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Empower - Learning center - Saving - Pretax or Roth

Pretax or Roth: Which road to take?

Before you determine which road or combination of roads may be right for you, you’ll need to consider a few important factors, including when you want to pay taxes. Let’s take a closer look.

What to know before you hit the road

Pretax contributions Roth contributions
Is my contribution taxable in the year I make it? ×
Is my contribution taxed when distributed? ×
Are potential earnings on my contributions taxed when distributed? × No, provided that it is qualified distribution.3
Can I contribute to both Roth and pretax plans? × ×
If I experience a financial hardship, can I make a withdrawal? × ×
Yes, if your plan allows hardship withdrawals.
Do I have to take a minimum distribution at age 73? × Not required
Once you reach age 73, you are generally required to begin taking minimum distributions.4
If I change jobs, can I roll over my account? × ×
Yes, to an eligible employer plan (if the plan allows it) or to an IRA.5
Consider all your options and their features and fees before moving money between accounts.

1 Contributions are made prior to tax withholding.

2 Contributions are made after tax withholding.

3 Subject to requirements: Roth contributions must be in your account for at least five years and the money withdrawn after you have reached age 59½, died or been disabled. If a distribution is not qualified, the earnings are taxed as ordinary income and may be subject to early withdrawal penalties.

4 As of January 1, 2023, the IRS generally requires you to start taking required minimum distributions (RMDs) at age 73. (If you turned 72 in 2022 and delayed your first-time RMD until April 1, 2023, you must take your 2022 RMD by April 1, 2023, and your 2023 RMD by December 31, 2023.)

5 Eligible employer plans include: qualified plans (e.g., 401(k), governmental 457(b) and 403(b) plans). Roth contributions can only be rolled over to another designated Roth account or to a Roth IRA.

Investing involves risk, including possible loss of principal.