Reference Library

Topics include education, estate, insurance, investment, retirement and risk management planning as well as basic tips for budgeting.

Retirement Planning

Roth 403(b)

Employees of public school districts, community colleges and other non-profit organizations may have an additional way to fund their retirement: the Roth 403(b).

If offered, the addition of the Roth 403(b) account option provides you with greater flexibility in your ability to save for retirement using either pre-tax dollars, after-tax dollars or a combination of the two.

Features of the Roth 403(b): A Tax-Sheltered Account (TSA)

Tax-Free Income Source at Retirement

The Roth 403(b) works just like a Traditional 403(b) with one important difference. Roth 403(b) contributions are made using after-tax dollars, whereas Traditional 403(b) contributions are made from pre-tax dollars.

Although Roth 403(b) contributions won't reduce your current income tax liability, they will provide a tax-free income source at retirement (monies must be withdrawn after age 59 1/2 and the account must have been in existence for at least five years).

Flexibility

You now have the option of funding your retirement using either pre-tax [Traditional 403(b)] or after-tax [Roth 403(b)] contributions, depending on your situation.

You can choose to direct your entire annual contribution to a Roth 403(b) or split your annual contribution between a Roth 403(b) and a Traditional 403(b) account in any manner you choose. However, your total annual contribution to all 403(b) accounts (Roth and Traditional) cannot exceed the maximum annual contribution limits for the year in which they are made.

Contributions and Earnings Grow Tax Free

Because a Roth 403(b) is a tax-sheltered account (TSA), your contributions and investment earnings may grow and compound tax free — there is no tax due upon withdrawal! At withdrawal, taxes may be due on earnings withdrawn. Your Lincoln Investment financial advisor can give you personalized illustrations based on your circumstances. Withdrawals subject to tax will be taxed as ordinary income in the year received. Taxes and penalties for early withdrawal may apply if taken prior to age 59 1/2.

Automatic Payroll Contributions

Automatic payroll contributions provide a convenient and disciplined way for you to save for your retirement.

None of the information in this section should be considered as tax advice. You should consult your tax advisor for information concerning your individual situation.

A plan of regular investing does not assure a profit or protect against loss in a declining market. You should consider your financial ability to continue your purchases over an extended period of time.