Your plan provides the option of making either traditional or Roth contributions. Here are some common questions and answers regarding Roth contributions to give you an overview of the feature.
Who is eligible?
If your plan offers Roth contributions, you can participate once you meet the plan’s eligibility requirements. There are no income restrictions, so high-income individuals can contribute as well; subject to tax or plan limits that may apply. Check with your employer to see if Roth is available.
How much can I contribute?
You can contribute up to the maximum limits set by the IRS and your plan sponsor. If you make both regular pretax contributions and Roth contributions, your combined contributions can’t exceed these limits. Check the chart below for current IRS limits.
Are there tax advantages?
Roth contributions are made with after-tax dollars so the account grows tax free and qualified withdrawals will not be taxed. If you expect your tax bracket during retirement to be higher than now, Roth contributions may make sense for you. Seek advice from a tax professional for more detail.
When can I receive tax-free distributions?
Distributions must be “qualified” if they are to be treated as tax free. A distribution is qualified if made after you reach age 59½, are deceased, or become disabled, and it is made at least five years after your first Roth contribution.
What happens to matching contributions?
Any matching employer contributions on Roth contributions are made with pre-tax dollars, as with traditional contributions.
What if I switch Jobs?
If you leave your employer, you can roll over your Roth account to a Roth IRA or to a new employer’s plan, if it accepts such rollovers.
Will I have to take RMDS?
Yes. Unlike a Roth IRA, employer sponsored retirement plans must distribute Required Minimum Distributions (RMDs) once you terminate employment and reach age 72*. Once you are eligible to request a distribution, consider rolling your Roth account to a Roth IRA, thereby avoiding the RMD rules.