Roth 403(b) Option
Your participation in the University of Illinois Roth 403(b) option allows you the opportunity to accumulate additional retirement savings with the following provisions:
- The money you save through the Roth plan is automatically deducted from your pay on an after-tax basis and is included in current taxable income.
- Although you pay taxes up front on the Roth contributions, all earnings are tax-free, if they are part of a qualified distribution. A qualified distribution is generally one that is made five years after the year of the first Roth contribution and when a participant attains age 59½, has a severance from employment, dies, or becomes disabled.
- Retirement assets from a Roth account can be transferred tax-free to your beneficiaries.
Please note that loans are not available with the Roth 403(b) option.
Who might benefit from a Roth 403(b)?
Many retirement experts suggest that the following individuals may benefit from a Roth 403(b):
- Younger employees who have a longer retirement horizon and more time to accumulate tax-free earnings.
- Highly compensated individuals who are not eligible for Roth IRAs, but who want a pool of tax-free money to draw on in retirement.
- Individuals who seek to maximize flexibility in drawing their retirement benefits.
- Individuals who wish to diversify against potential tax risks associated with pre-tax savings.
- Employees who want to leave tax-free money to their heirs.
Roth Fund Selection
When enrolling in the Roth 403(b), if you do not make a fund selection with the investment vendor, your funds will be automatically defaulted into the age-appropriate lifecycle fund. If you wish to alter this fund selection, it is very important that you visit the appropriate vendor's website to choose your investments.
Note: TIAA requires that the fund mix for the Roth account be identical to the pre-tax fund selection. Therefore, if you are already contributing to the pre-tax 403(b) through TIAA, and add the Roth option, your Roth funds will be automatically distributed to the same fund mix as your pre-tax account. Any changes to this fund mix will affect both the pre-tax and Roth contributions. Fidelity allows you the opportunity to choose different fund mixes for the pre-tax and Roth contributions.
IRS Website - Retirement Plans FAQs regarding Designated Roth Accounts
Fidelity Webinar - The New Roth 403(b) Option
Fidelity Website - Roth 401(k)/403(b)
TIAA Publication - Introducing Roth for your 403(b) Retirement Plan (PDF Format)
*Please return to the main University of Illinois Supplemental 403(b) Retirement Plan page for enrollment information and additional information on the 403(b) plan.
This information is provided with the understanding that it is a source of information and does not constitute legal, tax, or other professional advice. If legal advice or other professional assistance is required, the services of a professional advisor should be sought.