Roth 403b
I want to know advantages and disadvantages of doing a ROTH 403b account through my employer versus doing a Roth IRA on my own. I am aware of the higher contribution limits you can do with a Roth 403b (which is a positive), but since I was reading on the IRS.gov site about distributions, I was concerned about a few things – one being is I left my ROTH 403b account open after I retire, do I have to take RMDS from it??? I thought you did not have to take RMDs from a ROTH IRA. If it is true about taking RMDs from a Roth 403b – can I rollover my Roth 403b into a Roth IRA later, after I retire, and before 70 1/2 and avoid RMDs?
Permalink Submitted by Alan - IRA critic on Fri, 2017-04-28 17:32
Yes, designated Roth plans are subject to RMDs at 70.5 unless you are still working at the end of each year. To avoid at least one Roth 403b RMD you would have to roll the balance to your Roth IRA prior to the year you will reach 70.5. Of course, you could still contribute to the Roth 403b, but check with the plan if in service distribution is allowed before you retire. You might also contribute to a Roth IRA and Roth 403b, but as always you would generally not make Roth contributions if your current tax rate is higher than what you expect your marginal tax rate to be in retirement. Note that the distribution rules for non qualified distributions are more favorable for Roth IRAs if you need to take distributions because the gains always come out last. For Roth 403b the gains come out pro rated with your contributions. Both accounts become qualified and fully tax free at age 59.5 and 5 years.