A Roth 403(b) is a provision that permits employees to irrevocably designate all or a portion of their 403(b) as an after-tax Roth contribution. This type of contribution will not lower the employee's taxable income. However, distribution of Roth designated funds in retirement will not be subject to taxation.

Participants have the option of making pre-tax 403(b) contributions, Roth 403(b) contributions, or as a combination of the two. Total contributions cannot exceed the year's contribution limit. Not all employers offer a Roth 403(b), nor are they required to do so. Check with your employer for details.

How a Roth 403(b) Is Different From a Roth IRA

The tax treatment of a Roth 403(b) and a Roth IRA is similar (after-tax contribution, tax-free withdrawal in retirement). However, the Roth 403(b) is an employer-based plan, while the Roth IRA is an individual-based plan. Distribution rules are different. Roth IRA contributions can be accessed at any time (earnings after five years or until age 59½, whichever is later). The Roth 403(b) can be accessed only with the occurrence of a distributable event (age 59½, separation from service, disability, or death).

Contribution Limits:

• Participants may contribute up to $19,500 for year 2020.
• Participants age 50 and older at any time during the calendar year are permitted to contribute an additional $6,500 for 2020, for a total of $26,000

To review details about the 403(b) plan available through your employer, click here: