piggy bank with uncle Sam hatThe tax benefits of participating in the RIC 403b plan differ depending on whether you elect for your deductions to be taken from your paycheck before or (if your employer plan allows Roth contributions) after taxes.

Saver's Tax Credit: You may be eligible for up to a $1,000 tax credit read more...

 

Pretax

Post-tax Roth (if offered by your employer)

Contributions Made before state and federal tax withholding Made after state and federal tax withholding (See Roth 403b Summary for more information)
Immediate benefit Lower taxable income for the year None
Earnings (if any) Grow tax-deferred Grow tax-free
Distributions Taxable as ordinary income Tax-free if qualified
 
 

 

Qualified Roth Distribution

Roth 403b earnings are tax-free if the participant meets all 3 of these requirements.

  1. A distributable event has occurred
  2. Roth account is held 5+ years, and
  3. The participant is age 59½ or older, disabled, or deceased.

If one or more of these requirements are not met, it is considered a non-qualified Roth distribution and subject to taxation on the earnings portion of the distributed amount. Roth contributions were invested after taxes were withheld so distributions of Roth contributions are tax-free.

 

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