What are the advantages of Traditional and Roth contributions to a 403(b) plan?
A 403(b) plan usually has two options: Traditional and Roth contributions. With a Traditional account, a participant’s gross salary is reduced by the amount of the pre-tax contributions, deferring federal (and, in most states, state) income taxes. Earnings will not be taxed until withdrawal. With a Roth Account, participant contributions are subject to federal and, where applicable, state income taxes before they go into the plan but participants will not pay taxes on the earnings when they make a qualified withdrawal. Roth accounts are ideal for employees who expect to be in a higher tax bracket in retirement, and prefer to be taxed now in their lower bracket.
