The tax benefits of participating in the RIC 457 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 available) | |
|---|---|---|
| Contributions | Made before state and federal tax withholding | Made after state and federal tax withholding, See Roth 457 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 457 earnings are tax-free if the Roth participant meets all 3 of these requirements.
- A distributable event has occurred
- Roth account is held 5+ years, and
- 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.