What’s the difference between tax-sheltered and Roth contributions?

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Which contribution is right for you?

Your employer-sponsored retirement plan should offer tax-sheltered contributions. But if your employer-sponsored retirement plan also offers Roth contributions, you may be wondering which approach is right for you. Let’s take a look at both options.

Tax-Sheltered Contributions
Your contributions1 will be pre-tax, lowering your current taxable income
When retired, your distributions will be taxable
You may be eligible to contribute1,3 up to:
  • $23,500 annually if under age 50
  • $31,000 if age 50 or older3
  • $34,750 if turning ages 60-63 in 2025
You’re required to begin taking required minimum distributions (RMDs) at age 73, unless you’re still working for the employer sponsoring your retirement Plan
This option might be right for you if:
  • You expect to be in a lower tax bracket during retirement
  • You currently need as much take-home pay as possible, even if it means paying taxes on distributions in retirement
Roth Contributions
Your contributions1 will be after-tax
When retired, your earnings may be tax-free2 if they meet the requirements of a qualified withdrawal2
You may be eligible to contribute1,3 up to:
  • $23,500 annually if under age 50
  • $31,000 if age 50 or older3
  • $34,750 if turning age 60-63 in 2025
Required minimum distributions are not required
This option might be right for you if:
  • You expect to be in a higher tax bracket during retirement
  • You can afford less take-home pay now, in exchange for tax-free distributions2 in retirement

Learn more with this side-by-side comparison chart.

Ready to choose or change your contributions? Reach out to your benefits office today!

1This information applies to tax-sheltered contributions and Roth elective deferrals within an employer-sponsored retirement plan. Not all plans offer Roth options. See your employer for details.
2Roth distributions are not taxable if the account has been held for five years and the participant is over age 59½, deceased or disabled.
3Annual contribution limits apply to tax-sheltered, Roth or a combination of the two. Numbers quoted are for contributions made during 2025. Contribution limits are subject to change each year.
 
This information is provided for educational purposes only. This should not be considered tax advice. You should consult a tax professional to discuss your unique situation.