Roth 403(b): An opportunity to take advantage of tax-free income in your future

Looking for more opportunities to save now or reduce your taxable income later during retirement? Contributions to a Roth account provided through your employer’s 403(b) plan may be an attractive option for you.

Roth 403(b): An opportunity to take advantage of tax-free income in your future

Looking for more opportunities to save now or reduce your taxable income later during retirement? Contributing to a Roth account provided through your employer’s 403(b) plan may be an option for you.

A Roth 403(b) account permits you to:

Contribute after-tax dollars

Contributions are also:

• included in all catch-up contribution limits (both age 50+ catch-up and special catch-up), if applicable; and
• subject to the IRC 415 annual limits, as indexed, for aggregated employee elective contributions, employer contributions and any reallocated forfeitures.

Take tax-free distributions if the following conditions are met:

• Distribution must be made after the end of the five-year period beginning with the first year for which a Roth contribution was made to the plan, and
  • You turn age 59½,
  • You experience a financial hardship, or
  • Your total disability or death

Reduce taxable income during retirement, and possibly help reduce taxation of Social Security benefits under current law. Income taxes are payable on nonqualifying withdrawals from Roth account earnings. Federal restrictions and a 10% federal early withdrawal tax penalty may apply to withdrawals made prior to reaching age 59½.

Roth 403(b) basic features

• Roth 403(b) accounts are not subject to Required Minimum Distribution rules after 2024
• The RMD eligible age is as follows:
  • Age 73 if you were born January 1, 1951, or later
  • Age 72 if you were born after June 30, 1949, and before January 1, 1951 
  • Age 70 ½ if you were born before July 1, 1949.

*The RMD eligible age will increase to age 75 after December 31, 2032.

 

 

Treatment of retirement savings vehicles

 

	Traditional 403(b) Salary Deferral	Roth 403(b) Contribution	Roth IRA
Contribution taxable in year contributed	No	Yes	Yes
Contribution taxable in year distributed	Yes	No	No
Earnings on contributions taxable in year distributed	Yes	No, if distribution is made after age 591/2, death or disability, and, for Roth IRA, for first home purchase. Distributions must be made after the end of the five-year period* beginning with the first year for which a Roth contribution was made to the plan.
Eligible for rollover to non-Roth or traditional qualified plan, traditional IRA, 403(b) or governmental 457(b)	Yes	No	No
Eligible for direct rollover to other Roth accounts or to Roth IRA	Yes, but only to a Roth IRA	Yes	Yes, but only to a Roth IRA
Eligibility for contribution subject to family adjusted gross income limits	No	No	Yes
Employer can match employee’s contribution	Yes, but is pretax and taxable upon distribution		No

_{* The Roth 403(b) account and a Roth IRA have separate and distinct five-year aging periods (or clocks).}

 

Ready to take action?

You should carefully assess the advantages and disadvantages of a Roth 403(b) if you:

cannot contribute to a Roth IRA due to income limits; are young and in lower income tax brackets than you might be in retirement; view tax hikes as inevitable; and/or want tax diversity and flexibility in retirement.

Use the online calculator to help you decide if contributing on a pretax and/or after-tax basis is appropriate for you.

 

Corebridge: Moving financial futures forward

At Corebridge Financial, we believe everyone deserves financial security. We're helping people take action toward their future goals with our broad suite of retirement solutions and insurance products. Every day, we work hard to make it possible for more people to take action in their financial lives—because action is the bridge from planning to outcomes, from today’s financial needs to tomorrow’s aspirations. 

 

Important considerations before deciding to move funds either into or out of a Corebridge retirement services account. There are many things to consider. For starters, you will want to carefully review and compare your existing account and the new account, including: fees and charges; guarantees and benefits; and, any limitations under either of the accounts. Also, you will want to know whether a surrender of your current account could result in charges. Your financial professional can help you review these and other important considerations.

This material is general in nature, was developed for educational use only, and is not intended to provide financial, legal, fiduciary, accounting or tax advice, nor is it intended to make any recommendations. Applicable laws and regulations are complex and subject to change. Please consult with your financial professional regarding your situation. For legal, accounting or tax advice consult the appropriate professional. 

Securities and investment advisory services offered through VALIC Financial Advisors, Inc., member FINRA, SIPC and an SEC-registered investment adviser. Annuities are issued by The Variable Annuity Life Insurance Company, Houston, TX. Variable annuities are distributed by Corebridge Capital Services, Inc., member FINRA.  All companies above are wholly owned subsidiaries of Corebridge Financial, Inc. Corebridge Retirement Services, Corebridge Financial and Corebridge are marketing names used by these companies.