Investment Dictionary

Roth 403(b)

Prior to January 2006, participants in a 403(b) plan could only make traditional elective contributions with pretax dollars – not subject to income taxes when made. Taxes on the accumulation are deferred until money is withdrawn from the account, at which time the withdrawn amount is subject to income taxes. Now participants may also make a “Roth” elective contribution, which is made after income taxes are withheld. The interest and earnings withdrawn from a Roth Account are tax-free if the distribution is considered “qualified.”

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