Roth elective deferrals are an optional plan feature that may be incorporated in an existing plan design by plan sponsors. These contributions are made with after-tax dollars, and any “qualified distributions” of the contributions plus earnings would be completely tax-free.
GuideStone provides several tools to assist you in determining if Roth elective deferrals are right for you. You may review Things to Consider (pdf), utilize our convenient calculator or review the following side-by-side comparison of Roth 403(b)/401(k), Roth IRA and Traditional 401(k) Retirement Accounts.
Feature comparisons of Roth 403(b)/401(k), Roth IRA and Traditional 401(k) retirement accounts*
| Feature |
Designated Roth 403(b)/
401(k) Account |
Roth IRA |
Traditional, Pre-tax
403(b)/401(k) Account |
| Contributions |
Designated Roth employee elective contributions are made with after-tax dollars. |
Roth IRA contributions are made with after-tax dollars. |
Traditional pre-tax employee elective contributions are made with before-tax dollars. |
| Income limits |
No income limitation to participate. |
Income limits:
• Married $166,000
• Single $114,000 (modified
AGI). |
No income limitation to participate. Same as designated Roth
401(k) account. |
| Maximum elective contributions |
Combined* employee elective contributions limited to: $15,500 in 2007. ($20,500 for employees 50 or over). |
Contribution limited to: $4,000 in 2007. ($5,000 for employees 50 or over.) |
Same combined** limit as designated Roth 401(k) account. |
| Taxation of withdrawals |
Withdrawals of contributions and earnings are not taxed provided they are a qualified distribution — the account is held for at least five years and made:
• because of disability,
• after death, or
• after attainment of age 59½. |
Same as designated Roth
401(k) account and can have a qualified distribution for a first-time home purchase. |
Withdrawals of contributions and earnings are subject to federal and most state income taxes. |
| Required distributions |
Distributions must begin no later than age 70½, unless still working and not a 5% owner. |
No requirement to start taking distributions while owner is alive. |
Same as designated Roth 401(k) account. |
*Chart from IRS Publication 4530, Designated Roth Accounts Under a 401(k) or 403(b) Plan, 2007.
**This limitation is by individual, rather than by plan. Although permissible to split the annual employee elective contribution between designated Roth contributions and traditional pre-tax contributions, the combination cannot exceed the deferral limit — $15,500 ($20,500 if age 50 or over).