An Additional Option for your Drexel University Retirement Plan
Did you know that starting in 2018 you have another option to save for your retirement? In addition to the pre-tax 403(b) contributions that were previously offered, you can now make after-tax contributions to a Roth 403(b) account—or a combination of both. Each offers a valuable tax advantage:
- Pre-tax 403(b) contributions lower your taxable income, so you avoid paying taxes today, but not indefinitely. When you make a withdrawal, you will be taxed on your contributions and any earnings.*
- Roth 403(b) contributions do not lower your taxable income, so you pay taxes at the time of contribution. But you can make tax-free withdrawals of both your contributions and any earnings, provided you are at least age 59½ and made your first Roth contributions at least five years earlier.**
There are merits to both options, and participants are strongly encouraged to meet with a certified professional to determine the best strategy. There will be sessions available for participants to sign up in Career Pathway starting in mid-January.
*Withdrawals made before age 59 and a half may be subject to a 10% federal penalty tax.
**Earnings withdrawn before age 59 and a half or before the five-year holding period may be subject to income tax and a 10% federal penalty tax. State taxes may apply.
This story was published in the winter 2018 issue of Drexel Quarterly.