
2008 LIMITS FOR SALARY DEFERRAL RETIREMENT PLANS*
$23,500**
$22,000
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$20,500
$15,500
401(k)
&
403(b)
Plans
Most Employees
401(k)
&
403(b)
Plans
$18,500**
403(b)
Plans
Only
Employees Age
Employees With
50 and Over
15+ Years of Service
403(b)
Plans
Only
Employees Age 50
and Over with
15+ Years of Service
*Based upon your salary, you may contribute up to the maximum amount under each scenario represented by the different bars.
**You must be an employee of an eligible teaching institution, hospital, church, home health agency or health and welfare service agency to be
eligible for these contribution limits.
HOW WILL MY PAYCHECK BE
AFFECTED?
> Roth after-tax contributions do not reduce
your taxable income.
> Net pay will be reduced due to additional
tax withholdings.
ARE MY ROTH INVESTMENT
OPTIONS THE SAME AS MY 403(B)
OR 401(K) INVESTMENT OPTIONS?
> Yes !
ROLLOVER OPTIONS WITH THE
ROTH
ROTH
403(b) /
401 (k)
ROTH
403(b)
ROTH
IRA
WHAT WE’VE COVERED TODAY
> Basics of Roth savings
> Who might use the Roth option
> Contributions
> Distribution and rollover options
> Investment options
> Getting started
GETTING STARTED IS EASY!
> Complete and submit a new Salary
Reduction Agreement.
> First-time enrollees also need to complete
an enrollment application.
> Visit WSCTC benefits website for
enrollment instructions
TAKE THE NEXT STEP
Call us at 800 842-2776
Visit us at tiaa-cref.org
Please note: Neither TIAA-CREF nor its affiliates provide legal or tax advice.
Please consult with your advisors.
TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal
Investors Services, Inc., Members FINRA, distribute securities products. TIAACREF Trust Company, FSB provides trust services. TIAA-CREF Tuition
Financing Inc. 529 College Savings Plans are managed through TFI. Retirement
Annuity (RA) contract form series 1000.24; Group Retirement Annuity (GRA)
contract form series G1000.4. or G1000.5; G1000.6 or G1000.7 (not available in
all states). Supplemental Retirement Annuity (SRA) contract form series 1200.8;
Group Supplemental Retirement Annuity (GSRA) contract form series G1250.1,
(GSRA's are not available in all states); IRA annuity contract form series 1280.2
or 1280.4 (not available in all states); Roth IRA annuity contract form series
1280.3 or 1280.5 (not available in all states).
© 2008 Teachers Insurance and Annuity Association - College Retirement
Equities Fund (TIAA-CREF), 730 Third Avenue, New York, NY 10017
IMPORTANT INVESTMENT
INFORMATION
Annuity guarantees are based on the claims-paying
ability of the issuer.
Investment products are not FDIC insured, may lose
value and are not bank guaranteed.
You should consider the investment objectives,
risks, charges and expenses carefully before
investing.
This seminar must be preceded or accompanied by
a current prospectus.
Please call 877 518-9161 for additional copies, or
visit tiaa-cref.org for a prospectus that contains this
and other information.
Please read the prospectus carefully before
investing.