Roth 403(b) Retirement Option

Penn faculty and staff have another savings vehicle to consider for your retirement portfolio as of July 1. The Roth 403(b), which is similar to a Roth individual retirement account (IRA), is now an option under Penn's Tax Deferred Retirement (TDR) Plan and the Supplemental Retirement Annuity (SRA) Plan.

The Roth 403(b) is simply another way to put money aside for retirement, but as with a Roth IRA, money set aside in a Roth 403(b) is taxed as it is deposited, while distributions taken during retirement are generally tax-free. Roth 403(b) plans, however, have higher contribution limits than their IRA counterparts, so you can accumulate more tax-free income for retirement.

Keep in mind that Roth after-tax contributions will not reduce your taxable income as pre-tax selections do, and your paycheck will be reduced by additional tax withholdings. A combination of pre-tax and Roth after-tax deferrals are allowed, but only up to your annual limit: $17,000 or $22,500 for those age 50 and older.

Although you pay taxes on contributions you make to the Roth 403(b), all earnings are tax-free if they are part of a "qualified distribution". In addition, federally-required minimum distribution rules apply at age 70 ½. Remember that penalties will be assessed on withdrawals that do not meet the definition of a "qualified distribution".

If you'd like more information about the advantages of the Roth 403(b) option, including who may benefit from it and why, both TIAA-CREF and Vanguard have resources to help you.

Before you elect the Roth 403(b), you’re encouraged to discuss it with your tax adviser or financial planner. Penn's retirement vendors—Vanguard and TIAA-CREF—have licensed professionals who can meet with you one-on-one to discuss any questions you may have about the Roth 403(b) option. Also, please keep in mind that TIAA-CREF and Vanguard are the only providers authorized by the University to work with the TDR and SRA Plans. Any appointments or conversations with them have to be initiated by you. Click here to set up an appointment. We understand that there may be other organizations contacting faculty and staff claiming that they are authorized by Penn to advise you on matters related to the plans, but this is not the case. If you are contacted by such an organization, you should proceed very carefully and let us know immediately by sending an email to askhr@hr.upenn.edu.

Participating in the Roth 403(b) is easy—you can sign up using Penn’s online enrollment system. For more information, contact Penn’s Retirement Call Center at 1-877-PENN-RET or visit the IRS website for a list of Frequently Asked Questions regarding Roth retirement accounts.