Roth 457(b) Accounts: A Potential Tax-free Retirement Income
You’ve probably heard of a Roth IRA – an investment vehicle that lets you make contributions that are not tax deductible but take tax-free distributions in retirement, after certain conditions are met. Did you know there’s also a Roth option for 457(b) deferred compensation plans?
When you choose make Roth 457(b) contributions, you’ll pay taxes upfront when your money goes into the plan. Then you’ll enjoy tax-free withdrawals – as long as you’re at least 59½, and do not take withdrawals from your Roth account for at least five years after your first Roth contribution is made to the plan.
You can choose to allocate part or all of your salary deferral to the Roth or all or part of your salary deferral to your traditional 457(b) pre-tax account.
Is a Roth 457(b) account right for you?
Only you can answer that question. But you may want to consider making Roth 457(b) contributions if you:
- Think that taxes will be raised before you retire and want to take advantage of potential tax-free withdrawals
- Expect to be in a higher tax bracket when you retire
- Are younger, with many years until your retirement
The Roth 457(b) account option has only recently been allowed by law, so it may not be available in your deferred compensation plan. Contact us if you have questions.
Get the help you need
Talk with one of our Retirement Specialists about whether Roth 457(b) may be right for your retirement portfolio.
Determine the possible tax advantages of making after-tax contributions to your plan by using the Roth Analyzer, which will provide you with a detailed summary based on your answers.
Neither Nationwide nor its representatives may offer tax or legal advice. You should consult your own counsel before making any decisions.