Roth 403(b) Supplemental Retirement Account
Beginning July 1, 2011, the opportunity to contribute to a Roth 403(b) supplemental retirement account will be available for benefits-eligible faculty and staff at Case Western Reserve University. A Roth 403(b) lets you access your savings tax-free in retirement, provided you meet certain conditions. Unlike the current Plan C and Plan A 403(b) retirement accounts, Roth contributions are made with after-tax dollars. So you pay more in taxes today, but less in retirement.
You can make tax-free withdrawals of your Roth contributions - and any earnings - provided you are at least age 59 1/2 and made your first Roth contribution at least five years prior. That could be a significant advantage over pre-tax contributions, whose withdrawals are currently taxed based on your federal income tax bracket.
Special Note for Plan C Participants
Keep in mind that only your pre-tax contributions to Plan C are eligible for University matching contributions. If you want to make Roth 403(b) contributions, be sure to also contribute at least 4% of your salary on a pre-tax basis so that you receive the full university match. The combined pre-tax and Roth supplemental retirement contributions are limited by IRS maximum contribution allowance of $17,500 for 2014.
Who should consider a Roth 403(b) account?
If you are financially well-prepared for retirement, the Roth feature may be worthwhile. Strong savers can owe significant income taxes in retirement. Having tax-exempt Roth savings could be a real help. You may benefit by making Roth contributions if you:
- Have substantial pre-tax savings in other retirement accounts.
- Have a current income that is too high to allow you to contribute to a Roth IRA.
- Are at the start of your career and expect your income to rise substantially over the years.
- Are in a low tax bracket today - 10% or 15%.
TIAA-CREF and Vanguard consultants visit CWRU regularly. You can make an appointment to discuss whether a Roth 403(b) is right for you.