What is the difference between an after-tax (Roth) 403(b) and a pre-tax 403(b)?
Pre-tax 403(b) contributions are made on a before-tax basis, reducing your taxable income. You don’t pay taxes on the contributions or earnings until you withdraw the money. After-tax (Roth) 403(b) contributions are after-tax, which means you pay taxes on your contributions now, but all qualified* withdrawals, including earnings, are tax-free. Participants may make contributions on a before-tax basis, an after-tax basis, or some combination of the two up to the 403(b) contribution limit. Participants should consider holding both before-tax and after-tax (Roth) savings—the former to benefit in the event of lower taxes in your retirement years, and the latter to benefit in the event of higher taxes in your retirement years. This is tax diversification. The Roth 403(b) is an opportunity to have more control over your tax liability in retirement. *For qualified withdrawals from a Roth 403(b), the participant must be age 591/2 or older and have had the Roth 403(b) account for at least five
