Did you know that your employer-sponsored retirement plan could offer different contribution options? Let's take a look at both options to determine which approach is right for you.
Tax-Sheltered
Your contributions1 will be pretax, lowering your current taxable income
When retired, your distributions will be taxable
You can contribute up to $19,500 annually, plus another $6,500 if age 50 or older3
You're required to begin taking distributions at age 72, unless you're still working for the sponsoring employer
This option might be right for your 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
Your contributions1 will be after-tax
Tax-free2
$19,500 annually, plus another $6,500 if age 50 or older3
You're required to begin taking distributions at age 72, unless you're still working for the sponsoring employer
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 distributions in retirement
Article • Apr 14, 2022
