Roth and pre-tax contributions

Roth 401(k) contributions are available to members in the Deferred Salary Plan of the Electrical Industry who are covered under the NYC Construction, Street Lighting, Elevator Division, or Westchester/Fairfield collective bargaining agreements. Roth contributions offer you another way to help fund your future.

Traditional pre-tax contributions

Your contributions come out of your pay before taxes are deducted, so you save on your taxes now. In fact, every pre-tax dollar you contribute is less than a dollar reduction in take-home pay.

Potential benefits:

1. Potential for current tax savings (lower your taxable income, so you pay less in taxes now)
2. Deferred taxes on any potential earnings

Potential drawback: You pay taxes when you withdraw your savings, and your tax rate might be higher than when you contributed the money.

Roth after-tax contributions

Roth contributions come out of your pay after taxes have been withheld. Your take-home pay is reduced by the amount you contribute, but your contributions are never taxed again. In addition, any investment earnings will not face federal taxes as long as you hold the account for five or more tax years from your first contribution, or five or more years from January 1 of the year of your first contribution, and you:

1. are at least age 59½
2. or become disabled
3. or have died

Potential benefits:

1. Potential tax-free growth and tax-free withdrawal of your contribution amount
2. If you qualify, tax-free growth and tax-free withdrawal of any investment earnings

Potential drawback: No current tax break now.

Where to save? How to save?

To choose which way to save, consider following these guidelines:

You might benefit from pre-tax contributions if:

1. You think your tax rate will be lower in retirement.
2. You’re behind in saving and think Social Security could be a main source of retirement income.
3. You’re a mid or high earner and would rather lower your current taxable income.
4. You’re willing to risk paying higher taxes later so that you can have more take-home pay today.

You might benefit from Roth contributions if:

1. You think you could face a higher tax rate in retirement.
2. You’re on track for retirement savings, or you’re saving a lot and think you could be in a higher tax bracket when you retire.
3. You’re willing to trade less take-home pay today for potentially more income in retirement.
4. You do not earn a lot today, so you don’t expect to gain much from a current tax break.
5. You earn too much to contribute to a Roth IRA but want to take advantage of a Roth account.

You might benefit from both if:

• You’re not sure what your future income (or tax bracket) will be and want to “diversify your tax risk.”

Play now, pay later? Or vice versa? Consider finding out now what kind of retirement saving strategy makes the most sense for you—Traditional, Roth, or a combination of both—at roth.connectwithpru.com.

Comparison of key features for Roth Contributions and Pre-Tax Contributions

Key Features	Roth Contributions	Pre-Tax Contributions
Contribute pre-tax dollars	xno	√yes
Contribute after-tax dollars	√yes	xno
Total 2023 contribution limit	1% to 100% of pay (up to $22,500; $30,000 if age 50+)*Footnote. Combined, your Roth and pre-tax contributions cannot exceed 100% of your paycheck or the established IRS contribution limits listed above. End of footnote.	1% to 100% of pay (up to $22,500; $30,000 if age 50+)*Footnote. Combined, your Roth and pre-tax contributions cannot exceed 100% of your paycheck or the established IRS contribution limits listed above. End of footnote.
Account can grow tax-deferred	√yes	√yes
Federal tax-free withdrawals	Contributions always, earnings must qualify**Footnote. Qualified Roth distributions are federal income tax-free, provided the Roth account has been open for at least five tax years (which begins January 1 of the first year you make a contribution to a Roth account) and the owner has either reached age 59½, passed away or become disabled. Qualified Roth distributions may be subject to state and local income tax. You should consult your tax specialist or financial professional before making your contribution elections. Please see your employer for specific details. End of footnote.	xno
Available for loans	√yes	√yes
In-service withdrawals	√yes	√yes
May be best if:	You expect your tax bracket to be higher when you withdraw than when you contribute	You expect your tax bracket to be lower when you withdraw than when you contribute

* Combined, your Roth and pre-tax contributions cannot exceed 100% of your paycheck or the established IRS contribution limits listed above.

** Qualified Roth distributions are federal income tax-free, provided the Roth account has been open for at least five tax years (which begins January 1 of the first year you make a contribution to a Roth account) and the owner has either reached age 59½, passed away or become disabled. Qualified Roth distributions may be subject to state and local income tax. You should consult your tax specialist or financial professional before making your contribution elections. Please see your employer for specific details.

Roth Conversions

Your plan also allows all participants in the DSP to take advantage of Roth "conversions" if you are age 59½ or older, or otherwise have distributable money. This is an irrevocable process by which you convert existing pre-tax contributions in the plan into after-tax Roth contributions, eliminating federal income tax on the distribution and any earnings if the above qualification requirements are met. You are taxed on the amount of pre-tax contributions converted in the year of conversion.

Next steps

To make contributions of any kind, consider completing the Deferred Salary Plan Roth 401(k) application found under the documents section of the 401(k) Plan page at jibei.org.

Learn more

To learn more about Roth contributions, visit roth.connectwithpru.com. If you have any questions about your account, call 877-JIB-401K (877-542-4015)877-JIB-401K (877-542-4015) Monday through Friday, from 8 a.m. to 9 p.m. ET, to speak with a participant service representative.