Roth 401(k) After-Tax Contributions Today. Tax-Free Withdrawals at by by654321

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									    Roth 401(k)                                             .
                                     After-Tax Contributions Today. Tax-Free Withdrawals at Retirement.




The Roth 401(k) After-Tax Savings Option Offers South Carolina Deferred Compensation Program Participants
Another Way to Retire from Work. Not Life.
The South Carolina Deferred Compensation Program (SCDCP) offers participants the opportunity to save after-tax dollars through the Roth 401(k)
after-tax savings feature. The Roth 401(k) savings feature means that participants can save on both a pre-tax and after-tax basis.
The Roth 401(k) option is designed to give retirement plan participants increased tax-planning flexibility by combining some features of Roth IRAs
with the benefits of pre-tax savings programs such as the 401(k) and 457 plans. While pre-tax contributions provide an up-front tax deduction,
Roth 401(k) contributions offer tax benefits on the back end – namely, qualified withdrawals that are completely tax-free.



      Who Might Benefit Tomorrow from Making Roth 401(k) Contributions Today?

      You may want to consider making Roth contributions if you:

      • Expect to be in a higher tax bracket when you retire – Since the Roth tax break is on the back end when you make a
        withdrawal, you’d be maximizing your tax benefit in retirement with tax-free withdrawals on your Roth 401(k) contributions. Your
        before-tax balance can continue to remain invested and be your last withdrawal source. If you are not sure whether your tax
        bracket in retirement will be higher or lower than it is today, you may want to consider making contributions to the pre-tax plans
        and the Roth 401(k) to help you diversify your future tax risk. That way, you’ll pay some taxes now (on the Roth) and some later
        (on the money you withdraw from your pre-tax 401(k) and/or 457 Plan).

      • Want the option of not taking mandatory minimum withdrawals after age 70 1/2 – Although Roth balances are subject
        to required minimum distributions after age 70 1/2, Roth 401(k) balances can be rolled over directly to a Roth IRA, which has no
        withdrawal requirements.

      • Make too much money to qualify for a Roth IRA – The Roth 401(k) gives you the same tax-free withdrawal benefits of a Roth
        IRA without any income restrictions for participation.

      • Plan to keep your initial Roth 401(k) contributions invested for at least five years and do not expect to take withdrawals
        before age 59 1/2 – These restrictions are required to qualify for tax-free withdrawals of your Roth balance.




      The Roth 401(k) option is available to all state employees and
       employees of any agency for which the Comptroller General
     handles payroll. Other participants will need to check with their
              payroll office to determine option availability.



           Program Web site: http://scrs.ingplans.com • Program Information Line: 1-866-826-7283 • Local Office Phone: 803-754-7997
                                                                          Comparing Your Options
                                              401(k) and 457 Pre-tax                                                                               Roth 401(k) After-tax
      Feature                                 Savings Options                                                                                      Savings Option
      Advantages                              • Earnings grow tax-deferred                                                                         • Earnings grow tax-free
                                              • Reduce current income taxes                                                                        • No taxes on qualified withdrawals
                                              • Taxes on qualified withdrawals deferred until distributions begin                                  • Allows for rollover to a Roth IRA where minimum distributions are not
                                                                                                                                                     required in your lifetime
      Contribution tax                        • Contributions reduce taxable income dollar-for-dollar; may lower                                   • No current tax savings, contributions are made with after-tax dollars
      treatment                                 the taxes paid today                                                                               • Tax-free withdrawals may be made five years from the date of your first
                                              • Pre-tax contributions are taxed, along with earnings, upon withdrawal                                Roth contribution and if you are age 59 ½ or older
                                                at prevailing tax rate
      Contribution limits                     • For 2009, the maximum combined contribution to your Roth 401(k) and traditional 401(k) accounts is 100% of eligible compensation or $16,500,
                                                whichever is less
                                              • For 2009, the maximum contribution to your 457 account is 100% of eligible compensation or $16,500, whichever is less
                                              • An additional $5,500 catch-up contribution to the 401(k) plans and to the 457 plan may be made by participants age 50 or older – you may not use
                                                the Over-50 Catch-Up Provision in the 457 plan while using the Three-Year 457 Catch-Up Provision

     Withdrawal tax treatment                 Contributions and investment earnings are taxed as ordinary income                                   Individual contributions and investment earnings may be withdrawn
                                              for qualified withdrawals                                                                            tax-free for qualified withdrawals
     Age 70 ½ distributions                   Mandatory upon reaching age 70 ½                                                                     Mandatory upon reaching age 70 ½ and separated from service, unless
                                                                                                                                                   money is rolled into a Roth IRA
     Qualified withdrawal                     Traditional 401(k) Plan                                                                              Age 59 ½ or older (or upon disability or death) PLUS Roth 401(k)
     requirements                             • Age 59 ½ or older                                                                                  contributions remain invested for at least five years from the date of your
                                              • Age 55 AND separation from service                                                                 first Roth contribution
                                              457 Plan
                                              • Separation from service, no age requirement
                                                 Distributions are subject to federal and state taxes
     Non-qualified                            Traditional 401(k) Plan                                                                              10% early withdrawal penalty plus ordinary income taxes on
     withdrawal penalties                     • Ordinary income taxes on contributions and investment                                              investment earnings
                                                 earnings; a 10% early withdrawal penalty may apply
                                              457 Plan
                                              • Ordinary income taxes on contributions and investment earnings
     Rollovers permitted                      To an IRA or other employer qualified retirement plan1                                               To a Roth IRA or other employer qualified retirement plan that accepts
     without tax consequence                                                                                                                       Roth 401(k) balances
     Who benefits?                            Employees who:                                                                                       Employees who:
                                              • Expect to be in a lower tax bracket in retirement                                                  • Want tax-free2 withdrawals in retirement
                                              • Want to lower their taxes today                                                                    • Want the option of not taking required minimum distributions after
                                                                                                                                                     age 70 ½
                                                                                                                                                   • Make too much money to qualify for a Roth IRA
                                                                                                                                                   • Have more than five years until they will need the money and do not
                                                                                                                                                     expect to take withdrawals before age 59 ½
                                                                                                                                                   • Expect to be in a higher income tax bracket at retirement
                                                                                                                                                   • Are in a low tax bracket today with large tax deductions
     Are loans available?                     Yes                                                                                                  No

1
    Rollovers to qualified retirement plans are subject to the rules and restrictions of the receiving plan.
2
    Qualified tax-free distributions on earnings from a Roth 401(k) occur after the participant reaches 59 1/2 OR on account of the participant’s death or disability, AND after the participant has held the account for at least five years.




                                                                               Enroll Now! If you think the Roth 401(k) might fit into your savings strategy, your next step is to enroll.
        Contributions are invested                                             You may elect the Roth option online if you are already enrolled in the pre-tax 401(k) plan. To enroll, you
          according to the same                                                will need your PIN, previously sent to you from ING. If you’ve misplaced your PIN, you can request a PIN
         investment election you                                               reminder through the Web site or Information Line. Enter your elections by accessing the “Enroll Now”
                                                                               section of the Program Web site at http://scrs.ingplans.com or by calling the toll-free Information Line
            have made in the                                                   at 1-866-826-7283. Customer Contact Associates are available Monday through Friday, 8:00 A.M. to 8:00
           pre-tax 401(k) plan.                                                P.M., Eastern Time, except on New York Stock Exchange holidays. If you are not currently participating in the
         Your 457 plan elections                                               SCDCP, you will need to enroll with a paper Participation Enrollment Agreement form.
             can be different.
                                                                                                                                                                                                                                                 SC Roth 0709

								
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