If your employer has adopted the Roth option, you can now choose to contribute money from the after-tax portion of your salary. This helps you build a nest egg of tax-free income in retirement. Your qualified withdrawals of Roth contributions and any earnings come out tax-free, which means you could potentially end up with more in net distributions in retirement.
The Roth option doesn’t change the total of what you can contribute to the CalPERS 457 Plan, but it does give you more control over when your contributions—and retirement income—will be subject to federal income tax.
If you’re already contributing a portion of your salary on a pre-tax basis, you can choose to change that to a Roth contribution instead. You could also add a Roth contribution amount to your salary deduction and continue your pre-tax contributions, subject to IRS limits. Please consult a tax advisor before making any changes to make sure that using the Roth option is best for your situation.
Since the Roth option became available in March 2019, approximately 150 agencies throughout the state have added it to their CalPERS 457 plans. As a result, employees at these agencies can now make both traditional (pre-tax) and Roth (after-tax) contributions to the CalPERS 457 Plan.
To help you determine if the Roth option is right for you, schedule a personal phone review with your CalPERS 457 account manager.
Visit the website or call (888) 713-8244 to schedule an appointment.