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Roth 403(b) Presentation. Workplace Education Series 2 New Plan Contribution Option –Effective [Date] a new contribution option is available to you within.

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Presentation on theme: "Roth 403(b) Presentation. Workplace Education Series 2 New Plan Contribution Option –Effective [Date] a new contribution option is available to you within."— Presentation transcript:

1 Roth 403(b) Presentation

2 Workplace Education Series 2 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

3 Workplace Education Series 3 Roth 403(b) vs. Traditional pre-tax 403(b) –Elect a contribution amount on NetBenefits –Contributions are based on eligible compensation just like your traditional pre-tax contributions –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) How they are similarHow they are different –The Roth 403(b) contributions are after-tax –Roth earnings are tax-free as long as the withdrawal is qualified* * 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.

4 Workplace Education Series 4 Roth 403(b) vs. Traditional pre-tax 403(b) * 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. 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

5 Workplace Education Series 5 –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. 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. Roth 403(b) vs. Roth IRA

6 Workplace Education Series 6 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 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. Who would benefit from a Roth?

7 Workplace Education Series 7 Considerations –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.

8 Workplace Education Series 8 Next steps –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 for more information on the Roth 403(b) option

9 Workplace Education Series 9 Important legal information 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. Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI, ©2012 FMR LLC. All rights reserved


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