Roth 403(b)

A New Way to Save for Retirement

Effective January 1, 2006, employees of public school districts, community colleges and other non-profit organizations have an additional way to fund their retirement: the Roth 403(b).

The addition of the Roth 403(b) account option provides you with greater flexibility in your ability to save for retirement using either pre-tax dollars, after-tax dollars or a combination of the two.

Features of the Roth 403(b): A Tax-Sheltered Account (TSA)

• Tax-Free Income Source at Retirement
  The Roth 403(b) works just like a Traditional 403(b) with one important difference. Roth 403(b) contributions are made using after-tax dollars, whereas Traditional 403(b) contributions are made from pre-tax dollars.
  
  Although Roth 403(b) contributions won't reduce your current income tax liability, they will provide a tax-free income source at retirement (monies must be withdrawn after age 59 1/2 and the account must have been in existence for at least five years).
  
  
• Flexibility
  You now have the option of funding your retirement using either pre-tax [Traditional 403(b)] or after-tax [Roth 403(b)] contributions, depending on your situation.
  
  You can choose to direct your entire annual contribution to a Roth 403(b) or split your annual contribution between a Roth 403(b) and a Traditional 403(b) account in any manner you choose. However, your total annual contribution to all 403(b) accounts (Roth and Traditional) cannot exceed the maximum annual contribution limits for the year in which they are made.
  
  

• Contributions and Earnings Grow Tax Free
  Because a Roth 403(b) is a tax-sheltered account (TSA), your contributions and investment earnings may grow and compound tax free — there is no tax due upon withdrawal! The chart below illustrates the significant advantage tax-free growth can have over time:
  
  

  These charts are for illustration purposes only and, while based on current tax laws and regulations, should not be considered as tax advice or a projection of potential returns on any particular investment. At withdrawal, taxes may be due on earnings withdrawn. Your Dearborn & Creggs financial representative can give you personalized illustrations based on your circumstances. Withdrawals subject to tax will be taxed as ordinary income in the year received. Taxes and penalties for early withdrawal may apply if taken prior to age 59 1/2.

• Automatic Payroll Contributions
  Automatic payroll contributions provide a convenient and disciplined way for you to save for your retirement. Opening your Roth 403(b) account is even easier — simply contact your Dearborn & Creggs financial representative to help you complete the necessary payroll department forms.
  
  

Ask your Benefits Department if your workplace offers a Roth 403(b)

Dearborn & Creggs Can Help

Dearborn & Creggs financial representatives will discuss the features of both Traditional and Roth 403(b) accounts. They will review your financial situation and objectives, make investment and contribution recommendations and calculate your maximum allowable contribution.

You can count on your Dearborn & Creggs financial representative to provide the guidance and expertise necessary to help you make the best decision for your unique retirement and investment needs.